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EXHIBIT 10.9
CONVERTIBLE SECURED LOAN AGREEMENT
This CONVERTIBLE SECURED LOAN AGREEMENT (the "Agreement") dated as of
December 1, 1999, is made by and between SPATIALIGHT, INC., a New York
corporation (the "Company") and the parties listed on Exhibit A hereto (each, a
"Lender").
WHEREAS, Lender together with other lenders have agreed to advance
funds to the Company in an aggregate amount not to exceed $2,875,000 (the
"Convertible Secured Loan") evidenced by certain Convertible Secured Notes of
even date herewith (the "Notes") made by the Company in favor of the lenders who
are participating in this Convertible Secured Loan (the lenders are hereinafter
referred to collectively as the "Lenders");
WHEREAS, Lender's agreement to make such advances is conditioned upon
and subject to the provisions of this Agreement; and
WHEREAS, the Company has reserved for issuance shares of its Common
Stock issuable upon the conversion of the Notes into Common Stock.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
SECTION 1
Definitions
1.1 Defined Terms. The following terms are defined as follows:
"Benefit Arrangement" means any benefit arrangement, obligation, custom
or practice, to provide benefits, other than salary, as compensation for
services rendered, other than any obligation, arrangement, custom or practice
that is a Company Benefit Plan, including, without limitation, employment or
change of control agreements, severance agreements, executive compensation
arrangements, incentive programs or arrangements, sick leave, vacation pay,
severance pay policies, plant closing benefits, salary continuation for
disability, consulting, or other compensation arrangements, workers'
compensation, retirement, deferred compensation, bonus, stock option or
purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs and employee discounts, in each case with
respect to any present or former employees, directors or agents.
"Business Day" means any day other than a Saturday or Sunday on which
commercial banks located in New York, New York are not required or authorized by
law or executive order to close or remain closed.
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"Closing" is defined in Section 3 hereof.
"Closing Date" is defined in Section 3 hereof.
"Code" means the Internal Revenue Code of 1986 (or any successor
thereto), as amended from time to time.
"Conversion Shares" is defined in Section 5.6 hereof.
"Common Stock" is defined in Section 4.2(a) hereof.
"Company Benefit Arrangement" means any Benefit Arrangement sponsored
or maintained by the Company or its Subsidiaries or with respect to which the
Company or a Subsidiary has or will have any liability (whether actual,
contingent, direct or indirect) as of the Closing Date, in each case with
respect to any present or former directors, employees, or agents of the Company
or the Subsidiaries.
"Company Plan" means, as of the Closing Date, any Employee Benefit Plan
for which the Company or any Subsidiary has or will have any liability (whether
actual, contingent, direct or indirect).
"Company's Knowledge" or derivations thereof means knowledge of the
executive officers and members of the board of directors of the Company.
"Environmental Law" means any foreign, federal, state or local statute,
regulation, ordinance or rule of common law as now or hereafter in effect in any
way relating to the protection of the environment including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Sections 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. App. Sections 1801 et seq.), the Resource Conservation and Recovery Act
(42 U.S.C. Sections 6901 et seq.), the Clean Water Act (33 U.S.C. Sections 1251
et seq.), the Clean Air Act (42 U.S.C. Sections 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. Sections 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Sections 136 et seq.), and
the Occupational Safety and Health Act (29 U.S.C. Sections 651 et seq.) and the
regulations promulgated pursuant thereto.
"Event of Default" shall have the meaning ascribed to it in Section 4
of the Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Hazardous Material" means any substance, material or waste that is
regulated by the United States, the foreign jurisdictions in which the Company
or its Subsidiaries conduct business, or any state or local governmental
authority including, without limitation, petroleum and its by-products,
asbestos, and any material or substance that is defined as a "hazardous waste,"
"hazardous substance," "hazardous material," "restricted
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hazardous waste," "industrial waste," "solid waste," "contaminant,"
"pollutant," "toxic waste" or "toxic substance" under any provision of
Environmental Law.
"Lien" means any lien, pledge, mortgage, deed of trust, security
interest, adverse claim, charge, right of first refusal, easement, transfer
restriction under any shareholder or similar agreement, encumbrance or any other
restriction or limitation whatsoever.
"Loan Document" is defined in Section 4.5 hereof.
"Material Adverse Effect" is defined in Section 4.1 hereof.
"New Securities" means shares of Common Stock (as defined in Section
4.2 of this Agreement) of the Company and any securities or other rights
convertible or exchangeable into or exercisable for shares of Common Stock,
provided, however, "New Securities" does not include (i) Common Stock issued or
issuable upon conversion of the Notes or Non-transferable Warrants issued to
Lenders; (ii) securities issued by the Company as part of any public offering
pursuant to an effective registration statement under the Securities Act; (iii)
equity securities issued in connection with any stock split, stock dividend or
recapitalization of the Company; (iv) equity securities issued to management,
directors or employees of the Company pursuant to plans and options to purchase
equity securities issued in accordance with plans approved by the Board; (v)
securities issued in connection with any merger, acquisition or other business
combination by the Company; (vi) Common Stock issued upon the conversion of any
notes outstanding as of the date hereof to Argyle Capital Management
Corporation; (vii) any of the Excluded Shares (as defined in Section 4(f)(iii)
of the Notes; or (viii) Common Stock or warrants to purchase Common Stock in an
amount not to exceed 250,000 shares of Common Stock which may be issued by the
Company in satisfaction of outstanding accounts payable.
"Non-transferable Warrants" is defined in Section 2.1 hereof.
"Notes" is defined in Section 2.1 hereof.
"Permits" means any approvals, authorizations, consents, licenses,
permits or certificates.
"Person" means an individual, partnership, limited liability company,
corporation, joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal or leaching into the indoor
or outdoor environment, or into or out of any property;
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"Remedial Action" means all actions to (x) clean up, remove, treat or
in any other way address any Hazardous Material; (y) prevent the Release of any
Hazardous Material so it does not endanger or threaten to endanger public health
or welfare of the indoor or outdoor environment; or (z) perform pre-remedial
studies and investigations or post-remedial monitoring and care.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiaries" means all material corporations in which the Company
owns or controls, directly or indirectly, capital stock or other equity
interests representing at least 50% of the outstanding voting stock or other
equity interests.
SECTION 2
Issuance and Terms of Notes and Non-transferable Warrants
2.1 Notes and Non-transferable Warrants. At the Closing, the Company
will execute and deliver to each Lender (a) a Note, in the form attached hereto
as Exhibit B, (each a "Note", and collectively with the Notes given to the other
Lenders in the aggregate amount of $2,875,000, the "Notes",) and (b) a
Non-transferable Warrant, in the form attached hereto as Exhibit C, to purchase
one share of Common Stock for each share that the Note is convertible into,
assuming a $3.50 conversion price (so that if a Lender made a loan of $350,000,
such Lender would received a Non-transferable Warrant to purchase 100,000 shares
of Common Stock). The Non-transferable Warrant will be exercisable by the Lender
until June 30, 2002, at an exercise price of $3.50 per share of Common Stock.
2.2 Funding of Convertible Secured Notes. Subject to the provisions of
this Agreement, including satisfaction of the conditions to Lender's obligations
specified in Section 2.7 hereof, the Lender agrees to release the principal
amount of the Note set forth on Exhibit A hereto according to the Funds Release
Schedule attached hereto as Exhibit D. Anything in this Agreement, the Note or
any other Loan Document to the contrary notwithstanding, the Lender shall not be
required to advance any funds hereunder at any time when an Event of Default
exists under this Agreement, the Note, or any other Loan Document, or an event
has occurred or a condition has arisen which, if not cured during any applicable
cure period, will constitute an Event of Default. The obligations of the Lender
to advance any funds hereunder shall forever cease and terminate, in the event
that any Event of Default occurs under this Agreement, the Note, or any other
Loan Document, which is not cured within any applicable cure period provided in
such instrument.
2.3 Use of Proceeds. The Company agrees to use all of the funds
advanced hereunder to pay transaction costs and for working capital purposes.
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2.4 Security Agreement. At the Closing (as defined in Section 3 of this
Agreement), the Company shall execute and deliver to Lender a Security Agreement
in the form attached hereto as Exhibit E (the "Security Agreement"). Lender may
record the executed Security Agreement in the U.S. Patent and Trademark Office,
the U.S. Copyright Office, with any Secretary of State, or as otherwise
appropriate to protect the interests of Lender.
2.5 Intercreditor Agreement. This Agreement is being entered into by
the Lender together with the other Lenders in reliance upon that certain
Intercreditor Agreement (a copy of which is attached hereto as Exhibit F) among
the Lender, the Company, Argyle Capital Management Corporation and the
additional parties set forth on Schedule B to the Intercreditor Agreement. This
Agreement shall have no force or effect unless or until the said Intercreditor
Agreement is executed by Lender, the Company and Argyle Capital Management
Corporation.
2.6 Registration Rights Agreement. At the Closing, the parties shall
enter into a Registration Rights Agreement in the form attached hereto as
Exhibit G.
2.7 Conditions of Lender's Obligations. The obligation of Lender to
advance funds at the Closing and at any time thereafter under the terms of this
Agreement is subject to the fulfillment of the following conditions:
(a) No Misrepresentation. The representations and warranties
of the Company under this Agreement shall be deemed to have been made at the
Closing and on the date of any release of funds thereafter and shall then be
true and correct in all material respects.
(b) Compliance with Agreement. The Company shall have
performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied with by it on
or before the Closing Date.
(c) No Default. There shall not exist an Event of Default or
any event or condition which, with the giving of notice or lapse of time or
both, would constitute an Event of Default.
(d) Qualification Under State Securities Laws. All
registrations, qualifications, permits and approvals required under applicable
state securities laws and required to be filed before the issuance of securities
shall have been obtained for the lawful execution, delivery and performance of
this Agreement, including without limitation the offer and sale of the Notes.
(e) Closing Documents Delivered by the Company. The Company
shall have delivered to each Lender all of the following documents:
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(i) an Officer's Certificate, dated the date of the
Closing, stating that the conditions specified in Subsections (a), (b) and (c)
of this Section 2.7 have been fully satisfied;
(ii) certified copies of the resolutions duly adopted
by the Company's Board of Directors authorizing the execution, delivery and
performance of this Agreement, the other Loan Documents, the issuance and sale
of the Notes and the consummation of all other transactions contemplated by this
Agreement; and
(iii) copies of the Company's Articles of
Incorporation, with all amendments thereto, and the Company's Bylaws, with all
amendments thereto, each as in effect at the Closing and each certified as a
complete and correct copy by an officer of the Company.
(f) Proceedings and Documents. All corporate and other
proceedings and actions taken in connection with the transactions contemplated
hereby and all certificates, opinions, agreements, instruments and documents
mentioned herein or incident to any such transactions, shall be reasonably
satisfactory in form and substance to each Lender and its special counsel.
(g) Waiver. Any condition specified in this Section 2.7 may be
waived if consented to by each Lender; provided that no such waiver will be
effective against any Lender unless it is set forth in a writing executed by
such Lender.
SECTION 3
Closing
The closing of the transactions contemplated in this Agreement (the
"Closing") shall be held at the Company's offices located at 0 Xxxxxxxxxx
Xxxxxxxxx, Xxxxx 000, Xxxxxx, XX 00000 on the date which this Agreement is
executed by all parties, or on such other date or at such other place as Lender
and the Company shall mutually agree (the date of the Closing being referred to
herein as the "Closing Date").
SECTION 4
Representations and Warranties of the Company
The Company hereby represents and warrants as of the date hereof as
follows:
4.1 Organization. Good Standing and Qualification. Each of the Company
and its Subsidiaries (i) is an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (ii) has
all requisite power and authority to own its properties and carry on its
business, (iii) is duly qualified to transact business and is in good standing
in all jurisdictions where its ownership, lease or operation of property
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or the conduct of its business requires such qualification, except where the
failure to be so qualified would not, and reasonably could not be expected to,
have a material adverse effect on the business, operations, assets, financial
condition or results of operations of the Company and its Subsidiaries (a
"Material Adverse Effect"). The Company has the corporate power and authority
and is in possession of all material franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders to
(i) own, lease and operate its properties and to carry on its business as now
being conducted and (ii) execute and deliver this Agreement and the documents
and instruments contemplated hereby and to consummate the transactions
contemplated hereby.
4.2 Capitalization.
(a) The authorized capital stock of the Company consists of
40,000,000 shares of common stock, par value $.01 per share ("Common Stock") of
which not more than 13,288,258 shares are issued and outstanding as of September
30, 1999. There are no shares of preferred stock authorized or outstanding. The
Company has reserved for issuance 1,650,000 shares of Common Stock upon
conversion of the Notes and exercise of the Non-transferable Warrants. Except as
set forth on Schedule 4.2 hereto, there are no outstanding securities of the
Company convertible into or evidencing the right to purchase or subscribe for
any shares of Common Stock, there are no outstanding or authorized options,
warrants, calls, subscriptions, rights, commitments or any other agreements of
any character obligating the Company to issue any shares of its Common Stock or
any securities convertible into or evidencing the right to purchase or subscribe
for any shares of such stock, and there are no agreements or understandings with
respect to the voting, sale, transfer or registration of any shares of Common
Stock of the Company. No outstanding options, warrants or other securities
exercisable for or convertible into shares of Common Stock require anti-dilution
adjustments by reason of the consummation of the transactions contemplated
hereby.
(b) The issued and outstanding shares of Common Stock are duly
authorized, validly issued, fully paid and nonassessable. The shares of Common
Stock issuable upon conversion of the Notes of the Company and exercise of the
Non-transferable Warrants, when issued (i) will be validly issued, fully paid
and nonassessable, (ii) will be free and clear of all Liens and (iii) assuming
that the representations of Lender in Section 5 hereof are true and correct,
will be issued in compliance with all applicable federal and state securities
laws.
4.3 Subsidiaries. Schedule 4.3 sets forth a complete and accurate list
of all Subsidiaries of the Company, showing (as to each such Subsidiary) the
date of its incorporation and the jurisdiction of its incorporation. The Company
is the sole stockholder of each Subsidiary. The outstanding shares of capital
stock of each Subsidiary are validly issued, fully paid, and nonassessable and
all such shares represented as being owned by the Company are owned by it, free
and clear of all Liens, other than Liens held by Argyle Capital Management
Corporation and the Lenders. There are no outstanding securities of any
Subsidiary convertible into or evidencing the right to
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purchase or subscribe for any shares of capital stock of any Subsidiary, there
are no outstanding or authorized options, warrants, calls, subscriptions,
rights, commitments or any other agreements of any character obligating any
Subsidiary to issue any shares of its capital stock or any securities
convertible into or evidencing the right to purchase or subscribe for any shares
of such stock, and there are no agreements or understanding with respect to the
voting, sale, transfer or registration of any shares of capital stock of any
Subsidiary.
4.4 Partnerships and LLCs. The Company is not a party to, and does not
hold, any equity interests in any partnership, limited partnership or limited
liability company of any kind.
4.5 Authorization. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and each agreement, document or
instrument adopted, entered into or delivered in connection herewith (the "Loan
Documents") and to perform its obligations hereunder and thereunder. The
execution, delivery and performance of the Agreement and the transactions
contemplated hereby and thereby and the issuance and sale of the Notes and the
Non-transferable Warrants have been duly authorized by all necessary corporate
action on the part of the Company. Each Loan Document has been duly and validly
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity) and except to the extent that rights to indemnification and
contribution under this Agreement may be limited by federal or state laws or
public policy relating thereto.
4.6 Consents. Except as set forth in Schedule 4.6, no consent,
approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or local
governmental authority or other Person on the part of the Company is required in
connection with the valid execution and delivery by the Company of the Loan
Documents to which it is a party, or the consummation by the Company of the
transactions contemplated by the Loan Documents to which it is a party.
4.7 Absence of Litigation. Except for outstanding accounts payable or
as set forth in Schedule 4.7, there are no claims, actions, suits, proceedings
or investigations pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries, or any properties or rights of
the Company or its Subsidiaries, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign, that could
reasonably be expected to have a Material Adverse Effect. The Company has no
knowledge of any unasserted claim, the assertion of which is likely and which,
if asserted, would be reasonably likely to have a Material Adverse Effect.
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4.8 Insurance. The Company and its Subsidiaries maintain adequate
insurance with respect to their respective businesses and such policies of
insurance are in full force and effect. The Company and its Subsidiaries are not
in violation of, and to the Company's knowledge, are in compliance with all
material requirements and provisions of such insurance. The Company and its
Subsidiaries have not been refused any insurance coverage sought or applied for,
and the Company has no reason to believe that it will be unable to renew its
existing insurance coverage upon terms at least as favorable as those presently
in effect, other than possible increases in premiums that do not result from any
act or omission of the Company or its Subsidiaries.
4.9 Patents and Trademarks. The Company and its Subsidiaries have
sufficient title and ownership of (or rights under license agreements to use)
all patents, trademarks, service marks, trade names, copyrights, trade secrets,
proprietary rights and processes ("Intellectual Property") necessary for the
conduct of their businesses in the ordinary course. Other than the security
interest granted to Argyle Capital Management Corporation in all of the
Corporation's Collateral (as such term is defined in the Security Agreement and
the security interest granted to the Lenders), there are no outstanding options,
licenses or agreements of any kind relating to the foregoing, nor is the Company
or any of its Subsidiaries bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, proprietary rights or processes of any
other Person. A list of all patents, trademarks, service marks, trade names and
copyrights owned by the Company or any of its Subsidiaries is set forth on
Schedule 4.9(a). Except as set forth on Schedule 4.9(b), since January 1, 1998,
the Company has not received any written or oral communications alleging that
the Company or any of its Subsidiaries has violated or, by conducting its
business as proposed, would violate any of the patents (including pending patent
applications), trademarks, service marks, trade names, copyrights, trade
secrets, proprietary rights or processes of any other Person, nor is the Company
aware of any such violations. The Company is not aware of any infringements or
threatened infringements of the Intellectual Property.
4.10 Compliance with Other Instruments and Legal Requirements.
(a) None of the Company or any of its Subsidiaries is in
violation or default of any provisions of its certificate of incorporation,
by-laws, or comparable organizational documents. None of the Company or its
Subsidiaries is in violation or default in any material respect under any
provision, instrument, judgment, order, writ, decree, contract or agreement to
which it is a party or by which it is bound or of any provision of any federal,
state or local statute, rule or regulation applicable to the Company or any of
its Subsidiaries (including, without limitation, any law, rule or regulation
relating to protection of the environment and the maintenance of safe and
sanitary premises). The execution, delivery and performance of each Loan
Document and the consummation of the transactions contemplated hereby and
thereby will not result in any such violation or be in conflict with or
constitute, with or without the passage of time and giving of notice, either a
default under any such provision, instrument, judgment,
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order, writ, decree, contract or agreement, or require any consent, waiver or
approval thereunder, or constitute an event that results in the creation of any
Lien upon any assets of the Company or any of its Subsidiaries except as created
by the Loan Documents.
(b) The Company and its Subsidiaries have all Permits of all
governmental entities required to conduct their respective businesses as
proposed to be conducted, except to the extent that the failure to have such
Permits would not, and reasonably could not be expected to, have a Material
Adverse Effect.
4.11 Material Agreements; Action. Except as set forth on Schedule 4.11,
there are no material contracts, agreements, commitments, understandings or
proposed transactions to which the Company or any of its Subsidiaries is a party
or by which it is bound regarding: (i) any of their respective officers,
directors, stockholders or partners; (ii) the sale of any of the assets of the
Company or any of its Subsidiaries other than in the ordinary course of
business; (iii) covenants of the Company or any of its Subsidiaries not to
compete in any line of business or with any Person in any geographical area or
covenants of any other Person not to compete with the Company or any of its
Subsidiaries in any line of business or in any geographical area; (iv) the
acquisition by the Company or any of its Subsidiaries of any operating business
or the capital stock of any other Person; (v) the borrowing of money; or (vi)
the license or grant of any interest in any of the Intellectual Property or
other material proprietary right to or from the Company or any of its
Subsidiaries, except as created by the Loan Documents. To the Company's
knowledge, all such agreements are in full force and effect and are the legal,
valid and binding obligation of the Company or its Subsidiaries, enforceable
against them in accordance with their terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
4.12 Disclosure. To the best of the Company's knowledge, neither this
Agreement nor any of the Loan Documents nor any exhibit hereto, nor any
certificate, or instrument furnished to Lender or its counsel in connection with
the transactions contemplated by this Agreement, when read together, contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements contained herein
or therein, in light of the circumstances under which they are made, not
misleading.
4.13 Registration Rights. Except as set forth in Schedule 4.13, the
Company has not granted or agreed to grant any registration rights, including
piggyback registration rights, to any Person.
4.14 Property. None of the Company or its Subsidiaries owns real
property or interest in real property. The Company and its Subsidiaries have
good and marketable title to all material properties and assets, and the Company
and its Subsidiaries have good
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title to all of its leasehold interests in each case subject to no Liens other
than those set forth in Schedule 4.14.
4.15 Environmental Matters.
(a) the operations of each of the Company and its Subsidiaries
are in compliance in all material respects with all applicable Environmental
Laws and all Permits issued pursuant to Environmental Laws or otherwise;
(b) each of the Company and its Subsidiaries has obtained all
material Permits required under all applicable Environmental Laws necessary to
operate its business;
(c) neither the Company nor any of its Subsidiaries is the
subject of any outstanding written order, agreement or arrangement with any
governmental authority or Person respecting (i) Environmental Laws, (ii)
Remedial Action or (iii) any Release or threatened Release of a Hazardous
Material;
(d) none of the Company or any of its Subsidiaries has
received any written communication alleging that the Company or any of its
Subsidiaries may be in violation of any Environmental Law, or any Permit issued
pursuant to Environmental Law, or may have any liability under any Environmental
Law;
(e) none of the Company or any of its Subsidiaries has any
known current contingent liability in connection with any Release of any
Hazardous Materials into the indoor or outdoor environment;
(f) there are no investigations of the business, operations,
or currently or previously owned, operated or leased property of the Company or
any of its Subsidiaries pending or, to the Company's Knowledge, threatened that
could lead to the imposition of any liability pursuant to Environmental Law; and
(g) there is not located at any property leased or operated by
the Company or any of its Subsidiaries any (i) underground storage tanks, (ii)
asbestos containing material in a friable condition or (iii) equipment
containing polychlorinated biphenyls.
4.16 Company SEC Reports and Financial Statements.
(a) Lender has received true and complete copies of all
periodic reports, statements and other documents that the Company has filed with
the Securities and Exchange Commission (the "SEC") under the Exchange Act since
January 1, 1998 (collectively, the "Company SEC Reports"), each in the form
(including exhibits and any amendments thereto) required to be filed with the
SEC. As of their respective dates, each of the Company's SEC Reports (i)
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, and the rules and regulations
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promulgated thereunder, respectively, (ii) were filed in a timely manner, and
(iii) to the best of the Company's knowledge, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. None of the
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the audited consolidated financial statements of
the Company (including any related notes and schedules thereto) included (or
incorporated by reference) in its Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1998, and, to the best of the Company's knowledge, each
of the unaudited consolidated financial statements of the Company in its Forms
10-Q for the periods ending March 31, 1999, June 30, 1999, and September 30,
1999, are accurate and complete and fairly present, and in conformity with the
SEC's Regulation S-B, the consolidated financial position of the Company and its
consolidated subsidiaries as of its date and the consolidated results of
operations and changes in financial position for the period then ended.
4.17 Changes. Except as set forth on Schedule 4.17, since September 30,
1999:
(a) to the best of the Company's knowledge, there have not
been any events or circumstances that could reasonably be expected to have a
Material Adverse Effect;
(b) none of the Company nor its Subsidiaries has (i) declared
or paid any dividends, or authorized or made any distribution upon or with
respect to any class or series of its capital stock or equity interests, (ii)
incurred any indebtedness for money in excess of $100,000, (iii) made any loans
or advances to any Person, other than ordinary advances for travel expenses not
exceeding $5,000, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights for consideration in excess of $5,000 in any one transaction or
series of related transactions; and
(c) Company has not issued any options, warrants or other
securities convertible into shares of Common Stock.
4.18 Indebtedness. Neither the Company nor any of its Subsidiaries has
any outstanding indebtedness or is a guarantor or is otherwise contingently
liable for any indebtedness except as disclosed on the balance sheet of the
Company dated September 30, 1999 in the Company's Form 10-Q (the "Balance
Sheet"). There exists no material default under the provisions of any instrument
evidencing any Senior Secured Obligations or Subordinate Secured Obligations, as
each such term is defined in that certain Intercreditor Agreement dated even
herewith) or of any agreement relating thereto. The current outstanding
principal balance due to Argyle Capital Management Corporation is no more than
$1,188,000, and interest accrued and unpaid on such debt as of September 30,
1999 is not more than $10,000.
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4.19 Employee Benefit Plans.
(a) Schedule 4.19(a) contains a complete and accurate list of
all Company Plans and Company Benefit Arrangements. Schedule 4.19(a)
specifically identifies all Company Plans (if any) that are Qualified Plans.
(b) Schedule 4.19(b) hereto sets forth an accurate list, as of
the date hereof, of all officers, directors, and key employees of the Company
and lists all employment agreements with such officers, directors, and key
employees and the rate of compensation (and the portions thereof attributable to
salary, bonus, and other compensation respectively) of each such Person as of
the date hereof.
(c) The Company has not declared or paid any bonus
compensation in contemplation of the transactions contemplated by this
Agreement.
4.20 Taxes. All federal, state, local and foreign tax returns, reports
and statements, or extensions required by law to be filed by the Company and its
Subsidiaries have been filed with the appropriate governmental agencies in all
jurisdictions in which such returns, reports and statements are required to be
filed and all such returns, reports and statements or extensions are true,
complete and correct in all respects. All taxes, charges and other impositions
due and payable by the Company and its Subsidiaries have been paid in full on a
timely basis except where contested in good faith and by appropriate proceedings
and after adequate reserves therefor have been established on the books and
records of the Company or Subsidiary in accordance with generally accepted
accounting principles ("GAAP") consistently applied. The Company has not
received notice of any audit or of any proposed deficiencies from any
governmental authority, and no controversy with respect to taxes of any type is
pending or threatened. Except for routine filing extensions granted as a matter
of right under applicable law, none of the Company or any of its Subsidiaries
has executed or filed with the Internal Revenue Service or any other
governmental authority any agreement or other document extending, or having the
effect of extending, the period of assessment or collection of any taxes,
charges or other impositions.
4.21 No Brokers or Finders. Except as set forth in Schedule 4.21, no
Person has, or as a result of the transactions contemplated herein will have,
any right or valid claim against the Company for any commission, fee or other
compensation as a finder or broker or in any similar capacity.
4.22 Interested Party Transactions. Except as disclosed on Schedule
4.22, no officer, director or shareholder of the Company or any affiliate or
"associate" (as such term is defined in Rule 405 of the Commission promulgated
under the Securities Act) of any such Person or the Company has or has had,
either directly or indirectly, (a) an interest in any Person which (i) furnishes
or sells services or products which are furnished or sold or are proposed to be
furnished or sold by the Company, or (ii) purchases from or sells or furnishes
to, or proposes to purchase from, sell to or furnish to, the Company any
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goods or services, or (b) a beneficial interest in any contract or agreement to
which the Company is a party or by which it may be bound or affected.
4.23 Securities Laws. Assuming the accuracy and completeness of the
representations and warranties of the Lenders under the Agreement, the offer and
sale of the Notes are and will be exempt from the registration and prospectus
delivery requirements of the Securities Act, and have been registered or
qualified (or are exempt from registration and qualification) under the
registration or qualification requirements of all applicable state securities
laws.
4.24 Absence of Undisclosed Liabilities. Neither the Company nor any of
its Subsidiaries has any obligation or liability (whether accrued, absolute,
contingent, liquidated or otherwise, including without limitation any tax
liabilities due or to become due), which are not fully disclosed and adequately
provided for in the Balance Sheet, or fully disclosed on Schedules to this
Agreement, except current liabilities incurred and obligations under agreements
entered into in the usual and ordinary course of business since the date of the
Balance Sheet, none of which (individually or in the aggregate) is material to
the business, properties, financial condition or results of operations of the
Company and its Subsidiaries, and contingent liabilities that are not
(individually or in the aggregate) material to the business, properties,
financial condition or results of operations of the Company and its
Subsidiaries.
4.25 Employees. To the Company's knowledge, no officer or key employee
of the Company or any Subsidiary has any plans to terminate his or her
employment with the Company or such Subsidiary and no employee of the Company or
any Subsidiary is in violation of any term of any employment contract, or
nondisclosure agreement, non-competition agreement, or any other obligation,
contract or agreement or any restrictive covenant relating to the right of any
such employee to be employed by the Company or such Subsidiary or relating to
the use of trade secrets or proprietary information of others, and the
employment of the employees of the Company or any Subsidiary does not subject
the Company or any Subsidiary to any liability arising by reason of any such
contract, agreement or restrictive covenant or by reason of trade secret or
unfair competition laws. The Company and each Subsidiary has complied in all
material respects with all laws relating to employment or labor, including
provisions relating to wages, hours, equal opportunity, collective bargaining
and payment of Social Security and other taxes.
SECTION 5
Representations, Warranties and Covenants of the Lender
Each Lender severally hereby represents and warrants to and agrees with
the Company, as to itself only, as follows:
5.1 Accredited Investor; Investment. Lender is an accredited investor
within the definition of Regulation D promulgated under the Securities Act.
Lender has such
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knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the transactions contemplated herein. Lender
is acquiring its respective Note for investment purposes only, for its own
account and not with a view to, or for resale in connection with, any
distribution thereof in violation of applicable law.
5.2 Risk. Lender acknowledges that it, he or she is aware that the
Company is currently insolvent and has not had any revenues and has sustained
losses for the past several years. The Lender further acknowledges that (x)
there can be no assurance that the Company will have sufficient funds to repay
all or any portion of the loan being borrowed hereunder, (y) that the collateral
securing the loan will have sufficient value to repay the loan or (z) that the
securities into which the loan may be converted will have any value. Lender
further confirms that the Company has made available to the Lender the
opportunity to ask questions of and receive answers from the Company concerning
the Company and the activities of the Company.
5.3 Authorization. Lender represents that it has all requisite power
and authority to enter into and perform its obligations under the Loan Documents
to which it is a party. Assuming the due authorization, execution and delivery
of the Loan Documents by each other party thereto, each Loan Document to which
Lender is a party constitutes a valid and binding obligation of Lender,
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally, and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and except to the
extent that rights to indemnification and contribution under this Agreement may
be limited by federal or state securities laws or public policy relating
thereto.
5.4 Consents. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority or other Person on the part of
Lender is required in connection with the valid execution and delivery by Lender
of the Loan Documents to which it is a party, or the consummation by Lender of
the transactions contemplated by the Loan Documents to which it is a party,
except for such filings as have been made prior to the Closing. Lenders are
residents of the states listed on Schedule 5.4.
5.5 Brokers' Fees. No broker, finder, investment banker or other Person
is entitled to any brokerage fee, finder's fee or other commission in connection
with the transactions contemplated by this Agreement and based upon arrangements
made by Lender.
5.6 Restrictive Legends. Lender understands that the common shares to
be issued upon conversion of the Note (the "Conversion Shares"), shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer
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of such stock certificates) until such time as the sale of the Conversion Shares
have been registered under the Securities Act as contemplated hereunder:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT",) OR ANY STATE
OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED
EXCEPT IN COMPLIANCE THEREWITH.
If Lender desires to sell or otherwise dispose of all or any part of such common
shares under an exemption from registration under the Securities Act, and if
requested by the Company, such Lender shall deliver to the Company an opinion of
counsel, which may be counsel for the Company, that such exemption is available.
5.7 Receipt of Information. Lender has reviewed all periodic reports,
statements and other documents that the Company and its principal shareholders
have filed with the Securities and Exchange Commission (the "SEC") under the
Exchange Act since January 1, 1998, which filings are incorporated by reference
into the information provided by the Company to Lender.
SECTION 6
Covenants of the Company
6.1 Information. After the Closing Date and until the later to occur of
the date (the "Cessation Date") on which the Notes are fully repaid or converted
into equity of the Company, the Company will send each Lender the information
specified in this Section 6.1:
(a) Shareholders Information. Any and all materials which the
Company sends to the holders of its Common Shares shall be sent to each Lender
on the same date on which it is sent to such shareholders.
(b) Quarterly Financial Statements. As soon as available, but
in any event no later than forty-five (45) days after the end of each fiscal
quarter (other than the fourth fiscal quarter of the Company), the unaudited
consolidated balance sheet of the Company and its Subsidiaries as at the end of
each such quarter and the related unaudited consolidated statements of income
and cash flows of the Company and its Subsidiaries for such quarter and for the
elapsed period in such fiscal year, all in reasonable detail and stating in
comparative form the figures as of the end of and for the comparable periods of
the preceding fiscal year. All such financial statements shall be prepared in
accordance with GAAP on a consistent basis throughout the periods reflected
therein except as stated therein and shall be accompanied by a certificate of
the Company's president or chief financial officer to such effect.
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(c) Other Reports and Statements. Promptly (but in any event
within ten (10) days after any distribution to its stockholders generally, to
its directors or to the financial community of an annual report, definitive
proxy statement, registration statement or other similar report or
communication, and promptly (but in any event within ten (10) days) after any
filing by the Company with the SEC or with any national securities exchange or
market system, of any publicly available annual or periodic or special report or
proxy statement or registration statement, a copy of such report or statement
and copies of all press releases and other statements made available generally
by the Company to the public concerning material developments in the Company's
business, shall be sent to each Lender.
6.2 Preemptive Rights. If at any time after the Closing Date and prior
to the Cessation Date, the Company shall propose to issue or sell New Securities
or enters into any contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance or sale of any New Securities,
then each Lender shall have the right to purchase that number of New Securities
at the same price and on the same terms proposed to be issued or sold by the
Company so that such Lender would after the issuance and sale of all such New
Securities, hold the same proportional interest of the then outstanding shares
of Common Stock (assuming that any outstanding securities or other rights,
including the Notes, convertible or exchangeable into Common Stock have been
converted or exchanged) as was held by such Lender immediately prior to such
issuance and sale (the "Proportionate Percentage").
The Company shall give each Lender written notice of its intention to
issue and sell New Securities, describing the type of New Securities, the price
and the general terms and conditions upon which the Company proposes to issue
the same. Each Lender shall have ten (10) Business Days from the giving of such
notice to agree to purchase all (or any part) of its Proportionate Percentage of
New Securities for the price and upon the terms and conditions specified in the
notice by giving written notice to the Company and stating therein the quantity
of New Securities to be purchased.
If Lenders fail to exercise in full such right within ten (10) Business
Days, the Company shall have one hundred twenty-five (125) days thereafter to
sell the New Securities in respect of which Lenders' rights were not exercised,
at a price and upon general terms and conditions no more favorable to the buyers
thereof than specified in the Company's notice to Lenders pursuant to this
Section. If the Company has not sold the New Securities within such one hundred
twenty-five (125) day period, the Company shall not thereafter issue or sell any
New Securities, except by giving Lenders the right to purchase their
Proportionate Percentage in the manner provided above.
6.3 Negative Covenants. (a) Prior to the date on which the Notes are
paid in full, the Company shall not, without the prior written consent of each
Lender:
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(i) Incur any debt for borrowed money, or grant any security
interest which is senior to, or pari passu with, the Note;
(ii) Declare or pay any dividend on its Common Stock;
(iii) Redeem for cash any securities issued by the Company;
(iv) Directly or indirectly, consummate any merger,
consolidation or other reorganization (other than a reorganization or merger
solely for the purpose of a change in the state of incorporation of the Company
and a merger of Spatialight of California, Inc. with and into the Company), or
the sale, lease or other transfer of all or substantially all of its assets;
(v) Issue any options, warrants, or other securities to any
officer or director of the Company, except for an issuance under the 1991 Stock
Option Plan, the 1993 Employee Stock Option Plan, as amended, the 1993 Directors
Stock Option Plan, and the 1999 Stock Option Plan; or
(vi) Incur any indebtedness in excess of currently outstanding
debt, the $2,875,000 loan contemplated hereby and $2,125,000 in financing on
terms substantially similar to the loan contemplated hereby, without the prior
written consent of the Lenders representing more than 75% of the outstanding
debt.
(b) Prior to the Cessation Date, the Company shall not,
without the prior written consent of each Lender:
(i) issue any security which is preferred in dividends or in
liquidation to the Common Stock, which is not convertible into Common Stock; or
(ii) issue any preferred stock, convertible debenture or other
security which is preferred in dividends to the Common Stock, which is intended
to, or can reasonably be expected to pay the purchaser of such security an
annual preferred yield of greater than ten percent per annum, on the issue price
of such security.
6.4 Loss, Theft or Destruction of Notes. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Note and, in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation, upon surrender and cancellation of any Note, the Company
will make and deliver, in lieu of such lost, stolen, destroyed or mutilated
Note, a new Note of like tenor and unpaid principal amount and dated as of the
date to which interest has been paid on the unpaid principal amount of the Note
so lost, stolen, destroyed or mutilated, or, if no interest shall have been paid
thereon, then dated as of the date of the Note so lost, stolen, destroyed or
mutilated.
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SECTION 7
Indemnification
7.1 Indemnification by Company. The Company agrees to indemnify and
hold harmless each Lender and its respective partners, co-investors, officers,
directors, employees, agents, consultants, attorneys and advisers (each, a
"Lender Indemnified Party"), from and against any and all actual losses, claims,
damages, liabilities, costs and expenses (including, without limitation,
environmental liabilities, costs and expenses and all reasonable fees, expenses
and disbursements of counsel), joint or several (hereinafter collectively
referred to as a "Loss" or "Losses"), which may be incurred by or asserted or
awarded against any Lender Indemnified Party in connection with or in any manner
arising out of or relating to any investigation, litigation or proceeding or the
preparation of any defense with respect thereto, arising out of or in connection
with or relating to this Agreement, the other Loan Documents or the transactions
contemplated hereby or thereby, any breach of any representation, warranty or
covenant made by the Company in this Agreement, any use made or proposed to be
made with the proceeds of Lender's respective Note pursuant to this Agreement,
whether or not such investigation, litigation or proceeding is brought by the
Company, any of its Subsidiaries, shareholders or creditors, but excluding
therefrom any Losses arising out of resulting from (i) the gross negligence or
willful misconduct of an Lender Indemnified Party, (ii) any violation by an
Lender Indemnified Party of any law, governmental regulation or court order
applicable to it or (iii) the breach by an Lender Indemnified Party of any
provision of this Agreement or any of the other Loan Documents.
7.2 Indemnification by Lender. Each Lender severally agrees to
indemnify and hold harmless the Company and its respective officers, directors,
employees, agents, consultants, attorneys and advisers (each, a "Company
Indemnified Party"), from and against any and all Losses, which may be incurred
by or asserted or awarded against any Company Indemnified Party in connection
with or in any manner arising out of or relating to any investigation,
litigation or proceeding or the preparation of any defense with respect thereto,
arising out of or in connection with or relating to any breach of any
representation, warranty or covenant made by such Lender in this Agreement.
Notwithstanding the foregoing, no Lender shall be liable under this Section 7.2
for an amount in excess of that Lender's principal as set forth on Exhibit A.
7.3 Notice of Claim. An indemnified party shall give written notice to
the indemnifying party of any claim with respect to which it seeks
indemnification within ten (10) days after the discovery by such parties of any
matters giving arise to a claim for indemnification pursuant to this Section 7,
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under this
Section 7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action or claim is
brought against any indemnified party, the indemnifying party shall be entitled
to
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participate in and, unless in the reasonable good faith judgment of the
indemnified party a conflict of interest between such indemnified party and the
indemnifying party may exist in respect of such action or claim, to assume that
defense thereof, with counsel satisfactory to the indemnified party and after
notice from the indemnifying party to the indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs of
investigation. In any event, unless and until the indemnifying party elects in
writing to assume and does so assume the defense of any such action or claim the
indemnified party's costs and expenses arising out of the defense, settlement or
compromise of any such action or claim shall be Losses subject to
indemnification hereunder. If the indemnifying party elects to defend any such
action or claim, then the indemnified party shall be entitled to participate in
such defense with counsel of its choice at its sole cost and expense. The
indemnifying party shall not be liable for any settlement of any action or claim
effected without its written consent. Anything in this Section 7 to the contrary
notwithstanding, the indemnifying party shall not, without the indemnified
party's prior written consent, settle or compromise any claim or consent to
entry of any judgment in respect thereof that imposes any future obligation on
the indemnified party or that does not include, as an unconditional term
thereof, the giving by the claimant or the plaintiff to the indemnified party, a
release from all liability in respect of such claim.
SECTION 8
Miscellaneous
8.1 Amendment: Waiver. Neither this Agreement nor any provision hereof
may be amended, modified, supplemented or waived, except by a written instrument
executed by (i) the Company and (ii) Lenders representing more than half of the
outstanding debt, provided however, that no amendment, modification, supplement
or waiver adverse to a Lender will be binding upon a Lender that has not agreed
to such provision.
8.2 Notice. Any notice or communication given under this Agreement will
be in writing and be hand delivered, mailed by registered or certified mail,
postage prepaid, delivered by facsimile or electronic mail (with a telephonic
confirmation or confirmation) or by overnight courier as follows:
(i) If to Lender, as set forth next to such Lender's name on
Exhibit A hereto;
(ii) If to the Company to:
Spatialight, Inc.
0 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxx
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Facsimile: (000) 000-0000
or at such other address as hereafter will be furnished in writing by the
addressed party to the other party. Delivery by hand will be deemed given when
personally delivered; delivery by registered or certified mail will be deemed
given three (3) business days after the same is posted; delivery by facsimile or
electronic mail will be deemed given when received; and delivery by overnight
courier will be deemed given the first business day following the date of timely
deposit with such courier.
8.3 Survival of Representations and Warranties. All representations and
warranties made in, pursuant to or in connection with this Agreement shall
survive the execution, delivery and closing of this Agreement, and the issuance
of the Note for a period of two (2) years; provided, however, that the
representations and warranties made in Section 4.15 (Environmental) and 4.20
(Taxes) shall survive the applicable statutory period of limitations with
respect to any liabilities covered thereby.
8.4 Severability of Provisions. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction will, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
8.5 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors and assigns of the parties hereto, including, without limitation,
each transferee of all or any portion of the Note. The Company may not assign
its rights or delegate its obligations under this Agreement without the prior
written consent of the other parties hereto. A Lender may assign its rights and
delegate its obligations under this Agreement upon the Company's prior written
consent which consent will not be unreasonably withheld. The Parties agree that,
among other reasons, it will be reasonable for the Company to withhold such
consent if the proposed assignee is a competitor to the Company.
8.6 Entire Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subject matter hereof and thereof and
supersede and cancel all prior representations, alleged warranties, statements,
negotiations, undertakings, letters, acceptances, understandings, contracts and
communications, whether verbal or written, among the parties hereto and thereto
or their respective agents with respect to or in connection with the subject
matter hereof.
8.7 Choice of Law. This Agreement will be deemed to be a contract made
under the laws of the State of New York, and for all purposes will be construed
in accordance with the laws of said state, without regard to principles of
conflicts of law.
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8.8 Headings. The headings in this Agreement are for the convenience of
reference only and will not affect the construction of this Agreement.
8.9 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument. Execution and delivery by facsimile
shall constitute good and valid execution and delivery unless and until replaced
or substituted by an original executed instrument.
8.10 No Third-Party Beneficiaries. Nothing in this Agreement will
confer any third party beneficiary or other rights upon any Person (specifically
including any employees of the Company and its Subsidiaries) or entity that is
not a party to this Agreement.
(Signatures to follow on the next page)
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
SpatiaLight, Inc., a New York corporation
By: /s/ XXXXXXX X. XXXXXX
---------------------------
Name: Xxxxxxx X. Xxxxxx
Its: Chief Executive Officer
24
[COUNTERPART SIGNATURE PAGE TO
CONVERTIBLE SECURED LOAN AGREEMENT]
/s/ XXXXXX X. XXXXXX, M.D.
--------------------------
Xxxxxx X. Xxxxxx, M.D.
BIRMINGHAM HEMATOLOGY AND ONCOLOGY ASSOCIATES,
SLB FLEX PROTOTYPE P/S PLAN DTD 10-17-85
By: /s/ XXXXXX X. XXXXXX, M.D.
----------------------------
Xxxxxx X. Xxxxxx, M.D.
25
[COUNTERPART SIGNATURE PAGE TO
CONVERTIBLE SECURED LOAN AGREEMENT]
XXXXXXXX LIMITED PARTNERSHIP
By: /s/ XXXX XXXXXXX
------------------------
GENERAL PARTNER
26
[COUNTERPART SIGNATURE PAGE TO
CONVERTIBLE SECURED LOAN AGREEMENT]
/s/ XXXXX X. XXXXXXX
------------------------
Xxxxx X. Xxxxxxx
27
[COUNTERPART SIGNATURE PAGE TO
CONVERTIBLE SECURED LOAN AGREEMENT]
/s/ XXXX XXXXXXX
------------------------
Xxxx Xxxxxxx
28
[COUNTERPART SIGNATURE PAGE TO
CONVERTIBLE SECURED LOAN AGREEMENT]
/s/ XXXXXX X. XXXXX
---------------------------
Xxxxxx X. Xxxxx
XXXXX X. XXXXX TRUST
By: /s/ XXXXXX X. XXXXX, TTE
-------------------------
Xxxxxx X. Xxxxx, Trustee
XXXXXX X. XXXXX TRUST
By: /s/ XXXXXX X. XXXXX, TTE
-------------------------
Xxxxxx X. Xxxxx, Trustee
XXXX XXXXX XXXXX TRUST
By: /s/ XXXXXX X. XXXXX, TTE
-------------------------
Xxxxxx X. Xxxxx, Trustee
29
[COUNTERPART SIGNATURE PAGE TO
CONVERTIBLE SECURED LOAN AGREEMENT]
/s/ XXXXXX X. XXXXX
-------------------
Xxxxxx X. Xxxxx
30
[COUNTERPART SIGNATURE PAGE TO
CONVERTIBLE SECURED LOAN AGREEMENT]
/s/ XXXXXX X. XXXXXX
------------------------------------
Xxxxxx X. Xxxxxx
/s/ XXXXXXX X. XXXXXX
------------------------------------
Xxxxxxx X. Xxxxxx
/s/ XXXXXX X. XXXXXX
------------------------------------
Xxxxxx X. Xxxxxx
XXXXXX FAMILY LIMITED
PARTNERSHIP
By: /s/ XXXXXX X. XXXXXX
---------------------------------
XXXXXX X. XXXXXX, GENERAL PARTNER
31
[COUNTERPART SIGNATURE PAGE TO
CONVERTIBLE SECURED LOAN AGREEMENT]
/s/ XXXX XXX XXXX
------------------------------------
Xxxx Xxx Xxxx
XXXXXXX X. XXXX CHARITABLE REMAINDER
UNITRUST, DTD 5/29/97
By: /s/ XXXXXXX X. XXXX, TRUSTEE
---------------------------------
AGT C.T. XXXXXXXX, TUA 11/1/76 FBO XXXXXXX X. XXXX
By: /s/ EQUITABLE TRUST COMPANY
---------------------------------
32
[COUNTERPART SIGNATURE PAGE TO
CONVERTIBLE SECURED LOAN AGREEMENT]
/s/ XXXXXX X. XXXXX
-----------------------
Xxxxxx X. Xxxxx
33
[COUNTERPART SIGNATURE PAGE TO
CONVERTIBLE SECURED LOAN AGREEMENT]
/s/ XXXX X. XXXXX
-----------------------
Xxxx X. Xxxxx
34
[COUNTERPART SIGNATURE PAGE TO
CONVERTIBLE SECURED LOAN AGREEMENT]
/s/ XXXXXXXXX X. XXXX
-----------------------
Xxxxxxxxx X. Xxxx
35
[COUNTERPART SIGNATURE PAGE TO
CONVERTIBLE SECURED LOAN AGREEMENT]
XXXXX X. XXXXX, XX.
By: /s/ XXXXX X. XXXXX
--------------------------
36
[COUNTERPART SIGNATURE PAGE TO
CONVERTIBLE SECURED LOAN AGREEMENT]
PERFORMANCE FUTURES PSP DTD 1-1-93
By: /s/ XXXXX X. XXXXX, XX., TRUSTEE
----------------------------------
37
EXHIBIT A
LENDERS
Name Loan Amount Address
---- ----------- -------
Xxxxxx X. Xxxxxx, M.D. $250,000 0000 X. Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Fax: 000-000-0000
Xxxxxxxx Limited Partnership $100,000 Attn: Xxx Xxxxxxxx
0000 X. Xxxxxxxx
Xxxxx Xxx, XX 00000
Fax: 000-000-0000
Xxxxx X. Xxxxxxx $75,000 000 Xxxxxxxx Xxxx, #000
Xxxxxxx, XX 00000
Fax: 000-000-0000
Xxxx Xxxxxxx $50,000 0000 Xxxx Xxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Fax: 000-000-0000
Xxxxxx X. Xxxxx $225,000 00 Xxxxxx Xxxxxx Xxxx
Xxxxxx Xxxxxxx, XX 00000
Fax: 000-000-0000
Xxxxx X. Xxxxx Trust, Xxxxxx $250,000 00 Xxxxxx Xxxxxx Xxxx
X. Xxxxx, Trustee Xxxxxx Xxxxxxx, XX 00000
Fax: 000-000-0000
Xxxxxx X. Xxxxx Trust, Xxxxxx $250,000 00 Xxxxxx Xxxxxx Xxxx
X. Xxxxx, Trustee Xxxxxx Xxxxxxx, XX 00000
Fax: 000-000-0000
Xxxx Xxxxx Xxxxx Trust, $175,000 00 Xxxxxx Xxxxxx Xxxx
Xxxxxx X. Xxxxx, Trustee Xxxxxx Xxxxxxx, XX 00000
Fax: 000-000-0000
Xxxxxx X. Xxxxx $250,000 000 00xx Xxxxxx XX
Xxxxxxxxx, XX 00000
Xxxxxx Family Limited $100,000 000 XXX Xxxxx
Xxxxxxxxxxx Xxxxx Xxx, XX 00000
Fax: 000-000-0000
Xxxxxx X. Xxxxxx $100,000 000 XXX Xxxxx
Xxxxx Xxx, XX 00000
Fax: 000-000-0000
Xxxxxxx X. Xxxxxx $100,000 000 XXX Xxxxx
Xxxxx Xxx, XX 00000
Fax: 000-000-0000
Xxxxxx X. Xxxxxx $100,000 000 XXX Xxxxx
Xxxxx Xxx, XX 00000
Fax: 000-000-0000
38
Xxxx Xxx Xxxx $100,000 0000 Xxxxxx Xxxx
Xxxxxxxxx, XX
00000 Fax:
000-000-0000
Xxxxxxx X. Xxxx Charitable $37,500 Agent: Xxxx Xxxxxxx
Remainder Unitrust DTD 5/29/97 Xxxxxxx Xxxxx Financial
Services
0000 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Fax: 000-000-0000
Agt. C.T. Xxxxxxxx, $37,500 Agent: Xxxx Xxxxxx
TUA 11/1/76 SunTrust Equitable Trust
FBO Xxxxxxx X. Xxxx Co.
Account 10830 000 Xxxxxxxxx Xxxx Xxxxxx
Xxxxxxxxx, XX
00000 Fax:
000-000-0000
Xxxxxx X. Xxxxx $150,000 X.X. Xxxxxxxx Company
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Fax: 000-000-0000
Xxxx X. Xxxxx $175,000 000 Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
Fax: 000-000-0000
Xxxxxxxxx X. Xxxx $100,000 000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Fax: 000-000-0000
Xxxxx X. Xxxxx, Xx. $50,000 c/o Healthcare Realty Mgmt
0000 Xxxxx Xxxxxx Xx.#000
Xxxxxxxxxx, XX 00000
Fax: 000-000-0000
Performance Futures PSP $50,000 1400 Urban Center Dr.#415
DTD 1/1/93 FBO Xxxxx X. Xxxxxxxxxx, XX 00000
Starr, Jr. Fax: 000-000-0000
Birmingham Hematology and $150,000 000 Xxxxxxxxx Xxxx
Oncology Associates, SLB Flex Suite 100
Prototype P/S Plan DTD Xxxxxxxxxx, XX 00000
10/27/85 FBO Xxxxxx X.
Xxxxxx, M.D.
39
EXHIBIT B
Promissory Note
40
EXHIBIT C
Warrant
41
EXHIBIT D
Funds Release Schedule
Percentage of
Event Funds Released
----- --------------
- Closing 50%
- Binding purchase orders for the Company's
1280DV and/or 1280 BC products exceeding 50,000 units
for delivery over the succeeding twelve (12) month period. 50%
42
EXHIBIT E
Security Agreement
43
EXHIBIT F
Intercreditor Agreement
44
EXHIBIT G
Registration Rights Agreement
45
Schedule 4.2
Capitalization
Outstanding Warrants
1. Amended and Restated Warrant to purchase 792,500 shares of Common Stock of
the Company, par value $.01 per share (hereinafter "Common Shares") dated June
19, 1997, registered in the name of Sabotini Limited.
2. Warrant to purchase 200,000 Common Shares dated June 19, 1997, registered in
the name of Sabotini Limited.
3. Warrant to purchase 200,000 Common Shares dated June 19, 1997, registered in
the name of Jalcanto Limited.
4. Warrant to purchase 425,000 Common Shares dated May 5, 1999, in the name of
Jalcanto Limited.
5. Warrant to purchase 375,000 Common Shares dated November 30, 1998, registered
in the name of Xx. Xxxxxxxx Xxxxxx.
6. Warrant to purchase 3,000 Common Shares dated March 29, 1999, in the name of
Xxxxxxx X. Xxxxxx.
7. Warrant to purchase 6,500 Common Shares dated September 15, 1997, in the name
of Xxxxx X. Xxxxxx.
8. Warrant to purchase 8,000 Common Shares dated December 17, 1998, in the name
of Xxxxx X. Xxxxxx.
9. Warrant to purchase 42,500 Common Shares dated November 30, 1998, registered
in the name of 721192 Alberta Ltd.
10. Warrant to purchase 300,000 Common Shares to dated May 13, 1999, in the name
of Xxxxxxxx Xxxxx.
11. Warrant to purchase 40,000 Common Shares dated October 22, 1999, in the name
of Xxxxxxxx Xxxxxx.
12. Warrant to purchase 300,000 Common Shares dated August 5, 1999, in the name
of Xxxxxxxx Xxxxxx.
46
13. Warrant to purchase 30,000 Common Shares dated July 9, 1999, in the name of
Xxxxxx Xxxxxx.
14. Warrant to purchase 230,165 Common Shares dated September 15, 1999, in the
name of Third Point Partners L.P.
15. Warrant to purchase 103,440 Common Shares to be dated September 15, 1999, in
the name of Third Point Offshore Fund Ltd.
16. Warrant to purchase 84,215 Common Shares dated September 15, 1999, in the
name of Point West International Investments Ltd.
17. Warrant to purchase 50,065 Common Shares dated September 15, 1999, in the
name of Banzai Partners L.P.
18. Warrant to purchase 46,130 Common Shares dated September 15, 1999, in the
name of Protection II.
19. Warrant to purchase 20,000 Common Shares dated October 31, 1998, in the name
of Xxxx Xxxx Xxxx & Freidenrich LLP.
20. Warrant to purchase 100,000 Class A, 100,000 Class B, and 100,000 Class C
shares of Common Stock dated November 1, 1998 in the name of JRT Investments,
Inc. Class B warrants are not exercisable until Class A warrants are exercised.
Class C warrants are not exercisable until Class B warrants are exercised.
21. Warrant to purchase 100,000 Class A, 100,000 Class B, and 100,000 Class C
shares of Common Stock dated March 1, 1999 in the name of JRT Investments, Inc.
Class B warrants are not exercisable until Class A warrants are exercised. Class
C warrants are not exercisable until Class B warrants are exercised.
22. Warrant to purchase 100,000 Class A, 100,000 Class B, and 100,000 Class C
shares of Common Stock dated June 1, 1999 in the name of JRT Investments, Inc.
Class B warrants are not exercisable until Class A warrants are exercised. Class
C warrants are not exercisable until Class B warrants are exercised.
23. Warrant to purchase 100,000 Class A, 100,000 Class B, and 100,000 Class C
shares of Common Stock dated July 1, 1999 in the name of JRT Investments, Inc.
Class B warrants are not exercisable until Class A warrants are exercised. Class
C warrants are not exercisable until Class B warrants are exercised.
24. Warrant to purchase 120,000 Class A, 120,000 Class B, and 120,000 Class C
shares of Common Stock dated August 17, 1998 in the name of Xxxxxx Xxxxx. Class
B warrants are not exercisable until Class A warrants are exercised. Class C
warrants are not exercisable until Class B warrants are exercised.
47
25. Warrant to purchase 60,000 shares of Common Stock in the name of Xxxxxxxx
Xxxxxx.
26. Contractual commitment to issue a warrant to purchase 746,268 shares of
Common Stock in the name of Jalcanto Limited.
27. Warrant granted to address the contractual claim described in Schedule 4.21
below.
Options
1. As of September 30, 1999, options to purchase 1,821,300 Common Shares have
been granted to employees under the 1991 Stock Option Plan, 1993
Employee/Director Stock Option Plan, and the 1999 Stock Option Plan.
Convertible Debt
As of September 30, 1999, the Company's notes payable to Argyle Capital
Management Corporation in the aggregate principal amount of $1,188,000 are
convertible into 2,376,000 Common Shares at a conversion price of fifty cents
($.50) per Common Share.
Registration Rights
Certain holders of the equity listed above have registration rights. The Company
filed two registration statements on Form S-3, one for holders with registration
rights, and one voluntarily, to be effective in December 1999.
Additional Shares
2,917,051 shares have been issued between September 30, 1999 and December 2,
1999.
48
Schedule 4.3
Subsidiaries
Jurisdiction of
Name of Subsidiary Date of Incorporation Incorporation
------------------ --------------------- ---------------
Spatialight of California, Inc. December 4, 1992 California
49
Schedule 4.9
Patents and Trademarks
PATENTS
PATENT FILING
NO. TITLE DATE INVENTOR ASSIGNEE
--- ----- ---- -------- --------
5,396,261 Polysilicon Gate Bus With 03/07/95 W.A. Hastings Spatialight of
Interspersed Buffers For Driving a III(1) California,
Row of Pixels in an Active Matrix Inc.
Liquid Crystal Display
5,396,262 Polysilicon Gate Bus with 03/07/95 W.A. Hastings Spatialight of
Interspersed Buffers for Driving a III(1) California,
Row of Pixels in an Active Matrix Inc.
Liquid Crystal Display
5,365,355 Light Blocking Pixel Enhancement 11/15/94 W.A. Hastings Spatialight of
and Photocurrent Reduction in III(1) California,
Active Matrix Liquid Crystal Inc.
Displays
5,784,038 Color Projection System Employing 07/21/98 Xxxx Xxxxx(1) Spatialight of
Dual Monochrome Liquid Crystal California,
Displays with Misalignment Inc.
Correction
5,903,248 Active Matrix Display Having Pixel 05/11/99 Xxxx Xxxxx SpatiaLight,
Driving Circuits With Integrated Inc.
Charge Pumps
PATENT APPLICATIONS
APPLICATION FILING
SERIAL NO. TITLE DATE INVENTOR
08/734,230 Technique for Driving Dot-Matrix 10/21/96 Xxxx Xxxxx
Liquid Crystal Displays by Phase
Shifting a Front Electrode Voltage
One-Half a Refresh Cycle
TRADEMARKS
--------
(1) Assigned to Spatialight of California, Inc. (formerly WAH-III Technology
Corporation)
50
ISSUE OWNER OF
NO. TITLE DATE RECORD
--- ----- ---- ------
2,041,178 Liquid Crystal Displays and Liquid 02/25/97 SpatiaLight of
Crystal Light Modulations California, Inc.
2,006,653 Remote Controllers in the Audio 10/08/96 Sayett Group, Inc.
Visual Field
2,018,018 Video or Computer Controlled 11/19/96 Sayett Group, Inc.
Projectors
TRADEMARK APPLICATIONS
TRADEMARK
APPLICATION FILING OWNER OF
NO. TITLE DATE RECORD
----------- ----- ------ ---------
75/625,235 SPATIALIGHT IMAGENGINE 01/21/99 SpatiaLight, Inc.
75/716,246 DISPLASIC 05/27/99 SpatiaLight, Inc.
51
Schedule 4.11
Material Agreements
(i) Notes in the aggregate principal amount of $1,188,000 are outstanding and
payable to Argyle Capital Management Corporation whose President is a director
of the Company and a lender.
(iii) Non-competition agreements with Xxxxxxx X. Xxxxxx, L. Xxxx Xxxxxx and Xxxx
Xxxxx, all former officers and directors of the Company.
(v) As of December 2, 1999, the Company has the following outstanding debt:
Payee Amount
----- ------
Argyle Capital Management Corporation $1,188,000
(vi) A perfected security interest and lien on all of the Company's assets,
including but not limited to Accounts, Chattel Paper, Contacts, Deposit
Accounts, Equipment, Financial Assets, Fixtures, General Intangibles, including
Copyrights, Patents and Trademarks, Licenses, Instruments and Investment
Property was granted to Argyle Capital Management Corporation ("Argyle") to
secure the Company's debt to Argyle.
(vii) The agreements referenced on Schedule 4.22 below.
52
Schedule 4.13
Registration Rights
Registration Rights were granted to Jalcanto Limited, Sabotini Limited,
Xxxxxxxx Xxxxxx and 721192 Alberta Ltd. covering the Common Shares into which
the Warrants held by them may be exercised.
Registration Rights were granted to Argyle Capital Management
Corporation covering the Common Shares into which the Company's debt may be
converted.
The Company filed two registration statements on Form S-3, to be
effective December 1999, covering an aggregate of 814,015 and 1,729,500 shares
of Common Stock issuable upon exercise of warrants, respectively.
53
Schedule 4.14
Property
A perfected security interest and lien on all of the Company's assets,
including but not limited to Accounts, Chattel Paper, Contacts, Deposit
Accounts, Equipment, Financial Assets, Fixtures, General Intangibles, including
Copyrights, Patents and Trademarks, Licenses, Instruments and Investment
Property was granted to Argyle Capital Management Corporation ("Argyle") to
secure the Company's debt to Argyle.
54
Schedule 4.17
Changes
For Section 4.17(b)(ii), please see debt already scheduled on Schedule
4.11 (v). For Section 4.17(c), please see Schedule 4.2.
55
Schedule 4.19
Employee Benefit Plans
(a) 1991 Stock Option Plan
1993 Employee Stock Option Plan, as amended 1993 Directors Stock Option
Plan, as amended 1999 Stock Option Plan Delta Dental Blue Shield of
California - CPIC Life Insurance Blue Shield of California - Major
Medical Xxxxxxx Xxxxx - 401k standardized Profit Sharing Plan Hartfort
Insurance Travel Plan
(b)
Name Title Compensation Arrangement
---- ----- ------------------------
Xxxxxxx X. Xxxxxx Director and CEO, No employment agreement, compensation
Treas. & Secretary at the rate of $200,000 per annum
Xxxx X. Xxxxxxx President No employment agreement, compensation
at the rate of $200,000 per annum
Miles X. Xxxxx Vice President, No employment agreement, compensation
Engineering/ at the rate of $100,000 per annum
Manufacturing
Xxxxxx X. Xxxxx Director Outside director fee of $500 per meeting
Xxxxxxxx X. Xxxxxxxx Director
Xxxxxx X. Xxxxx Director Outside director fee waived
In addition to the compensation arrangements listed above all of the Company's
officers and directors hold options to acquire Common Stock of the Company
issued under stock option plans adopted by the Company.
56
Schedule 4.21
Brokers or Finders
Capital Strategies Advisors, Inc. will be granted a warrant to purchase 50,000
shares of Common Stock of the Company upon the closing of the transactions
contemplated hereby.
Another party who knows both the Company and the Lenders has claimed the right
to a finder's fee or warrant from the Company relating to the transactions
contemplated hereby. The Company is working to address this potential claim.
57
Schedule 4.22
Interested Party Transactions
Chronomotion Imaging Applications, Inc. ("Chronomotion"), a California
corporation controlled by the Company's Chief Executive Officer, has entered
into discussions with the Company to license the Company's technology for use in
Chronomotion's electronic holography products and to utilize the Company's
expertise to held develop a liquid crystal display optimized for Chronomotion's
electronic holography products. Any agreement would be subject to the approval
of the respective Boards of Chronomotion and the Company.
Xxxxxx Xxxxx and Xxxxxx Xxxxx, directors of the Company, individually or
through affiliates, hold convertible debt or equity in the Company. Further
information regarding these holdings is available through publicly available
Schedule 13D filings.
