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EXHIBIT 10.57
LOAN AND SECURITY AGREEMENT
Agreement No. 30450 Dated as of May 7, 1997
between
MMC/GATX PARTNERSHIP NO. I
Four Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
as Lender
and
SHAMAN PHARMACEUTICALS, INC.
a Delaware corporation
000 Xxxx Xxxxx Xxxxxx
Xxxxx Xxx Xxxxxxxxx, XX 00000
as Borrower
CREDIT AMOUNT: $5,000,000
Treasury Note Maturity: 36 months
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Loan Margin: 820 basis points
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Commitment Termination Date: May 16, 1997
The defined terms and information set forth on this cover page are a
part of the LOAN AND SECURITY AGREEMENT, dated as of the date first written
above (this "Agreement"), entered into by and between MMC/GATX PARTNERSHIP NO. I
("Lender") and the borrower ("Borrower") set forth above. The terms and
conditions of this Agreement agreed to between Lender and Borrower are as
follows:
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ARTICLE I
INTERPRETATION
1.01. Certain Definitions. Unless otherwise indicated in this Agreement or any
other Operative Document, the following terms, when used in this Agreement or
any other Operative Document, shall have the following respective meanings:
"Business Day" shall mean any day other than a Saturday, Sunday or
public holiday under the laws of California or Illinois or other day on which
banking institutions are authorized or obligated to close in California or
Illinois.
"Claim" has the meaning given to that term in Section 10.03.
"Collateral" has the meaning given to that term in Section 5.01(a).
"Commitment Fee" has the meaning given to that term in Section 2.04.
"Commitment Termination Date" shall mean the date specified on the
cover page of this Agreement.
"Credit Amount" shall mean the maximum amount that Lender is
committed to lend (if the conditions specified in Schedule 3 are satisfied),
which amount is set forth following such term on the cover page of this
Agreement.
"Current Assets" shall mean the aggregate amount of all of the
consolidated assets of Borrower and its Subsidiaries that would, in accordance
with GAAP, be classified on a balance sheet as current assets.
"Current Liabilities" shall mean the aggregate amount of all of the
consolidated liabilities of Borrower and its Subsidiaries that would, in
accordance with GAAP, be classified on a balance sheet as current liabilities.
"Default" shall mean any event which with the passing of time or the
giving of notice or both would become an Event of Default hereunder.
"Default Rate" shall mean the per annum rate of interest equal to
the higher of (i) 18% or (ii) the Prime Rate plus 6%, but such rate shall in no
event be more than the highest rate permitted by applicable law.
"Disclosure Schedule" has the meaning set forth in the definition of
the term "Permitted Liens."
"Environmental Law" shall mean the Resource Conservation and
Recovery Act of 1987, the Comprehensive Environmental Response, Compensation and
Liability Act, and any other federal, state or local statute, law, ordinance,
code, rule, regulation, order or decree (in each case having the force of law)
regulating or imposing liability or standards of conduct concerning any
Hazardous Material, as now or at any time hereafter in effect.
"Equity Securities" of any Person shall mean (a) all common stock,
preferred stock, participations, shares, partnership interests or other equity
interests in and of such Person (regardless of how designated and whether or not
voting or non-voting) and (b) all warrants, options and other rights to acquire
any of the foregoing.
"Funding Date" shall mean the date on which the Loan is made to or
on account of Borrower under this Agreement.
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"GAAP" shall mean generally accepted accounting principles and
practices as in effect in the United States of America from time to time,
consistently applied.
"Hazardous Material" means any hazardous, dangerous or toxic
constituent material, pollutant, waste or other substance, whether solid, liquid
or gaseous, which is regulated by any federal, state or local governmental
authority.
"Indebtedness" shall mean, with respect to Borrower or any
Subsidiary, the aggregate amount of, without duplication, (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (c) all obligations of
such Person to pay the deferred purchase price of property or services
(excluding trade payables aged less than 180 days and those trade payables which
remain subject to a good faith dispute), (d) all capital lease obligations of
such Person, (e) all obligations or liabilities of others secured by a lien on
any asset of such Person, whether or not such obligation or liability is
assumed, (f) all obligations or liabilities of others guaranteed by such Person;
and (g) any other obligations or liabilities which are required by GAAP to be
shown as debt on the balance sheet of such Person. Unless otherwise indicated,
the term "Indebtedness" shall include all Indebtedness of Borrower and the
Subsidiaries.
"Intellectual Property" shall mean all of Borrower's right, title
and interest in and to patents, patent rights (and applications therefor),
trademarks and service marks (and applications and registrations therefor),
inventions, copyrights, mask works (and applications and registrations
therefor), trade names, trade styles, software and computer programs, trade
secrets, methods, processes, know how, drawings, specifications, descriptions,
and all memoranda, notes, and records with respect to any research and
development, all whether now owned or subsequently acquired or developed by
Borrower and whether in tangible or intangible form or contained on magnetic
media readable by machine together with all such magnetic media.
"Landlord Consent" shall mean a consent in the form of Exhibit C or
such other form as Lender may agree to accept.
"Lien" shall mean any pledge, bailment, lease, mortgage,
hypothecation, conditional sales and title retention agreements, charge, claim,
encumbrance or other lien in favor of any Person.
"Loan" shall mean the loan advanced by Lender to Borrower under this
Agreement.
"Loan Margin" shall mean the number of basis points set forth
following such term on the cover page of this Agreement.
"Loan Rate" shall mean, with respect to the Loan, the per annum rate
of interest equal to the sum of (a) the U.S. Treasury note rate of a term equal
to the Treasury Note Maturity as quoted in The Wall Street Journal on the date
the Loan is made, plus (b) the Loan Margin.
"Note"shall mean the secured promissory note of Borrower
substantially in the form of Exhibit A.
"Obligations" has the meaning given to that term in Section 5.01.
"Operative Documents" shall mean this Agreement, the Note, the
Warrant, the Landlord Waiver and Consent(s) and all other documents, instruments
and agreements executed and delivered in connection herewith or therewith or in
respect of the closing of the transactions contemplated hereby or thereby.
"Payment Date" means the fifteenth day of each calendar month.
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"Permitted Indebtedness" shall mean and include:
(a) Indebtedness of Borrower to Lender;
(b) Indebtedness of Borrower secured by Liens permitted under
clause (e) of the definition of Permitted Liens;
(c) Indebtedness arising from the endorsement of instruments in
the ordinary course of business; and
(d) Other Indebtedness of Borrower not exceeding Two Hundred
Fifty Thousand Dollars ($250,000) at any time.
"Permitted Investments" shall mean and include:
(a) Deposits with commercial banks organized under the laws of
the United States or a state thereof to the extent such deposits are
fully insured by the Federal Deposit Insurance Corporation;
(b) Investments in marketable obligations issued or fully
guaranteed by the United States and maturing not more than one (1)
year from the date of issuance; and
(c) Investments in open market commercial paper rated at least
"A1" or "P1" or higher by a national credit rating agency and
maturing not more than one (1) year from the creation thereof.
(d) Investments pursuant to or arising under currency agreements
or interest rate agreements entered into in the ordinary course of
business;
(e) Investments consisting of deposit accounts of Borrower in
which Lender has a perfected security interest;
(f) Investments permitted under Borrower's Investment Policy,
dated as of October 9, 1995, as it may be amended by Borrower's
Board of Directors from time to time; and
(g) Other Investments aggregating not in excess of Two Hundred
Fifty Thousand Dollars ($250,000) at any time.
"Permitted Liens" shall mean (a) the Lien created by this Agreement,
(b) Liens for fees, taxes, levies, imposts, duties or other governmental charges
of any kind which are not yet delinquent or which are being contested in good
faith by appropriate proceedings which suspend the collection thereof (provided,
however, that such proceedings do not involve any substantial danger of the
sale, forfeiture or loss of any item of equipment and that Borrower has
adequately bonded such Lien or reserves sufficient to discharge such Lien have
been provided on the books of Borrower), (c) Liens identified on the disclosure
schedule attached hereto as Schedule 2 ("Disclosure Schedule"), (d) Liens to
secure payment of worker's compensation, employment insurance, old age pensions
or other social security obligations of Borrower in the ordinary course of
business of Borrower, (e) Liens upon any equipment or other personal property
acquired by Borrower after the date hereof to secure (i) the purchase price of
such equipment or other personal property or (ii) lease obligations or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment or other personal property; provided that (A) such Liens are
confined solely to the equipment or other personal property so acquired, and (B)
no such Lien shall be created, incurred, assumed or suffered
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to exist in favor of Borrower's officers, directors or shareholders holding five
percent (5%) or more of Borrower's Equity Securities, (f) carriers',
warehousemen's, mechanics', landlords', materialmen's, repairmen's or other
similar Liens arising in the ordinary course of business which are not
delinquent or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings, and (g) Liens or similar arrangements
entered into in connection with joint ventures and corporate collaborations.
"Person" shall mean and include an individual, a partnership, a
corporation, a business trust, a joint stock company, a limited liability
company, an unincorporated association or other entity and any domestic or
foreign national, state or local government, any political subdivision thereof,
and any department, agency, authority or bureau of any of the foregoing.
"Prime Rate" shall mean the interest rate per annum publicly
announced from time to time by Bank of America NT & SA (or its successor) as its
reference rate, but such rate shall in no event be more than the highest
interest rate permitted by applicable law.
"Subsidiary" shall mean any corporation of which a majority of the
outstanding capital stock entitled to vote for the election of directors
(otherwise than as the result of a default) is owned by Borrower directly or
indirectly through Subsidiaries.
"Term" shall mean the period from and after the date hereof until
the payment or satisfaction in full of all Obligations under this Agreement and
the other Operative Documents.
"Treasury Note Maturity" shall mean the period of months set forth
following such term on the cover page of this Agreement.
"Warrant" shall mean a warrant to purchase securities of Borrower
substantially in the form of Exhibit C.
1.02. Headings. Headings in this Agreement and each of the other
Operative Documents are for convenience of reference only and are not part of
the substance hereof or thereof.
1.03. Plural Terms. All terms defined in this Agreement or any other
Operative Document in the singular form shall have comparable meanings when used
in the plural form and vice versa.
1.04. Construction. This Agreement is the result of negotiations
among, and has been reviewed by, Borrower and Lender and their respective
counsel. Accordingly, this Agreement shall be deemed to be the product of all
parties hereto, and no ambiguity shall be construed in favor of or against
Borrower or Lender.
1.05. Entire Agreement. This Agreement, together with the terms set
forth in each of the other Operative Documents, taken together, constitute and,
contain the entire agreement of Borrower and Lender and, with regard to their
respective subject matters, supersede any and all prior agreements, term sheets,
negotiations, correspondence, understandings and communications among the
parties, whether written or oral, with respect to their respective subject
matters.
1.06. Other Interpretive Provisions. References in this Agreement to
"Articles," "Sections," "Exhibits," "Schedules" and "Annexes" are to recitals,
articles, sections, exhibits, schedules and annexes herein and hereto unless
otherwise indicated. References in this Agreement and each of the other
Operative Documents to any document, instrument or agreement shall include (a)
all exhibits, schedules, annexes and other attachments thereto, (b) all
documents, instruments or agreements issued or executed in replacement thereof,
and (c) such document, instrument or agreement, or replacement or predecessor
thereto, as amended, modified and supplemented from time to time and
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in effect at any given time. The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement or any other Operative
Document shall refer to this Agreement or such other Operative Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Operative Document, as the case may be. The words "include" and
"including" and words of similar import when used in this Agreement or any other
Operative Document shall not be construed to be limiting or exclusive. Unless
otherwise indicated in this Agreement or any other Operative Document, all
accounting terms used in this Agreement or any other Operative Document shall be
construed, and all accounting and financial computations hereunder or thereunder
shall be computed, in accordance with generally accepted accounting principles
as in effect in the United States of America from time to time.
ARTICLE II
THE CREDIT
2.01. Credit Facility.
(a) Commitment. On the terms and subject to the conditions hereof
and relying upon the representations and warranties herein set forth as and when
made or deemed to be made, Lender agrees to make a Loan in the principal amount
of Five Million Dollars ($5,000,000).
(b) Loan Interest Rate. Borrower shall pay interest on the unpaid
principal amount of the Loan from the date the Loan is made until the Loan is
paid in full, at a per annum rate of interest equal to the Loan Rate determined
in accordance with the definition of Loan Rate. All computations of such
interest shall be based on a year of twelve 30 day months. The Loan Rate
applicable to the Loan shall not be subject to change in the absence of manifest
error. If Borrower pays interest on any Loan which is determined to be in excess
of the then legal maximum rate, then that portion of each interest payment
representing an amount in excess of the then legal maximum rate shall be deemed
a payment of principal and applied against the principal of the Loan.
(c) Payments of Principal and Interest. On each Payment Date,
commencing on June 15, 1997, Borrower shall make equal payments of principal and
interest each in the amount set forth in the Note. Payments of principal and
interest on the Loan may not be prepaid.
2.02. Use of Proceeds; the Loan and the Note; Disbursement.
(a) Use of Proceeds. The proceeds of the Loan shall be used solely
for working capital or general corporate purposes of Borrower.
(b) The Loan and the Note. The obligation of Borrower to repay the
unpaid principal amount of and interest on the Loan shall be evidenced by the
Note. Lender may, and is hereby authorized by Borrower to, endorse on a grid
annexed to the Note appropriate notations regarding the Loan; provided, however,
that the failure to make, or an error in making, any such notation shall not
limit or otherwise affect the obligations of Borrower hereunder or under the
Note.
(c) Disbursement. Subject to the satisfaction of the conditions set
forth in this Agreement, Lender shall disburse such Loan by wire transfer to
Borrower unless otherwise directed in writing by Borrower.
(d) Termination of Commitment to Lend. Notwithstanding anything to
the contrary in the Operative Documents, Lender's obligation to lend the
undisbursed portion of the Credit Amount to Borrower hereunder shall terminate
on the earlier of (i) the occurrence of any Event of Default hereunder, and (ii)
the Commitment Termination Date.
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2.03. Other Payment Terms.
(a) Place and Manner. Borrower shall make all payments due to Lender
in lawful money of the United States, in immediately available funds, at the
address for payments and in the manner specified in Section 10.05(b).
(b) Date. Whenever any payment due hereunder shall fall due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall be included in the computation of
interest or fees, as the case may be.
(c) Default Rate. If either (i) any amounts required to be paid by
Borrower under this Agreement or the other Operative Documents (including
principal or interest payable on any Loan, any fees or other amounts) remain
unpaid after such amounts are due, or (ii) an Event of Default has occurred and
is continuing, Borrower shall pay interest on the outstanding principal balance
hereunder from the date due or from the date of the Event of Default, as
applicable, until such past due amounts are paid in full or until all Events of
Defaults are cured, as applicable, at a per annum rate equal to the Default
Rate, such rate to change from time to time as the Prime Rate shall change. All
computations of such interest at the Default Rate shall be based on a year of
twelve 30 day months.
2.04. Commitment Fee. Lender has received a commitment fee from
Borrower in the amount of $20,000 (the "Commitment Fee"). Any portion of the
Commitment Fee not utilized to pay Lender's expenses (not to exceed $10,000)
will be applied by Lender to amounts due under the Note in the order in which
such amounts are due. If the Loan is not made, any remaining balance of the
Commitment Fee shall be retained by Lender.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01. Representations and Warranties. Except as set forth in the
Disclosure Schedule, Borrower makes the following representations and warranties
to Lender as of the date hereof and again on the Funding Date:
(a) Organization and Qualification. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and is duly qualified to do business in the state of California.
Borrower has no Subsidiaries.
(b) Authority. Borrower has all necessary corporate power, authority
and legal right and has obtained all approvals and consents and has given all
notices necessary to execute and deliver this Agreement and the other Operative
Documents and to perform the terms hereof and thereof. Borrower has all
requisite corporate power and authority to own and operate its properties and to
carry on its businesses as now conducted.
(c) Conflict with Other Instruments, etc. Neither the execution and
delivery of any Operative Document to which Borrower is a party nor the
consummation of the transactions therein contemplated nor compliance with the
terms, conditions and provisions thereof will conflict with or result in a
breach of any of the terms, conditions or provisions of the charter or the
bylaws of Borrower or, to its knowledge, any law or any regulation, order, writ,
injunction or decree of any court or governmental instrumentality or any
material agreement or instrument to which Borrower is a party or by which it or
any of its properties is bound or to which it or any of its properties is
subject, or constitute a default thereunder or result in the creation or
imposition of any Lien, other than Permitted Liens.
(d) Title to Properties. Borrower has good and marketable title to
the Collateral, free and clear of all Liens, other than Permitted Liens.
Borrower has title and ownership of, or is licensed under, all Intellectual
Property, with no known infringement of the rights of others. Borrower has not
received any communications alleging that Borrower has violated, or by
conducting its business as proposed, would violate any proprietary rights of any
other Person.
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Borrower has no knowledge of any infringement or violation by it of the
intellectual property rights of any third party and has no knowledge of any
violation or infringement by a third party of any of its Intellectual Property.
The Collateral and the Intellectual Property constitute substantially all of the
assets and property of Borrower. Borrower does not own any right, title or
interest in or to any real property or motor vehicles, other than motor vehicles
leased for executives as part of a benefit arrangement.
(e) Authorization, Governmental Approvals, etc. The execution and
delivery by Borrower of each Operative Document, the granting of the security
interest in the Collateral, the issuance of the Warrant, the issuance of the
securities into which the Warrant is exercisable, the issuance of any securities
into which the securities issuable upon exercise of the Warrant are convertible,
and the performance of the obligations herein and therein contemplated have each
been duly authorized by all necessary action on the part of Borrower. No
authorization, consent, approval, license or exemption of, and no registration,
qualification, designation, declaration or filing with, or notice to, any Person
is, was or will be necessary to (i) the valid execution and delivery of any
Operative Document to which Borrower is a party, (ii) the performance of
Borrower's obligations under any Operative Document, or (iii) the granting of
the security interest in the Collateral, except for filings in connection with
the perfection of the security interest in any of the Collateral or the issuance
of the Warrant. The Operative Documents have been or will be duly executed and
delivered and constitute or will constitute legal, valid and binding obligations
of Borrower, enforceable in accordance with their respective terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency or other
similar laws of general application relating to or affecting the enforcement of
creditors' rights or by general principles of equity.
(f) Litigation. There are no actions, suits, proceedings or
investigations pending or, to the knowledge of Borrower, threatened against or
affecting Borrower, or the business or any property or asset owned by it, before
any court or governmental department, agency or instrumentality which, if
adversely determined, could reasonably be expected to have a material adverse
effect on the financial condition, business or operations of Borrower.
(h) Security Interest. Assuming the proper filing of one or more
financing statement(s) identifying the Collateral with the California Secretary
of State, the security interests in the Collateral granted to Lender pursuant to
this Agreement (i) constitute and will continue to constitute first priority
security interests (except to the extent any other Permitted Lien existing on
the date of this Agreement may create any priority to Lender's Lien under this
Agreement) to the extent a security interest in such Collateral may be perfected
with the filing of a financing statement with the California Secretary of State
and (ii) are and will continue to be superior and prior to the rights in the
Collateral of all other creditors of Borrower (except to the extent of such
Permitted Liens).
(i) Executive Offices. The principal place of business and chief
executive office of Borrower, and the office where Borrower will keep all
records and files regarding the Collateral, is set forth on the cover page of
this Agreement.
(j) Solvency, Etc. Borrower is Solvent (as defined below) and, after
the execution and delivery of the Operative Documents and the consummation of
the transactions contemplated thereby, Borrower will be Solvent. "Solvent" shall
mean, with respect to any Person on any date, that on such date (a) the fair
value of the property of such Person is greater than the fair value of the
liabilities (including, without limitation, contingent liabilities) of such
Person, (b) the present fair saleable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature and (d)
such Person is not engaged in business or a transaction, and is not about in
business or a transaction, for which such Person's property would constitute an
unreasonably small capital.
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(k) Catastrophic Events; Labor Disputes. None of Borrower or its
properties is or has been affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or other casualty that could reasonably be expected to have a material
adverse effect on the financial condition, business or operations of Borrower.
There are no disputes presently subject to grievance procedure, arbitration or
litigation under any of the collective bargaining agreements, employment
contracts or employee welfare or incentive plans to which Borrower is a party,
and there are no strikes, lockouts, work stoppages or slowdowns, or, to the best
knowledge of Borrower, jurisdictional disputes or organizing activity occurring
or threatened which could reasonably be expected to have a material adverse
effect on the financial condition, business or operations of Borrower.
(l) No Material Adverse Effect. No event has occurred and no
condition exists which could reasonably be expected to have a material adverse
effect on the financial condition, business or operations of Borrower since
December 31, 1996.
(m) Accuracy of Information Furnished. None of the Operative
Documents and none of the other certificates, statements or information
furnished to Lender by or on behalf of Borrower in connection with the Operative
Documents or the transactions contemplated thereby contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Lender recognizes that all
financial projections furnished to the Lender by or on behalf of Borrower in
connection with the Operative Documents or the transactions contemplated thereby
are not to be viewed as facts and that actual results during the period or
periods covered by such projections may differ from the projected or forecasted
results.
(n) Certain Agreements of Officers, Employees and Consultants.
(i) To Borrower's knowledge, no officer, employee or
consultant of Borrower is, or is now expected to be, in material violation of
any term of any employment contract, proprietary information agreement,
nondisclosure agreement, noncompetition agreement, or any other material
contract or agreement or any restrictive covenant relating to the right of any
such officer, employee or consultant to be employed by Borrower because of the
nature of the business conducted or to be conducted by Borrower or relating to
the use of trade secrets or proprietary information of others, and to the best
of Borrower's knowledge, the continued employment of Borrower's officers,
employees and consultants do not subject Borrower to any liability for any claim
or claims arising out of or in connection with any such contract, agreement, or
covenant.
(ii) To the knowledge of Borrower, no officers of Borrower,
and no employee or consultant of Borrower whose termination, either individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect, has any present intention of terminating his or her employment or
consulting relationship with Borrower.
ARTICLE IV
REPORTING REQUIREMENTS
4.01. Furnishing Reports. Borrower shall furnish to Lender:
(a) Financial Statements. Promptly as they are available and in any
event: (i) at the time of filing of Borrower's Form 10-K with the Securities and
Exchange Commission after the end of each fiscal year of Borrower, the financial
statements of Borrower filed with such Form 10-K; and (ii) at the time of filing
of Borrower's Form 10-Q
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with the Securities and Exchange Commission after the end of each of the first
three fiscal quarters of Borrower, the financial statements of Borrower filed
with such Form 10-Q.
(b) Notice of Defaults. As soon as possible, and in any event within
five (5) Business Days after the discovery of a Default or Event of Default
provide Lender with an Officer's Certificate of Borrower setting forth the facts
relating to or giving rise to such Default or Event of Default and the action
which Borrower proposes to take with respect thereto.
(c) Miscellaneous. Such other information as Lender may reasonably
request from time to time.
ARTICLE V
GRANT OF SECURITY INTEREST
GENERAL PROVISIONS CONCERNING SECURITY
5.01. Grant of Security Interest. Borrower, in order to secure the
payment of the principal and interest with respect to the Loan made pursuant to
this Agreement, all other sums due under and in respect hereof and of the other
Operative Documents, including fees, charges, expenses and reasonable attorneys'
fees and costs and the performance and observance by Borrower of all other
terms, conditions, covenants and agreements herein and in the other Operative
Documents (all such amounts and obligations being herein sometimes called the
"Obligations"), does hereby grant to Lender and its successors and assigns, a
security interest in and to the following property (collectively, the
"Collateral"): All right, title, interest, claims and demands of Borrower in and
to the following to the extent they do not include Intellectual Property:
(a) All goods and equipment now owned or hereafter acquired,
including, without limitation, all laboratory equipment, computer equipment,
office equipment, machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory now owned or hereafter acquired,
including, without limitation, all merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products including
such inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's books relating to any of the foregoing;
(c) All contract rights and general intangibles (except to
the extent included within the definition of Intellectual Property), now owned
or hereafter acquired, including, without limitation, goodwill, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
disks, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts,
contract rights, royalties, license rights and all other forms of obligations
owing to Borrower arising out of the sale or lease of goods, the licensing of
technology or the rendering of services by Borrower (subject, in each case, to
the contractual rights of third parties to require funds received by Borrower to
be expended in a particular manner), whether or not earned by performance, and
any and all credit insurance, guaranties, and other security therefor, as well
as all merchandise returned to or reclaimed by Borrower and Borrower's books
relating to any of the foregoing;
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(e) All documents, cash, deposit accounts, investment
property, securities entitlements, securities, letters of credit, certificates
of deposit, instruments and chattel paper now owned or hereafter acquired and
Borrower's books relating to the foregoing;
(f) Any and all claims, rights and interests in any of the
above and all substitutions for, additions and accessions to and proceeds
thereof, including, without limitation, insurance, condemnation, requisition or
similar payments and proceeds of the sale or licensing of Intellectual Property
to the extent such proceeds no longer constitute Intellectual Property; but
(g) Excluding, all Intellectual Property.
Notwithstanding the foregoing provisions of this Section 5.01, such grant of a
security interest shall not extend to, and the term "Collateral" shall not
include, any property or general intangibles which are now or hereafter held by
Borrower as licensee, lessee or otherwise, to the extent that (i) such property
or general intangibles are not assignable or capable of being encumbered as a
matter of law or under the terms of the license, lease or other agreement
applicable thereto (but solely to the extent that any such restriction shall be
enforceable under applicable law), without the consent of the licensor or lessor
thereof or other applicable party thereto and (ii) such consent has not been
obtained; provided, however, that the foregoing grant of a security interest
shall extend to, and the term Collateral shall include, (A) any and all proceeds
of such property and general intangibles to the extent that the assignment or
encumbering of such proceeds is not so restricted and (B) upon any such
licensor, lessor or other applicable party's consent with respect to any such
otherwise excluded property or general intangible being obtained., thereafter
such property or general intangibles as well as any and proceeds thereof that
might theretofore have been excluded from such grant of a security interest and
the term Collateral.
5.02. Duration of Security Interest. Lender's security interest in
the Collateral shall continue until the payment in full and the satisfaction of
all Obligations, whereupon such security interest shall terminate. Lender, upon
payment in full and the satisfaction of the Obligations, shall execute such
further documents and take such further actions as may be necessary to effect
the release and/or termination contemplated by this Section 5.02, including duly
executing and delivering termination statements for filing in all relevant
jurisdictions.
5.03. Possession of Collateral. Except as set forth in Section 5.04,
so long as no Event of Default has occurred and is continuing, Borrower shall
remain in full possession, enjoyment and control of the Collateral (except only
as may be otherwise required by Lender for perfection of its security interest
therein) and to manage, operate and use the same and each part thereof with the
rights and franchises appertaining thereto; provided, however, that the
possession, enjoyment, control and use of the Collateral shall at all times be
subject to the observance and performance of the terms of this Agreement.
5.04 Location of Collateral. The Collateral is and shall remain in
the possession of Borrower at Borrower's address stated on the cover page of
this Agreement, except for (i) deposit accounts at banks and securities accounts
held by broker-dealers, and (ii) other Collateral having an aggregate fair
market value of not more than One Hundred Thousand Dollars ($100,000) which may
be moved to other locations from time to time.
5.05 Lien Subordination. Lender agrees that the Liens granted to it
hereunder shall be subordinate to the Liens of existing and future lenders
providing equipment financing and equipment lessors; provided that such Liens
are confined solely to the equipment so financed and the proceeds thereof; and
provided, further, that the Obligations hereunder shall not be subordinate in
right of payment to any obligations to other lenders or equipment lessors and
Lender's rights and remedies hereunder shall not in any way be subordinate to
the rights and remedies of any such lenders or equipment lessors. Lender agrees
to execute and deliver such agreements and documents as may be
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reasonably requested by Borrower from time to time which set forth the lien
subordination described in this Section 5.05 and are reasonably acceptable to
Lender. Lender shall have no obligation to execute any agreement or document
which would impose obligations, restrictions or lien priority on Lender which
are less favorable to Lender than those described in this Section 5.05.
ARTICLE VI
AFFIRMATIVE COVENANTS
6.01. Affirmative Covenants.
(a) Payment of Taxes, etc. Borrower shall pay and discharge all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits, or upon any properties belonging to it, prior to the date
on which penalties attach thereto, and all lawful claims which, if unpaid, might
become a Lien upon any of its properties; provided that there shall be no
requirement to pay any such tax, assessment, charge, levy or claim (i) which is
being contested in good faith and by appropriate proceedings or which presents
no risk of seizure, forfeiture, levy or other event which could jeopardize any
Collateral or (ii) for which payment in full is bonded or reserved in Borrower's
financial statements.
(b) Inspection Rights. Borrower shall, at any reasonable time and
from time to time, permit Lender or any of its agents or representatives to
inspect the Collateral, to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, Borrower and to
discuss the affairs, finances and accounts of Borrower with any of its officers
or directors relating in each case to Lender's capacity as lender and secured
party hereunder and with respect to the Collateral.
(c) Maintenance of Equipment and Similar Assets. Borrower shall keep
and maintain all items of equipment and other similar types of tangible personal
property that form any significant portion or portions of the Collateral in good
operating condition and repair and shall make all necessary replacements thereof
and renewals thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved. Borrower shall not permit any such
material item of tangible Collateral to become a fixture to real estate or an
accession to other tangible personal property, without the prior written consent
of Lender. Borrower shall not permit any such material item of tangible
Collateral to be operated or maintained in violation of any applicable law,
statute, rule or regulation. With respect to items of leased equipment (to the
extent Lender has any security interest in any residual Borrower's interest in
such equipment under the lease), Borrower shall keep, maintain, repair, replace
and operate such leased equipment in accordance with the terms of the applicable
lease.
(d) Insurance.
(i) Borrower shall, obtain and maintain for the Term, at its
own expense, (x) "all risk" insurance against loss or damage to the Collateral,
(y) commercial general liability insurance (including contractual liability,
products liability and completed operations coverages) reasonably satisfactory
to Lender, and (z) such other insurance against such other risks of loss and
with such terms, as shall in each case be reasonably satisfactory to or
reasonably required by Lender (as to carriers, amounts and otherwise). The
amount of the "all risk" insurance shall be determined to Lender's reasonable
satisfaction as of each anniversary date of this Agreement and the appropriate
amount of coverage shall be put in effect on the next succeeding renewal or
inception date of such insurance.
(ii) The deductible with respect to "all-risk" insurance
required by clause (x) above and product liability insurance required by clause
(y) above shall not exceed $25,000; otherwise there shall be no deductible with
respect to any insurance required to be maintained hereunder. The amount of
commercial general liability insurance (other than products liability coverage
and completed operations insurance) required by clause (y) above shall be at
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least $3,000,000 per occurrence. The amount of the products liability and
completed operations insurance required by clause (y) above shall be at least
$3,000,000 per occurrence. Each "all risk" policy shall: (x) name Lender as loss
payee, (y) provide for each insurer's waiver of its right of subrogation against
Lender, and (z) provide that such insurance (A) shall not be invalidated by any
action of, or breach of warranty by, Borrower of a provision of any of its
insurance policies, and (B) shall waive set-off, counterclaim or offset against
Lender. Each liability policy shall (w) name Lender as an additional insured in
the full amount of Borrower's liability coverage limits (or the coverage limits
of any successor to Borrower or such successor's parent which is providing
coverage) and (x) provide that such insurance shall have cross-liability and
severability of interest endorsements (which shall not increase the aggregate
policy limits of Borrower's insurance). All insurance policies shall (y) provide
that Borrower's insurance shall be primary without a right of contribution of
Lender's insurance, if any, or any obligation on the part of Lender to pay
premiums of Borrower, and (z) shall contain a clause requiring the insurer to
give Lender at least 30 days' prior written notice of its cancellation (other
than cancellation for non-payment for which 10 days' notice shall be
sufficient). Borrower shall on or prior to the first Funding Date and prior to
each policy renewal, furnish to Lender certificates of insurance or other
evidence satisfactory to Lender that such insurance coverage is in effect.
ARTICLE VII
NEGATIVE COVENANTS
7.01. Negative Covenants. So long as the Obligations remain
outstanding, Borrower shall not:
(a) Name; Location of Chief Executive Office and Collateral. Without
thirty (30) days prior written notice to Lender, change its chief executive
office or principal place of business or remove or cause to be removed from the
location set forth on the cover page hereof or move any Collateral, except
deposit accounts and brokerage accounts, to a location other than that set forth
on the cover page hereof.
(b) Liens on Collateral. Create, incur, assume or suffer to exist
any Lien of any kind upon any Collateral, whether now owned or hereafter
acquired, except Permitted Liens.
(c) Negative Pledge Regarding Intellectual Property. Create, incur,
assume or suffer to exist any Lien of any kind upon any Intellectual Property,
whether now owned or hereafter acquired, except Permitted Liens.
(d) Dispositions of Collateral or Intellectual Property. Convey,
sell, offer to sell, lease, transfer, exchange or otherwise dispose of
(collectively, a "Transfer") all or any part of the Collateral or Intellectual
Property to any Person, other than: (i) transfers of inventory, cash and cash
equivalents in the ordinary course of business; (ii) transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower in the
ordinary course of business; or (iii) transfers of worn-out or obsolete
equipment. It is expressly agreed and understood that the ordinary course of
Borrower's business includes entering into agreements and arrangements with
third parties for research, development, manufacturing, sale or marketing of
products and the licensing of Intellectual Property in connection with such
agreements and arrangements.
(e) Distributions. (i) Pay any dividends or make any distributions
on its Equity Securities; (ii) purchase, redeem, retire, defease or otherwise
acquire for value any of its Equity Securities in an aggregate amount not to
exceed $250,000 (other than repurchases by cancellation of indebtedness pursuant
to the terms of employee stock purchase plans, employee restricted stock
agreements or similar arrangements); (iii) return any capital to any holder of
its Equity Securities as such; (iv) make any distribution of assets, Equity
Securities, obligations or securities to any holder of its Equity Securities as
such; or (v) set apart any sum for any such purpose; provided, however, that
Borrower may pay dividends payable solely in Common Stock or warrants or options
therefor.
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(f) Mergers or Acquisitions. Without the prior written consent of
Lender, which shall not be unreasonably withheld, merge or consolidate with or
into any other Person or acquire or all or substantially all of the capital
stock or assets of another Person.
(i) Transactions With Affiliates. Shall enter into any contractual
obligation with any affiliate or engage in any other transaction with any
affiliate except upon terms at least as favorable to Borrower as an arms-length
transaction with unaffiliated Persons.
(j) Maintenance of Accounts. Maintain any deposit accounts or
accounts holding securities owned by Borrower except (i) accounts located at
Xxxxx Fargo Bank, N.A., and (ii) other accounts with respect to which Lender
takes such action as it deems necessary to obtain a perfected security interest
in such account.
(k) Indebtedness Payments. Prepay, redeem, purchase, defease or
otherwise satisfy in any manner prior to the scheduled repayment thereof any
Indebtedness for borrowed money (other than amounts due under this Loan
Agreement or the Note) or lease obligations, (ii) amend, modify or otherwise
change the terms of any Indebtedness for borrowed money (other than the
Obligations) or lease obligations so as to accelerate the scheduled repayment
thereof or (iii) repay any notes to officers, directors or shareholders.
(l) Subsidiaries. Without the prior written consent of Lender, which
shall not be unreasonably withheld, form any Subsidiary.
(m) Indebtedness. Create, incur, assume or permit to exist any
Indebtedness except (i) trade credit in the ordinary course of business; (ii)
Indebtedness existing on the date hereof and set forth on the Disclosure
Schedule; (iii) Indebtedness secured by Liens permitted under clause (e) of the
definition of Permitted Liens and (iv) Subordinated Indebtedness.
(n) Investments. Make any Investment except for Permitted
Investments.
ARTICLE VIII
CONDITIONS PRECEDENT
8.01. Closing. At the time of execution and delivery of this
Agreement, Borrower shall have duly executed and/or delivered to Lender the
items set forth in Part I of Schedule 3.
8.02. Other Conditions. The obligation of Lender to make the Loan
shall be subject to the execution and/or delivery to Lender of each of the items
set forth in Part I of Schedule 3 and the satisfaction of by Borrower of each
condition set forth in Part II of Schedule 3.
8.03. Covenant to Deliver. Borrower agrees (not as a condition but
as a covenant) to deliver to Lender each item required to be delivered to Lender
as a condition to the Loan, if the Loan is advanced. Borrower expressly agrees
that the extension of such Loan prior to the receipt by Lender of any such item
shall not constitute a waiver by Lender of Borrower's obligation to deliver such
item.
ARTICLE IX
DEFAULT AND REMEDIES
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9.01. Events of Default. An "Event of Default" shall mean the
occurrence of one or more of the following described events:
(a) Borrower shall (i) default in the payment of principal of or
interest on the Loan when the same is due, or (ii) default in the payment of any
expense or other amount payable hereunder or thereunder for five (5) days after
receipt of written notice from Lender that the same is due; or
(b) Borrower shall breach any provision of Section 7.01; or
(c) Borrower shall default in the performance of any covenant,
agreement or obligation (other than a covenant, agreement or obligation referred
to in, Section 9.01(a) or Section 9.01(b)) contained in any Operative Document
(other than the Warrant) and Borrower shall fail to cure within thirty (30) days
after receipt of written notice from Lender any default in the performance of
any such covenant, agreement or obligation contained therein; or
(d) Borrower shall have breached the terms of the Warrant and shall
have failed to cure such breach within five (5) days of notice thereof; or
(e) Any representation or warranty made herein or on the Funding
Date by Borrower in any Operative Document, or any certificate or financial
statement furnished pursuant to the provisions of any Operative Document, shall
prove to have been false or misleading in any material respect as of the time
made or furnished; or
(f) Any Operative Document shall in any material respect cease to
be, or Borrower shall assert that any Operative Document is not, a legal, valid
and binding obligation of Borrower enforceable in accordance with its terms; or
(g) An uncured default shall exist under any agreement with any
third party or parties which consists of the failure to pay any Indebtedness at
maturity (or within any grace period thereafter) or which results in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness of Borrower in an amount in excess of ($250,000);
or
(h) A proceeding shall have been instituted in a court of competent
jurisdiction seeking a decree or order for relief in respect of Borrower in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or for the appointment of a receiver,
liquidator, assignee, custodian, trustee (or similar official) of Borrower or
for any substantial part of its property, or for the winding-up or liquidation
of its affairs, and such proceeding shall remain undismissed or unstayed and in
effect for a period of thirty (30) consecutive days or such court shall enter a
decree or order granting the relief sought in such proceeding; or
(i) Borrower shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian (or other similar official)
of Borrower or for any substantial part of its property, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any corporate action in furtherance of
any of the foregoing; or
(j) A final judgment or order for the payment of money in excess of
One Hundred Thousand Dollars ($100,000) (exclusive of amounts covered by
insurance issued by an insurer not an affiliate of Borrower) shall be rendered
against Borrower and the same shall remain undischarged for a period of thirty
(30) days during which
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execution shall not be effectively stayed, or any judgment, writ, assessment,
warrant of attachment, or execution or similar process shall be issued or levied
against a substantial part of the property of Borrower and such judgment, writ,
or similar process shall not be released, stayed, vacated or otherwise dismissed
within thirty (30) days after issue or levy.
9.02. Consequences of Event of Default. (a) If an Event of Default
specified under clauses (a) through (g) of Section 9.01 shall occur and be
continuing, Lender may (i) declare the Loan, together with interest thereon, and
all other liabilities of Borrower hereunder and under the other Operative
Documents to be immediately due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived,
and (ii) terminate its commitment to make the Loan and terminate any commitment
to advance money or extend credit to or for the benefit of Borrower pursuant to
any other agreement or commitment extended by Lender to Borrower.
(b) If an Event of Default specified under clause (h) or (i) of
Section 9.01 shall occur, then immediately and without notice (i) the Loan,
together with interest thereon, and all other liabilities of Borrower hereunder
and under the other Operative Documents shall automatically become due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, and (ii) Lender's commitment hereunder to
make the Loan and any other commitment of Lender to Borrower to advance money or
extend credit pursuant to any other agreement or commitment shall be terminated.
9.03. Rights Regarding Collateral. Borrower agrees that when any
Event of Default has occurred and is continuing, Lender shall have the rights,
options, duties and remedies of a secured party as permitted by law and, in
addition to and without limiting the foregoing, Lender may exercise any one or
more or all, and in any order, of the remedies herein set forth, including the
following:
(a) Lender, personally or by agents or attorneys, shall have the
right (subject to compliance with any applicable mandatory legal requirements)
to require Borrower to assemble the Collateral and make it available to Lender
at a place to be designated by Lender or to take immediate possession of the
Collateral, or any portion thereof, and for that purpose may pursue the same
wherever it may be found, and may enter any of premises of Borrower, with or
without notice, demand, process of law or legal procedure, to the extent
permitted by applicable law, and search for, take possession of, remove, keep
and store the same, or use and operate or lease the same until sold. In
furtherance of Lender's rights hereunder, Borrower hereby grants to Lender an
irrevocable, non-exclusive license (exercisable without royalty or other payment
by Lender) to use, license or sublicense any patent, trademark, trade name,
copyright or other intellectual property in which Borrower now or hereafter has
any right, title or interest together with the right of access to all media in
which any of the foregoing may be recorded or stored; provided, however, that
such license shall only be exercisable in connection with the disposition of
Collateral upon Lender's exercise of its remedies hereunder.
(b) Lender may, if at the time such action may be lawful and always
subject to compliance with any mandatory legal requirements, either with or
without taking possession and either before or after taking possession, without
instituting any legal proceedings whatsoever, having first given notice of such
sale by registered or certified mail to Borrower once at least ten (10) days
prior to the date of such sale, and having first given any other notice which
may be required by law, sell and dispose of the Collateral, or any part thereof,
at a private sale or at public auction, to the highest bidder, in one lot as an
entirety or in separate lots, and either for cash or on credit and on such terms
as Lender may determine, and at any place (whether or not it be the location of
the Collateral or any part thereof) designated in the notice referred to above.
To the extent permitted by applicable law, any such sale or sales may be
adjourned from time to time by announcement at the time and place appointed for
such sale or sales, or for any such adjourned sale or sales, without further
published notice, and Borrower, Lender or the holder or holders of the Note, or
of any interest therein, may bid and become the purchaser at any such sale.
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(c) Lender may proceed to protect and enforce this Agreement and the
other Operative Documents by suit or suits or proceedings in equity, at law or
in bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted;
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for any real property security or any part thereof, or for the recovery of
judgment for the Obligations or for the enforcement of any other proper, legal
or equitable remedy available under applicable law.
9.05. Effect of Sale. Any sale, whether under any power of sale
available to Lender or by virtue of judicial proceedings, shall operate to
divest all right, title, interest, claim and demand whatsoever, either at law or
in equity, of Borrower in and to the property sold, and shall be a perpetual
bar, both at law and in equity, against Borrower, its successors and assigns,
and against any and all persons claiming the property sold or any part thereof
under, by or through Borrower, its successors or assigns.
9.06. Application of Collateral Proceeds. The proceeds and/or avails
of the Collateral, or any part thereof, and the proceeds and the avails of any
remedy hereunder (as well as any other amounts of any kind held by Lender at the
time of, or received by Lender after, the occurrence of an Event of Default
hereunder) shall be paid to and applied as follows:
(a) First, to the payment of reasonable costs and expenses,
including all reasonable amounts reasonably expended to preserve the value of
the Collateral, of foreclosure or suit, if any, and of such sale and the
exercise of any other rights or remedies, and of all proper and reasonable fees,
expenses, liability and advances, including reasonable legal expenses and
attorneys' fees, incurred or made hereunder by Lender;
(b) Second, to the payment to Lender of the amount then owing or
unpaid on the Note, and in case such proceeds shall be insufficient to pay in
full the whole amount so due, owing or unpaid upon the Note, then first, to the
unpaid interest thereon, second, to unpaid principal thereof and third to the
remaining balance of the Obligations under the Note; such application to be made
upon presentation of the Note, and the notation thereon of the payment, if
partially paid, or the surrender and cancellation thereof, if fully paid;
(c) Third, to the payment of other amounts then payable to Lender
under any of the Operative Documents; and
(d) Fourth, to the payment of the surplus, if any, to Borrower, its
successors and assigns, or to whomsoever may be lawfully entitled to receive the
same.
9.07. Reinstatement of Rights. If Lender shall have proceeded to
enforce any right under this Agreement or any other Operative Document by
foreclosure, sale, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined
adversely, then and in every such case (unless otherwise ordered by a court of
competent jurisdiction), Lender shall be restored to its former position and
rights hereunder with respect to the property subject to the security interest
created under this Agreement.
ARTICLE X
MISCELLANEOUS
10.01. Modifications, Amendments or Waivers. The provisions of any
Operative Document may be modified, amended or waived only by a written
instrument signed by the parties thereto.
10.02. No Implied Waivers; Cumulative Remedies; Writing Required. No
delay or failure of Lender in exercising any right, power or remedy hereunder
shall affect or operate as a waiver thereof; nor shall any single or
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partial exercise thereof or any abandonment or discontinuance of steps to
enforce such a right, power or remedy preclude any further exercise thereof or
of any other right, power or remedy. The rights and remedies hereunder of Lender
are cumulative and not exclusive of any rights or remedies which it would
otherwise have. Any waiver, permit, consent or approval of any kind or character
on the part of Lender of any breach or default under this Agreement or any such
waiver of any provision or condition of this Agreement must be in writing and
shall be effective only in the specified instance and to the extent specifically
set forth in such writing.
10.03. Expenses; Indemnification. Borrower agrees upon demand to pay
or reimburse Lender for all liabilities, obligations and reasonable
out-of-pocket expenses, including reasonable fees and expenses of counsel for
Lender, from time to time arising in connection with the enforcement or
collection of sums due under the Operative Documents. Borrower shall indemnify,
reimburse and hold Lender, each of Lender's partners, and each of their
respective successors, assigns, agents, officers, directors, shareholders,
servants, agents and employees harmless from and against all liabilities,
losses, damages, actions, suits, demands, claims of any kind and nature
(including claims relating to environmental discharge, cleanup or compliance),
all reasonable costs and expenses whatsoever to the extent they may be incurred
or suffered by such indemnified party in connection therewith (including
reasonable attorneys' fees and expenses), fines, penalties (and other charges of
applicable governmental authorities), licensing fees relating to any item of
Collateral, damage to or loss of use of property (including consequential
damages to third parties), or bodily injury to or death of any person (including
any agent or employee of Borrower) (each, a "Claim"), directly or indirectly
relating to or arising out of the use of the proceeds of the Loan or otherwise,
the falsity of any representation or warranty of Borrower or Borrower's failure
to comply with the terms of this Agreement or any other Operative Document
during the Term. The foregoing indemnity shall cover, without limitation, (i)
any Claim in connection with a design or other defect (latent or patent) in any
item of equipment included in the Collateral, (ii) any Claim for infringement of
any patent, copyright, trademark or other intellectual property right, (iii) any
Claim resulting from the presence on or under or the escape, seepage, leakage,
spillage, discharge, emission or release of any Hazardous Materials on the
premises of Borrower, including any Claims asserted or arising under any
Environmental Law, or (iv) any Claim for negligence or strict or absolute
liability in tort; provided, however, that Borrower shall not indemnify Lender
for any liability incurred by Lender as a proximate result of Lender's gross
negligence or willful misconduct. Such indemnities shall continue in full force
and effect, notwithstanding the expiration or termination of this Agreement.
Upon Lender's written demand, Borrower shall assume and diligently conduct, at
its sole cost and expense, the entire defense of Lender, each of its partners,
and each of their respective, agents, employees, directors, officers,
shareholders, successors and assigns against any indemnified Claim described in
this Section 10.03. Borrower shall not settle or compromise any Claim against or
involving Lender without first obtaining Lender's written consent thereto, which
consent shall not be unreasonably withheld.
10.04. Waivers. (a) Borrower shall give Lender written notice within
one hundred eighty (180) days of obtaining knowledge of the occurrence of any
claim or cause of action it believes it has, or may seek to assert to allege
against Lender whether such claim is based in law or equity, arising under or
related to this Agreement or any of the other Operative Documents or to the
transactions contemplated hereby or thereby, or any act or omission to act by
Lender with respect hereto or thereto, and that if it shall fail to give such
notice to Lender with regard to any such claim or cause of action, Borrower
shall be deemed to have waived, and shall be forever barred from bringing or
asserting such claim or cause of action in any suit, action or proceeding in any
court or before any governmental agency or authority or any arbitrator. (b)
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR ANYWHERE
ELSE, BORROWER AGREES THAT IT SHALL NOT SEEK FROM LENDER UNDER ANY THEORY OF
LIABILITY (INCLUDING ANY THEORY IN TORTS), ANY SPECIAL, INDIRECT, CONSEQUENTIAL
OR PUNITIVE DAMAGES.
10.05. Notices; Payments. (a) All notices and other communications
given to or made upon any party hereto in connection with this Agreement shall
be in writing (including telexed, telecopied or telegraphic communication)
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and mailed (by certified or registered mail), telexed, telegraphed, telecopied
or delivered to the respective parties, as follows:
Borrower: At the address set forth on the cover page of this Agreement.
Lender: MMC/GATX PARTNERSHIP NO. I
c/o GATX Capital Corporation
Four Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone No.: 000-000-0000
Telecopier No.: 000-000-0000
Attention: Contract Administration
with a copy of all financial information to:
XXXXX XXXXXXXX & COMPANY
0 Xxxxxx Xxx, Xxxxx 000X
Xxxxxx, Xxxxxxxxxx 00000
or in accordance with any subsequent written direction from either party to the
other. All such notices and other communications shall, except as otherwise
expressly herein provided, be effective when received; or in the case of
delivery by messenger or overnight delivery service, when left at the
appropriate address.
(b) Unless Lender specifies otherwise in writing, all payments
shall be made to:
MMC/GATX PARTNERSHIP NO. I
c/o GATX Capital Corporation, as Agent
Xxx 00000
Xxxxxxx, Xxxxxxxx 00000
10.06. Termination. This Agreement shall terminate at the end of the
Term; provided, however, that the termination of this Agreement shall not affect
any of the rights and remedies of Lender hereunder, it being understood and
agreed that all such rights and remedies shall continue in full force and effect
until payment of all amounts owed to Lender under or in connection with the
Operative Documents, whether on account of principal, interest, fees or
otherwise.
10.07. Severability. If any provision of any Operative Document is
held invalid or unenforceable to any extent or in any application, the remainder
of such Operative Document and all other Operative Documents, or the application
of such provision to different Persons or circumstances or in different
jurisdictions, shall not be affected thereby.
10.08. Survival. All representations, warranties, covenants and
agreements of Borrower contained herein or made in writing in connection
herewith shall survive the execution and delivery of the Operative Documents,
the making of the Loan hereunder, the granting of security and the issuance of
the Note.
10.09. Governing Law. THIS AGREEMENT, THE OTHER OPERATIVE DOCUMENTS
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO AND THERETO SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF CALIFORNIA. ANY ACTION TO ENFORCE THIS AGREEMENT AGAINST BORROWER MAY BE
BROUGHT IN CALIFORNIA OR, WITH REGARD TO COLLATERAL, MAY ALSO BE BROUGHT
WHEREVER SUCH COLLATERAL IS LOCATED.
18
20
10.10. Successors and Assigns. This Agreement and the other
Operative Documents shall be binding upon and inure to the benefit of Lender,
all future holders of the Note, Borrower and their respective successors and
permitted assigns, except that Borrower may not assign or transfer its rights
hereunder or any interest herein without the prior written consent of Lender.
Lender may sell to any other financial entity (a "Participant") participation
interests in Lender's rights under this Agreement and the other Operative
Documents; provided that notwithstanding the sale of participations, Lender
shall remain solely responsible for the performance of its obligations under
this Agreement, Lender shall remain the holder of the Note for all purposes
under this Agreement and Borrower shall continue to deal solely and directly
with Lender in connection with this Agreement and the other Loan Documents.
Lender may disclose the Operative Documents and any other financial or other
information relating to Borrower or any Subsidiary to any potential Participant,
provided that such Participant agrees to protect the confidentiality of such
documents and information using the same measures that it uses to protect its
own confidential information.
10.11. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.
10.12. Further Assurances. Borrower will, at its own expense, from
time to time do, execute, acknowledge and deliver all further acts, deeds,
conveyances, transfers and assurances, and all financing and continuation
statements and similar notices, reasonably necessary or proper for the
perfection of the security interest being herein provided for in the Collateral,
whether now owned or hereafter acquired.
10.13. Power of Attorney in Respect of the Collateral. Borrower does
hereby irrevocably appoint Lender (which appointment is coupled with an
interest), the true and lawful attorney-in-fact of Borrower with full power of
substitution, for it and in its name (a) to perform (but Lender shall not be
obligated to and shall incur no liability to Borrower or any third party for
failure to perform) any act which Borrower is obligated by this Agreement to
perform, (b) to ask, demand, collect, receive, receipt for, xxx for, compound
and give acquittance for any and all rents, issues, profits, avails,
distributions, income, payment draws and other sums in which a security interest
is granted under Section 5.01 with full power to settle, adjust or compromise
any claim thereunder as fully as if Lender were Borrower itself, (c) to receive
payment of and to endorse the name of Borrower to any items of Collateral
(including checks, drafts and other orders for the payment of money) that come
into Lender's possession or under Lender's control, (d) to make all demands,
consents and waivers, or take any other action with respect to, the Collateral,
(e) in Lender's discretion, to file any claim or take any other action or
institute proceedings, either in its own name or in the name of Borrower or
otherwise, which Lender may reasonably deem necessary or appropriate to protect
and preserve the right, title and interest of Lender in and to the Collateral,
and (f) to otherwise act with respect thereto as though Lender were the outright
owner of the Collateral; provided, however, that the power of attorney herein
granted shall be exercisable only upon the occurrence and during the
continuation of an Event of Default. Borrower agrees to reimburse Lender upon
demand for all reasonable costs and expenses, including attorneys' fees and
expenses, which Lender may incur while acting as Borrower's attorney in fact
hereunder, all of which costs and expenses are included within the Obligations.
10.14 Confidentiality. All information (other than periodic reports
filed by Borrower with the Securities and Exchange Commission) disclosed by
Borrower to Lender in writing or through inspection pursuant to this Agreement
shall be considered confidential. Lender agrees to use the same degree of care
to safeguard and prevent disclosure of such confidential information as Lender
uses with its own confidential information, but in any event no less than a
reasonable degree of care. Lender shall not disclose such information to any
third party (other than Lender's or Lender's partner's attorneys and auditors
subject to the same confidentiality obligation set forth herein) and shall use
such information only for purposes of evaluation of its investment in Borrower
and the exercise of Lender's rights and the enforcement of its remedies under
this Agreement and the other Operative Agreements. The obligations of
confidentiality shall not apply to any information that (a) was known to the
public prior to disclosure by Borrower
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under this Agreement, (b) becomes known to the public through no fault of
Lender, (c) is disclosed to Lender by a third party' having a legal right to
make such disclosure, or (d) is independently developed by Lender.
20
22
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Agreement as of the day and year first above
written.
SHAMAN PHARMACEUTICALS, INC.
By: /s/ XXXX X XXXXX
----------------------------------------
Name: Xxxx X. Xxxxx
----------------------------------------
Title: President and CEO
----------------------------------------
MMC/GATX PARTNERSHIP NO. I
By: Xxxxx Xxxxxxxx & Company, as general partner
By:
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
21
23
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Agreement as of the day and year first above
written.
SHAMAN PHARMACEUTICALS, INC.
By:
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
MMC/GATX PARTNERSHIP NO. 1
By: Xxxxx Xxxxxxxx & Company, as general partner
By: /s/ XXXXX X. XXXXXXXX
----------------------------------------
Name: Xxxxx X. Xxxxxxxx
----------------------------------------
Title: Secretary
----------------------------------------
21
24
SCHEDULES
1 Funding Certificate
2 Disclosure Schedule
3 Conditions Precedent
EXHIBITS
A Form of Secured Promissory Note
B Form of Landlord Consent
C Form of Warrant
D Form of Opinion of Counsel
25
SCHEDULE 1
FUNDING CERTIFICATE
The undersigned,___________________ , being the duly elected and
acting_____________________________ of SHAMAN PHARMACEUTICALS, INC., a Delaware
corporation ("Borrower"), does hereby certify to MMC/GATX Partnership No. 1, in
connection with that certain Loan and Security Agreement dated as of May 7,
1997, (the "Loan Agreement"; with other capitalized terms used below having the
meanings ascribed thereto in the Loan Agreement) that:
1. The representations and warranties made by Borrower in
Article III of the Loan Agreement and in the other
Operative Documents are true and correct as of the date
hereof.
2. No event or condition has occurred and is continuing
that would constitute a Default or an Event of Default
under the Loan Agreement or any other Operative
Document.
3. Borrower is in compliance with the covenants and
requirements contained in Articles IV, VI and VII of the
Loan Agreement.
4. All conditions referred to in Article VIII of the Loan
Agreement to the making of the Loan to be made on or
about the date hereof been satisfied.
5. No material adverse change in the general affairs,
management, results of operations, condition (financial
or otherwise) or prospects of Borrower, whether or not
arising from transactions in the ordinary course of
business, has occurred.
Dated: May 7, 1997
SHAMAN PHARMACEUTICALS, INC.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
26
SCHEDULE 2
DISCLOSURE SCHEDULE
Any and all liens and security interests created under or pursuant
to any of the agreements filed or incorporated by reference as exhibits to
Borrower's Registration Statement on Form S-3 (file no. 333-23211) declared
effective by the Securities and Exchange Commission on April 15, 1997.
27
SCHEDULE 3
CONDITIONS PRECEDENT
PART I:
At the time of execution and delivery of this Agreement, there shall
also have been duly executed and delivered to Lender:
(a) The Warrant and amendments to certain existing warrants
to purchase the Common Stock of Borrower;
(b) A Landlord Consent, from the owner of each building in
which Collateral is anticipated to be located;
(c) A favorable opinion of counsel for Borrower, dated as of
the closing date, in the form attached hereto as Exhibit
D;
(d) Copies, certified by the Secretary, Assistant Secretary
or Chief Financial Officer of Borrower as of the closing
date, of Borrower's charter documents and bylaws and of
all documents evidencing corporate action taken by
Borrower authorizing the execution, delivery and
performance of the Operative Documents to which Borrower
is a party, in form and substance satisfactory to Lender
and its counsel;
(e) Good standing certificate from Borrower's state of
incorporation and the state in which Borrower's
principal place of business is located, together with
certificates of the applicable governmental authorities
that Borrower is in compliance with the franchise tax
laws of each such state, each dated as of a recent date;
(f) Evidence of the insurance coverage required by Section
6.01(d) of this Agreement;
(g) All necessary consents of shareholders and other third
parties with respect to the execution, delivery and
performance of this Agreement, the Warrant, the Note and
the other Operative Documents; and
(h) Form UCC-1 Financing Statements, duly executed by
Borrower, or other documents, and Borrower shall have
taken such actions, if any, as Lender shall reasonably
determine are necessary or desirable to perfect and
protect its security interest in the Collateral;
(i) Notices of Security Interest to Depository Banks in the
forms provided by Lender; and
(j) All other documents as Lender shall have reasonably
requested.
PART II
On or prior to the Funding Date of the Loan, each of the items set
forth in Part I of this Schedule 3 shall have been delivered to Lender and the
following conditions shall have been satisfied or waived by Lender:
(a) Borrower shall have provided to Lender such documents,
instruments and agreements as Lender shall reasonably
request to evidence the perfection and priority of the
security interests granted to Lender pursuant to Article
V;
(b) No Event of Default or Default shall have occurred and
be continuing;
(c) Borrower shall have duly executed and delivered to
Lender the Note;
(d) In Lender's sole discretion, there shall not have
occurred any material adverse change in the general
affairs, management, results of operations, condition
(financial or otherwise) or prospects of Borrower,
whether or not arising from transactions in the ordinary
course of business, and there shall not have occurred
since March 14, 1997, any material adverse change in
Borrower's stock price;
28
(e) The representations and warranties contained in this
Agreement and the other Operative Documents to which
Borrower is a party shall be true and correct in all
material respects as if made on such Funding Date;
(f) Each of the Operative Documents remains in full force
and effect; and
(g) The Funding Date of the Loan shall not be later than the
Commitment Termination Date.
29
Exhibit A
Form of Secured Promissory Note
[see Exhibit 10.58]
30
EXHIBIT B
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
MMC/GATX PARTNERSHIP NO. I
c/o GATX CAPITAL CORPORATION, Agent
Xxxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attn: Contract Administration
-------------------------------------------------------------------------------
LANDLORD'S WAIVER AND CONSENT
THIS LANDLORD'S WAIVER AND CONSENT (this "Waiver"), dated as of
___________________, 199__, is executed by and between ____________________
("Landlord") and MMC/GATX PARTNERSHIP NO. I, a California general partnership
("Lender").
RECITALS
A. Landlord and SHAMAN PHARMACEUTICALS, INC. ("Tenant") are
parties to a ______________________ [Lease Agreement], dated as of
____________________, 19__ (together with any other agreement between Landlord
and Tenant relating to the Premises, as defined below, all as amended from time
to time, to be referred to herein collectively as the "Lease"), pursuant to
which Landlord has leased to Tenant that certain real property commonly known
as ______________________, and more particularly described in Attachment 1
hereto (the "Premises").
B. Tenant and Lender intend to or have entered into a Loan and
Security Agreement dated as of May 7, 1997 (the "Loan Agreement") pursuant to
which Lender has agreed or will agree to make a loan to Tenant from time to time
secured by certain assets (the "Assets") which will be located on the Premises.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Lender hereby agree as follows:
1. Waiver and Consent. Landlord hereby does irrevocably waive,
disclaim and relinquish and assign to Lender any and all rights to impose,
receive, assert or enforce any lien, encumbrance, charge, security interest,
ownership interest, claim or demand of any kind against or involving the
Assets, whether arising by common law, statute or consensually (under the Lease
or otherwise) and whether now in existence or hereafter created, including, but
not limited to, those for rent or other right of payment. This waiver,
disclaimer, relinquishment and assignment shall survive the termination of the
Lease. Landlord further agrees that (a) neither the Assets nor any item thereof
shall become part of, or otherwise be or become a fixture attached to, the
Premises, notwithstanding the manner of the Assets' annexation, the Assets'
adaptability to the uses and purposes for which the Premises are used, and the
intentions of the party making the annexation; (b) the Assets (or any item
thereof) may be repossessed by lender; (c) in connection with such repossession
or otherwise, Lender, and any of its agents and employees, may enter upon the
Premises for the purposes of preparing for transport, disassembling,
dismantling, loading and/or removing the Assets (or any item thereof); and (d)
the right of Lender to enter the Premises and the other rights granted to
Lender in this Waiver shall not terminate until up to thirty (30) days after
Lender receives written notice from Landlord of the termination of the Lease;
provided, that if Lender exercises its rights hereunder, for any such period
after the termination of the Lease, Lender shall pay to Landlord a pro rated
rental payment for the space in which the Assets are located (at the last
monthly rate payable by Tenant) for the period until the Assets are removed.
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2. Costs. Lender agrees to indemnify and hold the Landlord harmless
from any out-of-pocket costs incurred by Landlord for any physical damage to
the Premises caused by Lender solely from the exercise of its rights under
clauses (b) or (c) of Paragraph 1 above.
3. Lease Defaults. Landlord further agrees to provide Lender with
telephonic confirmation of any default or event of default under the Lease upon
inquiry by Lender.
4. Landlord's Representations and Warranties. Landlord hereby warrants
and represents to Lender that (a) Landlord is the lessor under the Lease;
(b) there are no other agreements between the parties affecting or relating to
the Premises; (c) Landlord has all requisite power and authority to execute and
deliver this Waiver and no consents from any third party are required to do so;
(d) no event of default (nor any event which with the passage of time would
constitute an event of default) has occurred under the Lease; (e) there exists
no litigation affecting title to the Premises or any adverse claim with respect
to the Premises of which Landlord has received notice; and (f) there is no
condemnation proceeding pending with respect to any part of the Premises, nor
any threat thereof, of which the Landlord has received notice.
5. Miscellaneous. This Waiver and all rights hereby granted to Lender
hereunder shall remain in effect so long as there are any obligations owing
by Tenant under the Loan Agreement or any present or future agreement between
Tenant and Lender which involves the Assets. All the terms and provisions of
this Waiver shall be binding on and inure to the benefit of the respective
successors and assigns of Landlord and Lender. The rights and benefits of this
Waiver may be assigned or transferred by Lender or to third parties who may
become the lender, directly or indirectly, to Tenant. Lender shall provide
subsequent written notice to Landlord and Tenant of the assignment or transfer.
Headings in this Waiver are for convenience of reference only and are not part
of the substance hereof. This Waiver shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, Landlord and Lender have executed this Waiver as of
the date and year first written above.
LANDLORD:
----------------------------------------------
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
LENDER:
MMC/XXXX PARTNERSHIP NO. 1
By: Xxxxx Xxxxxxxx & Company, as general partner
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
32
ATTACHMENT 1
LEGAL DESCRIPTION OF PREMISES
(To Be Provided By Tenant)
33
State of________________)
)
County of ______________)
On _____________, 199___ before me, the undersigned, personally appeared
__________________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature _______________________ (Seal)
State of _______________)
)
County of ______________)
On _____________, 199___ before me, the undersigned, personally appeared
__________________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature _______________________ (Seal)
34
EXHIBIT C
FORM OF WARRANT
[See Exhibit 10.59]
35
EXHIBIT D
FORM OF OPINION OF COUNSEL
May 7, 1997
MMC/GATX Partnership No. I
c/o GATX Capital Corporation, Agent
Xxxx Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Gentlemen:
We have acted as counsel for SHAMAN PHARMACEUTICALS, INC. (the
"Borrower") in connection with (i) the execution of the Loan and Security
Agreement of even date herewith (the "Loan") between Borrower and MMC/GATX
Partnership No. I ("Lender"), (ii) the issuance of a warrant to purchase
_______ shares of Borrower's [Common] [Series ____ Preferred] Stock (the
"Warrant") and (iii) the transactions contemplated thereby. This opinion is
being rendered to you pursuant to Section 8.01 of the Loan Agreement.
Capitalized terms not otherwise defined in this opinion have the meaning given
them in the Loan Agreement.
In connection with this opinion and our representation, we have
examined originals, or copies certified or otherwise identified to our
satisfaction, of the following:
(i) The Loan Agreement;
(ii) The Warrant and exhibits thereto dated as of May 7, 1997,
issued by Borrower to Lender;
(iii) The Note dated as of __________, 1997;
(iv) The Restated Certificate of Incorporation and the Bylaws of
Borrower, each as in effect on the date hereof;
(v) The certificate of an officer of Borrower as to certain factual
matters ("Officer Certificate");
(vi) Certificates issued by the Secretary of State of the State of
______________ dated _______________, 199_, [and the Secretary
of State of the State of ____________________, dated
_________________, 199_,] certifying the good standing of the
Borrower;
(vii) Such other documents, records, and certificates as we have
deemed necessary or appropriate as a basis for the opinions
hereafter expressed.
The Loan Agreement, the Note and the Warrant are hereinafter referred
to as the "Transaction Documents."
In such examinations we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity to originals of all documents submitted to us as certified,
facsimile, telecopied or photostatic copies thereof. As to certain matters of
fact material to our opinion, we have relied upon the Officer Certificate and
upon your representations in the Transaction Documents.
As used in this opinion, the expression "to the best of our knowledge,"
means the actual present knowledge or belief of those attorneys in our firm who
have or who are currently representing Borrower. We have not undertaken any
independent investigation to determine the existence or nonexistence of other
facts, and no inference as to our
D-1
36
knowledge of the existence or nonexistence of other facts should be drawn from
the fact of this firm's representation of Borrower in connection with the
Transaction Documents.
Based upon and subject to the foregoing and subject to the
qualifications contained herein, we are of the opinion that:
(a) Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware [and is duly
qualified to do business and in good standing in the State of California].
(b) Borrower has the requisite corporate power and authority to
execute, deliver and perform the Transaction Documents and to issue the
Warrant. All action on the part of Borrower, its directors and its shareholders
necessary for the authorization, execution, delivery and performance of the
Transaction Documents, has been taken. The Transaction Documents have been duly
executed and delivered by an authorized officer of Borrower.
(c) The execution, delivery and performance of the Transaction
Documents do not conflict with or violate any provision of Borrower's Restated
Certificate of Incorporation or Bylaws or of applicable law and, to the best of
our knowledge, do not conflict with or constitute a default under any provision
of any judgment, writ, decree, order or material agreement, indenture, or
instrument to which Borrower is a party or by which it is bound.
(d) The Transaction Documents constitute legal, valid and
binding obligations of Borrower, enforceable in accordance with their
respective terms. Except for ____________, to our knowledge, no filing need be
made with any governmental authority with respect to the Transaction Documents
in connection with an exemption from state usury laws or in connection with any
other matter.
(e) The Common Stock issuable upon exercise of the Warrant have
been duly authorized and reserved for issuance upon such exercise, and when
issued in accordance with the terms of the Warrants, will be duly authorized,
validly issued, fully paid and non-assessable.
The opinions set forth above are subject to the following
additional qualifications, assumptions, limitations and exceptions:
(A) The effect of bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and other similar laws relating to or
affecting the rights and remedies of creditors generally.
(B) Limitations imposed by general equitable principles upon
the specific enforceability of any of the provisions of the Transaction
Documents and upon the availability of injunctive relief or other equitable
remedies.
(C) We express no opinion as to the enforceability of any
choice of law provision in the documents.
(D) We express no opinion as to the compliance or noncompliance
with applicable antifraud statutes under the rules and regulations of state and
federal securities laws concerning the issuance of the Warrant.
(E) We express no opinion herein concerning any law other than
the law of the State of California, [the general corporate law of the State of
Delaware] and the federal laws of the United States of America.
This opinion is furnished to you solely for your benefit and may not be
relied upon by any other person (other than assignees of any of your rights)
without our prior written consent, which consent shall not be unreasonably
withheld or delayed.
Very truly yours,
_______________________________________
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