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EXHIBIT 10.15
LOAN AND SECURITY AGREEMENT
(EQUIPMENT)
DATED AS OF FEBRUARY 9, 1999
BETWEEN
NEW FOCUS, INC.,
A CALIFORNIA CORPORATION
AS "BORROWER",
AND
VENTURE LENDING & LEASING II, INC.,
A MARYLAND CORPORATION
AS "LENDER"
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LOAN AND SECURITY AGREEMENT
(EQUIPMENT)
The Borrower and Lender identified on the cover page of this document have
entered or anticipate entering into one or more transactions pursuant to which
Lender agrees to make available to Borrower an equipment loan facility governed
by the terms and conditions set forth in this document and one or more
Supplements executed by Borrower and Lender which incorporate this document by
reference. Each Supplement constitutes a supplement to and forms part of this
document, and will be read and construed as one with this document, so that
this document and the Supplement constitute a single agreement between the
parties (collectively referred to as this "Agreement").
Accordingly, the parties agree as follows:
ARTICLE 1 - INTERPRETATION
1.1 DEFINITIONS. The terms defined in Article 10 and in the Supplement
will have the meanings therein specified for purposes of this Agreement.
1.2 INCONSISTENCY. In the event of any inconsistency between the
provisions of any Supplement and this document, the provisions of the
Supplement will be controlling for the purpose of all relevant transactions.
ARTICLE 2 - THE COMMITMENT AND LOANS
2.1 THE COMMITMENT. Subject to the terms and conditions of this
Agreement, Lender agrees to make term loans to Borrower from time to time from
the Closing Date and to, but not including, the Termination Date in an
aggregate principal amount not exceeding the Commitment, for the purpose of
financing the acquisition or carrying of certain Equipment. The Commitment is
not a revolving credit commitment, and Borrower does not have the right to
repay and reborrow hereunder. Each Loan requested by Borrower to be made on a
single Business Day shall be for a minimum principal amount set forth in the
Supplement, except to the extent the remaining Commitment is a lesser amount.
2.2 NOTES EVIDENCING LOANS; REPAYMENT. Each Loan shall be evidenced by
a separate Note payable to the order of Lender, in the total principal amount
of the Loan. Principal and interest of each Loan shall be payable at the times
and in the manner set forth in the Note.
2.3 PROCEDURES FOR BORROWING.
(a) Borrower shall give Lender, at least five (5) Business Days'
prior to a proposed Borrowing Date, written notice of any request for borrowing
hereunder (a "Borrowing Request"). Each Borrowing Request shall be in
substantially the form of Exhibit "B" to the Supplement, shall be executed by
a responsible executive or financial officer of Borrower, and shall state how
much is requested, and shall be accompanied by such other information and
documentation as Lender may reasonably request.
(b) No later than 1:00 p.m. Pacific Standard Time on the Borrowing
Date, if Borrower has satisfied the conditions precedent in Article 4, Lender
shall make the Loan available to Borrower in immediately available funds.
2.4 INTEREST. Basic Interest on the outstanding principal balance of
the each Loan shall accrue daily at the Designated Rate from the Borrowing Date
until the Maturity Date.
2.5 TERMINAL PAYMENT. Borrower shall pay the Terminal Payment with
respect to each Loan on the Maturity Date of such Loan.
2.6 INTEREST RATE CALCULATION. Basic Interest, along with charges and
fees under this Agreement and any Loan Document, shall be calculated for actual
days elapsed on the basis of a 360-day year, which results in higher interest,
charge or fee payments than if a 365-day year were used. In no event shall
Borrower be obligated to pay Lender interest, charges or fees at a rate in
excess of the highest rate permitted by applicable law from time to time in
effect.
2.7 DEFAULT INTEREST. Any unpaid payments of principal or interest or
the Terminal Payment with respect to any Loan shall bear interest from their
respective maturities, whether scheduled or accelerated, at the Designated Rate
for such Loan plus five percent (5.00%) per annum, until paid in full, whether
before or
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after judgment (the "Default Rate"), Borrower shall pay such interest on
demand.
2.8 LATE CHARGES. If Borrower is late in making any payment of
principal or interest or Terminal Payment under this Agreement by more than
five (5) days, Borrower agrees to pay a late charge of five percent (5%) OF
the installment due, but not less than fifty dollars ($50.00) for any one
such delinquent payment. This late charge may be charged by Lender for the
purpose of defraying the expenses incidental to the handling of such
delinquent amounts. Borrower acknowledges that such late charge represents a
reasonable sum considering all of the circumstances existing on the date of
this Agreement and represents a fair and reasonable estimate of the costs
that will be sustained by Lender due to the failure of Borrower to make
timely payments. Borrower further agrees that proof of actual damages would
be costly and inconvenient. Such late charge shall be paid without prejudice
to the right of Lender to collect any other amounts provided to be paid or
to declare a default under this Agreement or any of the other Loan Documents
or from exercising any other rights and remedies of Lender.
2.9 LENDER'S RECORDS. Principal, Basic interest, Terminal Payments and
all other sums owed under any Loan Document shall be evidenced by entries in
records maintained by Lender for such purpose. Each payment on and any other
credits with respect to principal, Basic Interest, Terminal Payments and all
other sums outstanding under any Loan Document shall be evidenced by entries in
such records. Absent manifest error, Lender's records shall be conclusive
evidence thereof.
2.10 GRANT OF SECURITY INTERESTS. To secure the timely payment and
performance of all of Borrower's Obligations to Lender, Borrower hereby grants
to Lender continuing security interests in all of the Collateral.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that, except as set forth in the
Supplement or any schedule of exceptions executed by the parties, as the
Closing Date and each Borrowing Date:
3.1 DUE ORGANIZATION. Borrower is a corporation duly organized and
validly existing in good standing under the laws of the jurisdiction of its
incorporation, and is duly qualified to conduct business and is in good
sanding in each other jurisdiction in which its business is conducted or its
properties are located, except where the failure to be so qualified would not
reasonably be expected to have a Material Adverse Effect.
3.2 AUTHORIZATION, VALIDITY AND ENFORCEABILITY. The execution, delivery
and performance of all Loan Documents executed by Borrower are within
Borrower's powers, have been duly authorized, and are not in conflict with
Borrower's articles or certificate of incorporation or by-laws, or the terms
of any charter or other organizational document of Borrower, as amended from
time to time; and all such Loan Documents constitute valid and binding
Obligations of Borrower, enforceable in accordance with their terms (except as
may be limited by bankruptcy, insolvency and similar laws affecting the
enforcement of creditors' rights in general, and subject to general principles
of equity).
3.3 COMPLIANCE WITH APPLICABLE LAWS. Borrower has complied with all
licensing, permit and fictitious name requirements necessary to lawfully
conduct the business in which it is engaged, and to any sales, leases or the
furnishing of services by Borrower, including without limitation those
requiring consumer or other disclosures, the noncompliance with which would
have a material Adverse Effect.
3.4 NO CONFLICT. To its knowledge the execution, delivery, and
performance by Borrower of all Loan Documents are not in conflict with any law,
rule, regulation, order or directive, or any indenture, agreement, or
undertaking to which Borrower is a party or by which Borrower may be bound or
affected.
3.5 NO LITIGATION, CLAIMS OR PROCEEDINGS. There is no litigation, tax
claim, proceeding or dispute pending, or, to the knowledge of Borrower,
threatened against or affecting Borrower or its property, which may have a
Material Adverse Effect.
3.6 CORRECTNESS OF FINANCIAL STATEMENTS. Borrower's financial statements
which have been delivered to Lender fairly and accurately reflect Borrower's
financial condition as of the latest date of such financial statements; and,
since that date there has been no Material Adverse Change.
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3.7 SUBSIDIARIES. Borrower has one wholly-owned subsidiary, Focused
Research, a California corporation, engaged in advanced research and
development, but otherwise is not a majority owner of or in a control
relationship with any other business entity.
3.8 ENVIRONMENTAL MATTERS. Borrower has reviewed, or caused to be reviewed
on its behalf, all Environmental Laws applicable to its business operations and
materials handled therein, and as a result thereof has reasonably concluded
that Borrower is in compliance with such Environmental Laws, except to the
extent a failure to be in such compliance could not reasonably be expected to
have a Material Adverse Effect on Borrower's operations, properties or
financial condition.
3.9 NO EVENT OF DEFAULT. No Default or Event of Default currently exists.
3.10 FULL DISCLOSURE. None of the representations or warranties made by
Borrower in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of Borrower
in connection with the Loan Documents (including disclosure materials delivered
by or on behalf of Borrower to Lender prior to the Closing date), contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of
the circumstances under which they are made, not misleading as of the time when
made or delivered.
3.11 SPECIFIC REPRESENTATIONS REGARDING COLLATERAL.
(a) TITLE. Except for the security interests created by this Agreement
and Permitted Liens, (i) Borrower is and will be the unconditional legal and
beneficial owner of the Collateral, and (ii) the Collateral is genuine and
subject to no Liens (other than Permitted Liens), rights or defenses of others.
(b) LOCATION OF COLLATERAL. Other than mobile goods as defined in Division
9 of the California Uniform Commercial Code, as amended, Borrower's chief
executive office, Records, Equipment, and any other offices or places of
business are located at the address(es) shown on the Supplement as amended in
writing by Borrower from time to time.
(c) BUSINESS NAMES. Other than its full corporate name, Borrower has not
conducted business using any trade names or fictitious business names except as
shown on the Supplement.
ARTICLE 4 - CONDITIONS PRECEDENT
4.1 CONDITIONS TO FIRST LOAN. The obligation of Lender to make its first
Loan hereunder is, in addition to the conditions precedent specified in Section
4.2, subject to the fulfillment of the following conditions and to the receipt
by Lender of the documents described below, duly executed and in form and
substance satisfactory to Lender and its counsel:
(a) RESOLUTIONS. A certified copy of the resolutions of the Board of
Directors of Borrower authorizing the execution, delivery and performance by
Borrower of the Loan Documents.
(b) INCUMBENCY AND SIGNATURES. A certificate of the secretary of Borrower
certifying the names of the officer or officers of Borrower authorized to sign
the Loan Documents, together with a sample of the true signature of each such
officer.
(c) LEGAL OPINION. The opinion of legal counsel for Borrower as to such
matters as Lender may reasonably request, including the matters covered by
Sections 3.1, 3.2 and 3.4 hereof.
(d) ARTICLES AND BY-LAWS. Certified copies of the Articles or Certificate
of Incorporation and By-Laws of Borrower, as amended through the Closing Date.
(e) THIS AGREEMENT. A counterpart of this Agreement and an initial
Supplement, with all schedules completed and attached thereto, and disclosing
such information as is acceptable to Lender.
(f) FINANCING STATEMENTS. Filing copies (or other evidenced of filing
satisfactory to Lender and its counsel) of such Uniform Commercial Code
financing statements, collateral assignments and termination statements, with
respect to the Collateral as Lender shall request.
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(g) LIEN SEARCHES. Uniform Commercial Code lien, judgment, bankruptcy and
tax lien searches of Borrower from such jurisdictions or offices as Lender may
reasonably request, all as of a date reasonably satisfactory to Lender and its
counsel.
(h) GOOD STANDING CERTIFICATE. A Certificate of status or good standing of
Borrower as of a date acceptable to Lender from the jurisdiction of Borrower's
organization and any foreign jurisdictions where Borrower is or should be
qualified to do business.
(i) WARRANT. A warrant issued by Borrower to Lender exercisable for such
number, type and class of shares of Borrower's capital stock, and for an initial
exercise price as is specified in the Supplement.
4.2 CONDITIONS TO ALL LOANS. The obligation of Lender to make its initial
Loan and each subsequent Loan is subject to the following further conditions
precedent that:
(a) NO DEFAULT. No Default or Event of Default has occurred and is
continuing or will result from the making of such Loan, and the
representations and warranties of Borrower contained in Article 3 of this
Agreement and in any Supplement are true and correct as of the Borrowing Date
of such Loan.
(b) NO MATERIAL ADVERSE CHANGE. No Material Adverse Change shall have
occurred since the date of the most recent financial statements submitted to
Lender.
(c) BORROWING REQUEST. Borrower shall have delivered to Lender a Borrowing
Request for such Loan.
(d) NOTE. Borrower shall have delivered an executed Note evidencing such
Loan, in form and substance satisfactory to Lender.
(e) SUPPLEMENTAL LIEN FILINGS. Borrower shall have executed and delivered
such amendments or supplements to this Agreement and such financing statements
as Lender may reasonably request in connection with the proposed Loan, in order
to create or perfect or to maintain the perfection of Lender's Liens on the
Collateral.
(f) VCOC LIMITATION. Lender shall not be obligated to make any Loan under
its Commitment if at the time of or after giving effect to the proposed Loan
Lender would no longer qualify as: (A) a "venture capital operating company"
under U.S. Department of Labor Regulations Section 2510.3-101(d), Title 29 of
the Code of Federal Regulations, as amended; and (B) a "business development
company" under the provisions of federal Investment Company Act of 1940, as
amended; and (C) a "regulated investment company" under the provisions of the
Internal Revenue Code of 1986, as amended.
ARTICLE 5 - AFFIRMATIVE COVENANTS
During the term of this Agreement and until its performance of all
obligations to Lender, Borrower will:
5.1 NOTICE TO LENDER. Promptly give written notice to Lender of:
(a) Any litigation or administrative or regulatory proceeding affecting
Borrower where the amount claimed against Borrower is at the Threshold Amount or
more, or where the granting of the relief requested could have a Material
Adverse Effect.
(b) Any substantial dispute which may exist between Borrower or any
governmental or regulatory authority and which could have a Material Adverse
Effect.
(c) The occurrence of any Default or any Event of Default.
(d) Any change in the location of any of Borrower's places of business or
Collateral other than mobile goods as defined in Division 9 of the California
Uniform Commercial Code, as amended, at least thirty (30) days in advance of
such change, or of the establishment of any new, or the discontinuance of any
existing, place of business.
(e) Any dispute or default by Borrower or any other party under any joint
venture, partnering, distribution, cross-licensing, strategic alliance,
collaborative research or manufacturing, license or similar agreement which
could reasonably be expected to have a Material Adverse Effect.
(f) Any other matter which has resulted or might reasonably result in a
Material Adverse Change.
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5.2 FINANCIAL STATEMENTS. Deliver to each Lender or cause to be delivered
to Lender, in form and detail satisfactory to Lender and Lender agrees to
protect the confidentiality of the following financial information, which
Borrower warrants shall be accurate and complete in all material respects:
(a) MONTHLY FINANCIAL STATEMENTS. As soon as available but no later than
thirty (30) days after the end of each month, Borrower's balance sheet as of the
end of such period, and Borrower's income statement for such period and for that
portion of Borrower's financial reporting year ending with such period, prepared
and attested by a responsible financial officer of Borrower as being complete
and correct and fairly presenting Borrower's financial condition and the results
of Borrower's operations; provided, however, that after the effective date of
the initial Qualified Public Offering Borrower's obligations hereunder to
deliver financial statements shall apply only to those statements required to be
filed by the Securities and Exchange Commission, to be provided no less
frequently than quarterly.
(b) YEAR-END FINANCIAL STATEMENTS. As soon as available but no later than
ninety (90) days after and as of the end of each financial reporting year, a
complete copy of Borrower's audit report, which shall include balance sheet,
income statement, statement of changes in equity and statement of cash flows for
such year, prepared and certified by an independent certified public accountant
selected by Borrower and satisfactory to Lender (the "Accountant"); provided,
however, that after the effective date of the initial Qualified Public Offering
Borrower's obligations hereunder to deliver financial statements shall apply
only to those statements required to be filed by the Securities and Exchange
Commission, to be provided no less frequently than quarterly. The Accountant's
certification shall not be qualified or limited due to a restricted or limited
examination by the Accountant of any material portion of Borrower's records or
otherwise.
(c) COMPLIANCE CERTIFICATES. Simultaneously with the delivery of each set
of financial statements referred to in paragraphs (a) and (b) above, a
certificate of the chief financial officer of Borrower substantially in the form
of Exhibit "C" to the Supplement (i) setting forth in reasonable detail any
calculations required to establish whether Borrower is in compliance with any
financial covenants or tests set forth in the Supplement, and (ii) stating
whether any Default or Event of Default exists on the date of such certificate,
and if so, setting forth the details thereof and the action which Borrower is
taking or proposes to take with respect thereto.
(d) GOVERNMENT REQUIRED REPORTS; PRESS RELEASES. Promptly after sending,
issuing, making available, or filing, copies of all statements released to any
news media for publication, all reports, proxy statements, and financial
statements that Borrower sends or makes available to its stockholders, and, not
later than five (5) days after actual filing or the date such filing was first
due, all registration statements and reports that Borrower files or is required
to file with the Securities and Exchange Commission, or any other governmental
or regulatory authority.
(e) OTHER INFORMATION. Such other statements, lists of property and
accounts, budgets, forecasts, reports, or other information as Lender may from
time to time reasonably request.
5.3 MANAGERIAL ASSISTANCE FROM LENDER. Permit Lender, as a "venture
capital operating company" to participate in, and influence the conduct of
management of Borrower through the exercise of "management rights," as such
terms are defined in 29 C.F.R. Sections 2610.3-101(d), and;
(a) Permit Lender to make available to Borrower, at no cost to Borrower,
"significant managerial assistance", as defined in Section 2(a)(47) of the
Investment Company Act of 1940, as amended, either in the form of: (i)
consulting arrangements with Lender or any of its officers, directors, employees
or affiliates, (ii) Borrower's allowing Lender to provide recommendations of
prospective candidates for election to Borrower's Board of Directors, or (iii)
Lender, at Borrower's request, seeking the services of third-party consultants
to aid Borrower with respect to its management and operations;
(b) Permit Lender to make available consulting and advisory services to
officers of Borrower regarding Borrower's equipment acquisition and financing
plans, and such other matters affecting the business, financial condition and
prospects of Borrower as Lender shall reasonably deem relevant; and
(c) If Lender reasonably believes that financial or other developments
affecting Borrower have impaired or are likely to impair Borrower's ability to
perform its obligations under this Agreement, permit Lender reasonable access to
Borrower's management and/or
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Board of Directors and opportunity to present Lender's views with respect to
such developments.
5.4 EXISTENCE. Maintain and preserve Borrower's existence, present form
of business, and all rights and privileges necessary or desirable in the normal
course of its business; and keep all Borrower's property in good working order
and condition, ordinary wear and tear excepted.
5.5 INSURANCE. Obtain and keep in force insurance in such amounts and
types as is usual in the type of business conducted by Borrower, with insurance
carriers having a policyholder rating of not less than "A" and financial
category rating of Class VII in "Best's Insurance Guide," unless otherwise
approved by Lender. Such insurance policies must be in form and substance
satisfactory to Lender, and shall list Lender as an additional insured or loss
payee, as applicable, on endorsement(s) in form reasonably acceptable to
Lender. Borrower shall furnish to Lender such endorsements, and upon Lender's
request, copies of any or all such policies.
5.6 ACCOUNTING RECORDS. Maintain adequate books, accounts and records,
and prepare all financial statements in accordance with GAAP, and in compliance
with the regulations of any governmental or regulatory authority having
jurisdiction over Borrower or Borrower's business; and permit employees or
agents of Lender at such reasonable times as Lender may request, at Borrower's
expense, to inspect Borrower's properties, and to examine, and make copies and
memoranda of Borrower's books, accounts and records. Such inspections shall
occur no more frequently than once a year except after a Default.
5.7 COMPLIANCE WITH LAWS. Comply with all laws (including Environmental
Laws), rules, regulations applicable to, and all orders and directives of any
governmental or regulatory authority having jurisdiction over, Borrower or
Borrower's business, and with all material agreements to which Borrower is a
party, except where the failure to so comply would not have a Material Adverse
Effect.
5.8 TAXES AND OTHER LIABILITIES. Pay all Borrower's obligations when due;
pay all taxes and other governmental or regulatory assessments before
delinquency or before any penalty attaches thereto, except as may be contested
in good faith by the appropriate procedures and for which Borrower shall
maintain appropriate reserves; and timely file all required tax returns.
5.9 SPECIAL COLLATERAL COVENANTS.
(a) MAINTENANCE OF COLLATERAL; INSPECTION. Do all things reasonably
necessary to maintain, preserve, protect and keep all Collateral in good
working order and salable condition, ordinary wear and tear excepted, deal with
the Collateral in all ways as are considered good practice by owners of like
property, and use the Collateral lawfully and, to the extent applicable, only
as permitted by Borrower's insurance policies. Maintain, or cause to be
maintained, complete and accurate Records relating to the Collateral. Upon
reasonable prior notice at reasonable times during normal business hours,
Borrower hereby authorizes Lender's officers, employees, representatives and
agents, at Lender's expense, to inspect the Collateral and to discuss the
Collateral and the Records relating thereto with Borrower's officers and
employees.
(b) FINANCING STATEMENTS AND OTHER ACTIONS. Execute and deliver to Lender
all financing statements, notices and other documents from time to time
reasonably requested by Lender to maintain a first perfected security interest
in the Collateral in favor of Lender; perform such other acts, and execute and
deliver to Lender such additional conveyances, assignments, agreements and
instruments, as Lender may at any time request in connection with the
administration and enforcement of this Agreement or Lender's rights, powers and
remedies hereunder.
(c) LIENS. Not create, incur, assume or permit to exist any Lien or grant
any other Person a negative pledge on any Collateral, except Permitted Liens.
(d) DOCUMENTS OF TITLE. Not sign or authorize the signing of any
financing statement or other document naming Borrower as debtor or obligor, or
acquiesce or cooperate in the issuance of any xxxx of lading, warehouse receipt
or other document or instrument of title with respect to any Collateral, except
those negotiated to Lender, or those naming Lender as secured party.
(e) DISPOSITION OF COLLATERAL. Not sell, transfer, lease or otherwise
dispose of any Collateral. Unless Borrower grants to Lender a perfected first
security interest in replacement collateral, acceptable to Lender, with a value
equal to or greater than the Collateral being disposed of.
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(f) CHANGE IN LOCATION OR NAME. Without at least 30 days' prior written
notice to Lender: (a) not relocate any Collateral except as provided in Section
3.11(b) or Records, its chief executive office, or establish a place of
business at a location other than as specified in the Supplement; and (b) not
change its name, mailing address, location of Collateral except as provided in
Section 3.11(b), or its legal structure.
(g) DECALS, MARKINGS. At the request of Lender, firmly affix a decal,
stencil or other marking to designated items of Equipment, indicating thereon
the security interest of Lender.
(h) AGREEMENT WITH REAL PROPERTY OWNER/LANDLORD. Obtain and maintain such
acknowledgments, consents, waivers and agreements from the owner, lienholder,
mortgagee and landlord with respect to any real property on which Equipment is
located as Lender may require, all in form and substance satisfactory to Lender.
ARTICLE 6 - NEGATIVE COVENANTS
During the term of this Agreement and until the performance of all obligations
to Lender, Borrower will not (without Lender's prior written consent which
shall not be unreasonably withheld):
6.1 DIVIDENDS. Except after a Qualified Public Offering, pay any
dividends or purchase, redeem or otherwise acquire or make any other
distribution with respect to any of Borrower's capital stock, except (a)
dividends or other distributions solely of capital stock of Borrower, (b)
conversions of its securities into other securities pursuant to the terms of
such convertible securities or otherwise in exchange therefore, and (c)
repurchases of stock from employees upon termination of employment under
reverse vesting or similar repurchase plans.
6.2 CHANGES/MERGERS. Liquidate or dissolve, or enter into any
consolidation, merger, partnership, joint venture or other combination except:
(a) joint ventures, strategic alliances, licensing and similar arrangements
customary in Borrower's industry, or
(b) mergers or consolidations in which the surviving entity:
(i) succeeds to all or substantially all of Borrower's business and
assets to which this Agreement pertains; and
(ii) agrees in writing to be bound by the Agreement, including all of the
terms, rights and obligations thereto; and
(iii) has a net worth balances and cash balances, each after giving effect
to the merger or consolidation, greater than the net worth and cash of Borrower
immediately prior to such merger or consolidation; or (c) the creation of
additional direct or indirect subsidiaries of Borrower.
6.3 SALES OF ASSETS. Except for in connection with mergers or
consolidations permitted under Section 6.2(b), sell, transfer, lease or
otherwise dispose of any of Borrower's assets except for fair consideration and
in the ordinary course of its business.
6.4 LOANS/INVESTMENTS. Make or suffer to exist any loans, guaranties,
advances, or investments, except:
(a) Accounts receivable in the ordinary course of Borrower's business;
(b) Investments in domestic certificates of deposit issued by, and other
domestic investments with financial institutions organized under the laws of
the United States or a state thereof, having One Hundred Million Dollars
($100,000,000) in capital and a rating of at least "investment grade" or "A" by
Xxxxx'x or any successor rating agency."
(c) Investments in marketable obligations of the Untitled States of
America and in open market commercial paper given the highest credit rating by
a national credit agency and maturing not more than one year from the creation
thereof, and
(d) Temporary advances to cover incidental expenses to be incurred in the
ordinary course of business.
6.5 TRANSACTION WITH RELATED PERSONS. Directly or indirectly enter into
any transaction with any Affiliate except for transactions that are in the
ordinary course of Borrower's business, upon fair and reasonable terms that are
no less favorable to Borrower that would be obtained in an arm's length
transaction with a non-Affiliate party and except for transactions with a
Subsidiary that are upon fair and reasonable terms and transactions constituting
permitted investments under Section 6.4.
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6.6 OTHER BUSINESS. Engage in any material line of business other than
the business Borrower conducts as of the Closing Date.
6.7 FINANCIAL COVENANTS. Fail to comply with any financial covenants or
tests set forth in the Supplement.
ARTICLE 7 - EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence and during the
continuation of any Default, the obligation of Lender to make any additional
Loan shall be suspended. The occurrence of any of the following (each, as "Event
of Default") shall terminate any obligation of Lender to make any additional
Loan; and shall, at the option of Lender (1) make all sums of Basic Interest
and principal, all Terminal Payments, and any Obligations and other amounts
owing under any Loan Documents immediately due and payable without notice of
default, presentment or demand for payment, protest or notice of nonpayment or
dishonor or any other notices or demands, and (2) give Lender the right to
exercise any other right or remedy provided by contract or applicable law;
(a) Borrower shall fail to pay any principal, interest or Terminal
Payment under this Agreement, or fail to pay any fees or other charges when due
under any Loan Document, and such failure continues for five (5) Business Days
or more after the same first becomes due; or an Event of Default as defined in
any other Loan Document shall have occurred.
(b) Any representation or warranty made, or financial statement,
certificate or other document provided, by Borrower under any Loan Document
shall prove to have been false or misleading in any material respect when made
or deemed made herein.
(c) Borrower shall fail to pay its debts generally as they become due or
shall commence any Insolvency Proceeding with respect to itself; an involuntary
Insolvency Proceeding shall be filed against Borrower, or a custodian, receiver,
trustee, assignee for the benefit of creditors, or other similar official, shall
be appointed to take possession, custody or control of the properties of
Borrower, and such involuntary Insolvency Proceeding, petition or appointment is
acquiesced to by Borrower or is not dismissed within sixty (60) days; or the
dissolution or termination of the business of Borrower.
(d) Borrower shall be in default beyond any applicable period of grace or
cure under any other agreement involving the borrowing of money, the purchase
of property, the advance of credit or any other monetary liability of any kind
to Lender or to any Person, exceeding the Threshold Amount or aggregate
indebtedness exceeding the sum of One Hundred Thousand Dollars ($100,000),
which results in the acceleration of payment of such obligation in an amount in
excess of the Threshold Amount.
(e) Any governmental or regulatory authority shall take any judicial or
administrative action, or any defined benefit pension plan maintained by
Borrower shall have any unfunded liabilities, any of which, in the reasonable
judgment of Lender, might have a Material Adverse Effect.
(f) Except for a merger pursuant to Section 6.2, any sale, transfer or
other disposition of all or a substantial or material part of the assets of
Borrower, including without limitation to any trust or similar entity, shall
occur.
(g) Any judgment(s) singly or in the aggregate in excess of the Threshold
Amount shall be entered against Borrower which remain unsatisfied, unvacated or
unstayed pending appeal for ten (10) or more days after entry thereof.
(h) Except as provided for in Section 6.2, any Person or two or more
Persons acting in concert shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission) of twenty-five
percent (25%) or more of the outstanding shares of voting stock of Borrower.
(i) Borrower shall fail to perform or observe any covenant
contained in Article 6 of this Agreement.
(j) Borrower shall fail to perform or observe any covenant contained in
this Agreement or any other Loan Document (other than a covenant which is
dealt with specifically elsewhere in this Article 7) and the breach of such
covenant is not cured within 30 days after the sooner to occur of Borrower's
receipt of notice of such breach from Lender or the date on which such breach
first becomes known to any officer of Borrower, provided, however, that if such
breach is not capable of being cured within such 30-day period and Borrower
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timely notifies Lender of such fact and Borrower diligently pursues such cure,
then the cure period shall be extended to the date requested by Borrower's
notice but in no event more than 90 days from the initial breach; provided,
further, that such additional 60-day opportunity to cure shall not apply in the
case of any failure to perform or observe any covenant which has been the
subject of a prior failure within the preceding 180 days or which is a willful
and knowing breach by Borrower.
7.2 REMEDIES UPON DEFAULT. Upon the occurrence and during the continuance
of an Event of Default, Lender shall be entitled to, at its option, exercise any
or all of the rights and remedies available to a secured party under the Uniform
Commercial Code or any other applicable law, and exercise any or all of its
rights and remedies provided for in this Agreement and in any other Loan
Document. The obligations of Borrower under this Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any Obligations is rescinded or must otherwise be returned by Lender upon, on
account of, or in connection with, the insolvency, bankruptcy or reorganization
of Borrower or otherwise, all as though such payment had not been made.
7.3 SALE OF COLLATERAL. Upon the occurrence and during the continuance of
an Event of Default, Lender may sell all or any part of the Collateral, at
public or private sales, to itself, a wholesaler, retailer or investor, for
cash, upon credit or for future delivery, and at such price or prices as Lender
may deem commercially reasonable. To the extent permitted by law, Borrower
hereby specifically waives all rights of redemption and any rights of stay or
appraisal which it has or may have under any applicable law in effect from time
to time. Any such public or private sales shall be held at such times and at
such place(s) as Lender may determine. In case of the sale of all or any part
of the Collateral on credit or for future delivery, the Collateral so sold may
be retained by Lender until the selling price is paid by the purchaser, but
Lender shall not incur any liability in case of the failure of such purchaser
to pay for the Collateral and, in case of any such failure, such Collateral may
be resold. Lender may, instead of exercising its power of sale, proceed to
enforce its security interest in the Collateral by seeking a judgment or decree
of a court of competent jurisdiction.
7.4 BORROWER'S OBLIGATIONS UPON DEFAULT. Upon the request of Lender after
the occurrence and during the continuance of an event of Default, Borrower will:
(a) Assemble and make available to Lender the Collateral at such place(s)
as Lender shall reasonably designate, segregating all Collateral so that each
item is capable of identification; and
(b) Subject to the rights of any lessor, permit Lender, by Lender's
officers, employees, agents and representatives, to enter any premises where
any Collateral is located, to take possession of the Collateral, to complete
the processing, manufacture or repair of any Collateral, and to remove the
Collateral, or to conduct any public or private sale of the Collateral, all
without any liability of Lender for rent or other compensation for the use of
Borrower's premises.
ARTICLE 8 - SPECIAL COLLATERAL PROVISIONS
8.1 PERFORMANCE OF BORROWER'S OBLIGATIONS. Without having any obligation
to do so, upon reasonable prior notice to Borrower, Lender may perform or pay
any obligation which Borrower has agreed to perform or pay under this
Agreement, including, without limitation, the payment or discharge of taxes or
Liens levied or placed on or threatened against the collateral. In so
performing or paying, Lender shall determine the action to be taken and the
amount necessary to discharge such obligations. Borrower shall reimburse Lender
on demand for any amounts paid by Lender pursuant to this Section, which
amounts shall constitute Obligations secured by the Collateral and shall bear
interest from the date of demand at the Default Rate.
8.2 POWER OF ATTORNEY. For the purpose of protecting and preserving the
Collateral and Lender's rights under this Agreement, Borrower hereby
irrevocably appoints Lender, with full power of substitution, as its
attorney-in-fact with full power and authority, after the occurrence and during
the continuance of an Event of Default, to do any act which Borrower is
obligated to do hereunder; to exercise such rights with respect to the
Collateral as Borrower might exercise; to use such Equipment, Fixtures or other
property as Borrower might use; to enter Borrower's premises; to give notice of
Lender's security interest in, and to collect the Collateral; and to execute
and file in Borrower's name any financing statements, amendments and
continuation statements necessary or desirable to perfect or continue the
perfection of
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Lender's security interests in the Collateral. Borrower hereby ratifies all
that Lender shall lawfully do or cause to be done by virtue of this appointment.
8.3 AUTHORIZATION FOR LENDER TO TAKE CERTAIN ACTION. The power of
attorney created in Section 8.2 is a power coupled with an interest and shall
be irrevocable. The powers conferred on Lender hereunder are solely to protect
its interests in the Collateral and shall not impose any duty upon Lender to
exercise such powers. Lender shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and in no event
shall Lender or any of its directors, officers, employees, agents or
representatives be responsible to Borrower for any act or failure to act,
except for gross negligence or willful misconduct. After the occurrence and
during the continuance of an Event of Default, Lender may exercise this power
of attorney without notice to or assent of Borrower, in the name of Borrower,
or in Lender's own name, from time to time in Lender's sole discretion and at
Borrower's expense, provided that such expenses are reasonable and actually
incurred. To further carry out the terms of this Agreement, after the
occurrence and during the continuance of an Event of Default, Lender may:
(a) Sign and endorse any invoice, freight or express bills, bills of
loading, storage or warehouse receipts; drafts, certificates and statements
under any commercial or standby letter of credit relating to Collateral; or any
other documents relating to the Collateral, including without limitation the
Records.
(b) Use or operate Collateral or any other property of Borrower for the
purpose of preserving or liquidating Collateral.
(c) File any claim or take any other action or proceeding in any court of
law or equity or as otherwise deemed appropriate by Lender for the purpose of
collecting any and all monies due or securing any performance to be rendered
with respect to the Collateral.
(d) Commence, prosecute or defend any suits, actions or proceedings or as
otherwise deemed appropriate by Lender for the purpose of protecting or
collecting the Collateral.
(e) Prepare, adjust, execute, deliver and receive payment under insurance
claims, and collect and receive payment of and endorse any instrument in
payment of loss or returned premiums or any other insurance refunds or return,
and apply such amounts at Lender's sole discretion toward repayment of the
Obligation or replacement of the Collateral.
8.4 APPLICATION OF PROCEEDS. Any Proceeds and other monies or property
received by Lender pursuant to the terms of this Agreement or any Loan Document
may be applied by Lender first to the payment of expenses of collection,
including without limitation reasonable attorney's fees, and then to the
payment of the Obligations in such order of application as Lender may elect.
8.5 DEFICIENCY. If the Proceeds of any disposition of the Collateral are
insufficient to cover all costs and expenses of such sale and the payment in
full of all the Obligations, plus all other sums required to be expended or
distributed by Lender, then Borrower shall be liable for any such deficiency.
8.6 LENDER TRANSFER. Upon the transfer of all or any part of the
Obligations, Lender may transfer all or part of the Collateral and shall be
fully discharged thereafter from all liability and responsibility with respect
to such Collateral so transferred, and the transferee shall be vested with all
the rights and powers of Lender hereunder with respect to such Collateral so
transferred, but with respect to any Collateral not so transferred, Lender
shall retain all rights and powers hereby given.
8.7 LENDER'S DUTIES.
(a) Lender shall use reasonable care in the custody and preservation of
any Collateral in its possession. Without limitation on other conduct which may
be considered the exercise of reasonable care, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of such Collateral if
such Collateral is accorded treatment substantially equal to that which Lender
accords its own property, or taking any necessary steps to preserve any rights
against any Person with respect to any Collateral. Under no circumstances shall
Lender be responsible for any injury or loss to the Collateral, or any part
thereof, arising from any cause beyond the reasonable control of Lender.
(b) Neither Lender, nor any of its directors, officers, employees, agents,
attorneys or any other person affiliated with or representing Lender shall be
liable for any claims, demands, losses or damages, of
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any kind whatsoever, made, claimed, incurred or suffered by Borrower or any
other party through the ordinary negligence of Lender, or any of its directors,
officers, employees, agents, attorneys or any other person affiliated with or
representing Lender.
8.8 TERMINATION OF SECURITY INTERESTS. Upon the payment in full of the
Obligations and if Lender has no further obligations under its Commitment, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to Borrower. Upon any such termination, the Lender
shall, at Borrower's expense, execute and deliver to Borrower such documents as
Borrower shall reasonably request to evidence such termination.
ARTICLE 9 - GENERAL PROVISIONS
9.1 NOTICES. Any notice given by any party under any Loan Document shall
be in writing and personally delivered, sent by overnight courier, or United
States mail, postage prepaid, or sent by facsimile, or other authenticated
message, charges prepaid, to the other party's or parties' addresses shown on
the Supplement. Each party may change the address or facsimile number to which
notices, requests and other communications are to be sent by giving written
notice of such change to each other party. Notice given by hand delivery shall
be deemed received on the date delivered; if sent by overnight courier, on the
next business day after delivery to the courier service; if by first class
mail, on the third business day after deposit in the U.S. Mail; and if by
facsimile, on the date of transmission.
9.2 BINDING EFFECT. The Loan Documents shall be binding upon and inure to
the benefit of Borrower and Lender and their respective successors and assigns;
provided, however, that Borrower may not assign or transfer Borrower's rights
or obligations under any Loan Document, except to a person or entity into which
it has merged or which has otherwise succeeded to all or substantially all of
its business and assets to which this Agreement pertains, by merger
reorganization or otherwise, in accordance with Section 6.2 without Lender's
prior written consent. Lender reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in,
Lender's rights and obligations under the Loan Documents. In connection with
any of the foregoing, Lender may disclose all documents and information which
Lender now or hereafter may have relating to the Loans, Borrower, or its
business; provided that any person who receives such information shall have
agreed in writing in advance to maintain the confidentiality of such
information on terms reasonably acceptable to Borrower.
9.3 NO WAIVER. Any waiver, consent or approval by Lender of any Event of
Default or breach of any provision, condition, or covenant of any Loan Document
must be in writing and shall be effective only to the extent set forth in
writing. No waiver of any breach or default shall be deemed a waiver of any
later breach or default of the same or any other provision of any Loan
Document. No failure or delay on the part of Lender in exercising any power,
right, or privilege under any Loan Document shall operate as a waiver thereof,
and no single or partial exercise of any such power, right, or privilege shall
preclude any further exercise thereof or the exercise of any other power, right
or privilege. Lender has the right at its sole option to continue to accept
interest and/or principal payments due under the Loan Documents after default,
and such acceptance shall not constitute a waiver of said default or an
extension of the Maturity Date unless Lender agrees otherwise in writing.
9.4 RIGHTS CUMULATIVE. All rights and remedies existing under the Loan
Documents are cumulative to, and not exclusive of, any other rights or remedies
available under contract or applicable law.
9.5 UNENFORCEABLE PROVISIONS. Any provision of any Loan Document executed
by Borrower which is prohibited or unenforceable in any jurisdiction, shall be
so only as to such jurisdiction and only to the extent of such prohibition or
unenforceability, but all the remaining provisions of any such Loan Document
shall remain valid and enforceable.
9.6 ACCOUNTING TERMS. Except as otherwise provided in this Agreement,
accounting terms and financial covenants and information shall be determined
and prepared in accordance with GAAP.
9.7 INDEMNIFICATION; EXCULPATION. Borrower shall pay and protect, defend
and indemnify Lender and Lender's employees, officers, directors, shareholders,
affiliates, correspondents, agents and representatives (other than Lender,
collectively "Agents") against, and hold Lender and each such Agent harmless
from, all claims, actions, proceedings, liabilities, damages, losses, expenses
(including, without limitation, attorneys' fees and costs) and other amounts
incurred by Lender and each such Agent, arising from (i) the
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matters contemplated by this Agreement or any other Loan Documents or (ii) any
contention that Borrower has filed to comply with any law, rule, regulation,
order or directive applicable to Borrower's business; PROVIDED, HOWEVER, that
this indemnification shall not apply to any of the foregoing incurred solely as
the result of Lender's or any Agent's gross negligence or willful misconduct.
This indemnification shall survive the payment and satisfaction of all of
Borrower's Obligations to Lender.
9.8 REIMBURSEMENT. Borrower shall reimburse Lender for all reasonable
costs and expenses actually incurred, including without limitation reasonable
attorneys' fees and disbursements expended or incurred by Lender in any
arbitration, mediation, judicial reference, legal action or otherwise in which
Lender obtains a favorable judgement, award or other similar favorable outcome
and in connection with (a) the preparation and negotiation of the Loan
Documents, (b) the amendment and enforcement of the Loan Documents, including
without limitation during any workout, attempted workout, and/or in connection
with the rendering or legal advice as to Lender's rights, remedies and
obligations under the loan Documents, (c) collecting any sum which becomes due
Lender under any Loan Document, (d) any proceeding for declaratory relief, any
counterclaim to any proceeding, or any appeal or (e) the protection,
preservation or enforcement of any rights of Lender. For the purposes of this
section, attorney's fees shall include, without limitation, fees incurred in
connection with the following; (1) contempt proceedings; (12) discovery; (3)
any motion, proceeding or other activity of any kind in connection with an
Insolvency Proceeding; (4) garnishment, levy, and debtor and third party
examinations; and (5) postjudgment motions and proceedings of any kind,
including without limitation any activity taken to collect or enforce any
judgment. All of the foregoing costs and expenses shall be payable upon demand
by Lender, and if not paid within forty-five (45) days of presentation of
invoices shall bear interest at the highest applicable Default Rate.
9.9 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts which, when taken together, shall constitute but one
agreement.
9.10 ENTIRE AGREEMENT. The Loan Documents are intended by the parties as
the final expression of their agreement and therefore contain the entire
agreement between the parties and supersede all prior understandings or
agreements concerning the subject matter hereof. This Agreement may be amended
only in a writing signed by Borrower and Lender.
9.11 GOVERNING LAW AND JURISDICTION.
(a) THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR
OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH OF BORROWER AND LENDER CONSENTS, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS. EACH OF BORROWER AND LENDER IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. BORROWER AND LENDER EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
CALIFORNIA LAW.
9.12 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVES ITS RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OTHERWISE. BORROWER AND
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LENDER EACH AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY, WITHOUT LIMITING THE FOREGOING, THE PARTIES
FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEMS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY
OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
ARTICLE 10 - DEFINITIONS
The definitions appearing in this Agreement or any Supplement shall be
applicable to both the singular and plural forms of the defined terms:
"AFFILIATE" means any Person which directly or indirectly controls, is
controlled by, or is under common control with Borrower. "Control," "controlled
by" and "under common control with" mean direct or indirect possession of the
power to direct or cause the direction of management or policies (whether
through ownership of voting securities, by contract or otherwise);
provided, that control shall be conclusively presumed when any Person or
affiliated group directly or indirectly owns five percent (5%) or more of the
securities having ordinary voting power for the election of directors of a
corporation.
"AGREEMENT" means this Loan and Security Agreement and each Supplement
thereto, as each may be amended or supplemented from time to time.
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.
Section 191, et seq.), as amended.
"BASIC INTEREST" means the fixed rate of interest payable on the outstanding
balance of each Loan at the applicable Designated Rate.
"BORROWING DATE" means the Business Day on which the proceeds of a Loan are
disbursed by Lender.
"BORROWING REQUEST" means a written request from Borrower in substantially the
form of Exhibit "B" to the Supplement, requesting the funding of one or more
Loans on a particular Business Date.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on
which commercial banks in New York City or San Francisco are authorized or
required by law to close.
"CLOSING DATE" means the date of this Agreement.
"COLLATERAL" means all Borrower's Equipment now owned or hereafter acquired or
arising, wherever located, and whether held by Borrower or any third party, and
all proceeds and products thereof, including all insurance and condemnation
proceeds ("Proceeds"), and all monies now or at any time hereafter in the
possession or under the control of Lender or a bailee or affiliate of Lender,
including any cash collateral in any cash collateral or other account, and all
Records.
"COMMITMENT" means the obligation of Lender to make Loans to Borrower up to the
aggregate principal amount set forth in the Supplement.
"DEFAULT" means an event which with the giving of notice, passage of time, or
both would constitute an Event of Default.
"DEFAULT RATE" is defined in Section 2.7.
"DESIGNATED RATE" means the rate of interest per annum described in the
Supplement as being applicable to an outstanding Loan from time to time.
"ENVIRONMENTAL LAWS" means all federal, state or local laws, statutes, common
law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authorities, each case
relating to environmental, health, or safety matters.
"EQUIPMENT" means all of Borrower's specific items of equipment described on
Schedule 1 attached to this Agreement and incorporated herein by this
reference (as such Schedule 1 may be amended or supplemented from time to
time), and all such property which is or is to become fixtures on real
property, and all improvements, replacements, accessions and additions thereto,
wherever located, and all proceeds thereof arising from the sale, lease, rental
or other use or
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disposition of any such property, including all rights to payment with respect
to insurance or condemnation, returned premiums, or any cause of action
relating to any of the foregoing.
"EVENT OF DEFAULT" means any event described in Section 7.1.
"FIXTURES" means all items of Equipment that are so related to the real
property upon which they are located that an interest in them arises under real
property law, and improvements, replacements, parts, accessions and additions
thereto, and substitutions therefor.
"GAAP" means generally accepted accounting principles and practices consistent
with those principles and practices promulgated or adopted by the Financial
Accounting Standards Board and the Board of the American Institute of Certified
Public Accountants, their respective predecessors and successors. Each
accounting term used but not otherwise expressly defined herein shall have the
meaning given it by GAAP.
"INSOLVENCY PROCEEDING" means (a) any case, action or proceeding before any
court or other governmental authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar arrangement
in respect of its creditors generally or any substantial portion of its
creditors, undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"LIEN" means any voluntary or involuntary security interest, mortgage, pledge,
claim, charge, encumbrance, title retention agreement, or third party interest,
covering all or any part of the property of Borrower or any other Person.
"LOAN" means an extension of credit by Lender under this Agreement.
"LOAN DOCUMENTS" means individually and collectively, this Loan and Security
Agreement, each Supplement, each Note, and any other security or pledge
agreement(s), any Warrants issued by Borrower in connection with this Agreement,
and all other contracts, instruments, addenda and documents executed in
connection with this Agreement or the extensions of credit which are the subject
of this Agreement.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means (a) a material
adverse change in, or a material adverse effect upon, the operations, business,
properties, or condition (financial or otherwise) of Borrower; (b) a material
impairment of the ability of Borrower to perform under any Loan Document; or
(c) a material adverse effect upon the legality, validity, binding effect or
enforceability against Borrower of any Loan Document.
"MATURITY DATE" means, with regard to a Loan, the earlier of (i) its maturity
by reason of acceleration, or (ii) its stated maturity date; and is the date on
which payment of all outstanding principal, accrued interest, and the Terminal
Payment with respect to such Loan is due.
"NOTE" means a promissory note substantially in the form attached to the
Supplement as Exhibit "A", executed by Borrower evidencing each Loan.
"OBLIGATIONS" means all debts, obligations and liabilities of Borrower to
Lender currently existing or now or hereafter made, incurred or created under,
pursuant to or in connection with this Agreement, whether voluntary or
involuntary and however arising or evidenced, whether direct or acquired by
Lender by assignment or succession, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, and whether
Borrower may be liable individually or jointly, or whether recovery upon such
debt may be or become barred by any statute of limitations or otherwise
unenforceable; and all renewals, extensions and modifications thereof; and all
attorneys' fees and costs incurred by Lender in connection with the collection
and enforcement thereof as provided for in any Loan Document.
"PERMITTED LIEN" means
(a) Involuntary Liens which, in the aggregate, would not have a Material
Adverse Effect and which in any event would not exceed the Threshold Amount;
(b) Liens for current taxes or other governmental or regulatory
assessments which are not delinquent, or which are contested in good faith by
the appropriate procedures and for which appropriate reserves are maintained;
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(c) Liens in favor of Lender;
(d) materialmen's, mechanics', repairmen's, employees' or other like
Liens arising in the ordinary course of business and which are not delinquent
for more than 45 days or are being contested in good faith by appropriate
proceedings;
(e) any judgment, attachment or similar Lien, unless the judgment it
secures has not been discharged or execution thereof effectively stayed and
bonded against pending appeal within 30 days of the entry thereof; and
(f) Any Liens existing on the Closing Date and disclosed in the Schedule
or arising under this Agreement or the other Loan Documents.
"PERSON" means any individual or entity.
"QUALIFIED PUBLIC OFFERING" means the closing of a firmly underwritten public
offering of Borrower's common stock with aggregate proceeds of not less than
$20,000,000 (prior to underwriting expenses and commissions).
"RECORDS" means all Borrower's computer programs, software, hardware, source
codes and data processing information, all written documents, books, invoices,
ledger sheets, financial information and statements, and all other writings
concerning Equipment.
"RELATED PERSON" means any Affiliate of Borrower, or any officer, employee,
director or equity security holder of Borrower or any Affiliate.
"TERMINAL PAYMENT" means, with respect to each Loan, an amount payable on the
Maturity Date of such Loan in an amount equal to that percentage of the
original principal amount of such Loan specified in the Supplement.
"TERMINAL DATE" has the meaning specified in the Supplement.
"THRESHOLD AMOUNT" has the meaning specified in the Supplement.
"UCC" means the Uniform Commercial Code as enacted in the applicable
jurisdiction, in effect on the Closing Date and as amended from time to time.
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SUPPLEMENT
TO THE
LOAN AND SECURITY AGREEMENT (EQUIPMENT)
DATED AS OF FEBRUARY 9, 1999
BETWEEN
NEW FOCUS, INC. ("BORROWER")
AND
VENTURE LENDING & LEASING II, INC. ("LENDER")
________________________________________________________________________________
This is a Supplement identified in the document entitled Loan
and Security Agreement (Equipment) dated as of February 9, 1999 between Borrower
and Lender. All capitalized terms used in this Supplement and not otherwise
defined in this Supplement have the meanings ascribed to them in Section 10 of
the Loan and Security Agreement, which is incorporated in its entirety into
this Supplement. In the event of any inconsistency between the provisions of
that document and this Supplement, this Supplement is controlling. Execution of
this Supplement by the Lender and Borrower shall constitute execution of the
Loan and Security Agreement.
In addition to the provisions of the Loan and Security
Agreement, the parties agree as follows:
1. - ADDITIONAL DEFINITIONS:
"COMMITMENT": Lender commits to make Loans to Borrower up to the
aggregate, original principal amount of Two Million Dollars ($2,000,000.00).
"DESIGNATED RATE": The Designated Rate is eight and 40/100
percent (8.40%) per annum.
"TERMINAL PAYMENT": Each Terminal Payment shall be an amount
equal to ten percent (10%) of the original principal amount of the associated
Loan.
"TERMINATION DATE": The Termination Date is the earlier of (a)
the date Lender may terminate making Loans or extending other credit pursuant
to the rights of Lender under Article 7 of the Agreement, or (b) December 31,
1999.
"THRESHOLD AMOUNT": Fifty Thousand Dollars ($50,000.00).
2. - Additional Terms and Conditions:
A. ISSUANCE OF WARRANT TO LENDER. As additional consideration for
the making of the Loans under the Agreement, upon the making of, and as a
condition to, the initial Loan, Lender shall be entitled to receive a warrant to
purchase 35,000 shares of Series D Preferred Stock of Borrower ("Warrant
Shares") with an aggregate initial exercise price of $140,000 and a per share
exercise price of $4.00 which is determined on the basis of the per share price
of the preferred stock issued in the most recent round of venture capital equity
financing prior to the Closing Date. The warrant under this Agreement shall be
in substantially the form attached hereto as Exhibit "D"; shall be transferable
by Lender, subject to compliance with applicable securities laws; shall expire
not earlier than December 31, 2004; and shall include piggy-back registration
rights, "net issuance" provisions, and anti-dilution protections reasonably
satisfactory to Lender and its counsel.
Page 1
18
B. LIMITATION ON REIMBURSEMENT OF DOCUMENTATION COSTS. Notwithstanding
anything to the contrary in Section 9.8 of the Loan and Security Agreement,
Borrower's obligation to reimburse Lender its attorneys' fees and costs of
documenting this transaction shall not exceed $1,000.00.
C. LIMITATION ON EQUIPMENT LOANS. Each Loan shall be in an amount not to
exceed one hundred percent (100%) of the amount paid or payable by Borrower to
a non-affiliated manufacturer, vendor or dealer for an item of equipment as
shown on an invoice therefor (excluding any commissions and any portion of the
payment which relates to the servicing of the equipment and sales taxes payable
by Borrower upon acquisition, and delivery charges). Used equipment purchased
by Borrower may be financed at the depreciated value of the equipment purchase
price (excluding any commissions and any portion of the payment which relates
to the servicing of the equipment and sales taxes payable by Borrower upon
acquisition, and delivery charges). Lender has the right to approve individual
items of Equipment for funding. Each Loan requested by Borrower to be made on a
single Business Day shall be for a minimum principal amount equal to $50,000
except to the extent the remaining Commitment is a lesser amount.
3. - ADDITIONAL REPRESENTATIONS:
Borrower represents and warrants that as of the Closing Date:
Its chief executive office is located at: 0000 Xxxxx Xxxxxx, Xxxxx Xxxxx,
XX 00000-0000
Its Equipment is located at: Same
Its Records are located at: Same
In addition to its chief executive office, Borrower maintains offices or
operates its business at the following locations: Madison, WI (Fab
Facility)
Other than its full corporate name and the name of its fully-owed
subsidiary Focused Research, Borrower has conducted business using the
following trade names or fictitious business names: None
4. - ADDITIONAL LOAN DOCUMENTS:
Schedule 1 to the Loan and Security Agreement
Form of Note Exhibit "A"
Form of Borrowing Request Exhibit "B"
Form of Compliance Certificate Exhibit "C"
Form of Warrant Exhibit "D"
Page 2
19
IN WITNESS WHEREOF, the parties have executed this Supplement as of the date
first above written.
BORROWER: LENDER:
NEW FOCUS, INC. VENTURE LENDING & LEASING II, INC.
By: /s/ XXXXXXX X. XXXXXXXX By: /s/ XXXXXXXX X. XXXXXXXXX
--------------------------- ---------------------------
Name: XXXXXXX X. XXXXXXXX Name: XXXXXXXX X. XXXXXXXXX
--------------------------- ---------------------------
Title: President & CEO Title: President
-------------------------- --------------------------
Address for Notices:
Attn: Chief Financial Officer Attn: Chief Financial Officer
0000 Xxxxx Xxxxxx 0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xx 00000 Xxx Xxxx, XX 00000
Fax # 000-000-0000 Fax # (000) 000-0000
Page 3
20
EXHIBIT A
[Note No. X-XXX]
FORM OF PROMISSORY NOTE
$[Face Amount of Note] [Note Date]
San Jose, California
The undersigned ("Borrower") promises to pay to the order of VENTURE
LENDING & LEASING II, INC., a Maryland corporation ("Lender") at its office at
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, Xxxxxxxxxx 00000, or at such
other place as Lender may designate in writing, in lawful money of the United
States of America, the principal sum of _____________________ Dollars ($______),
with Basic Interest thereon from the date until maturity, whether scheduled or
accelerated, at a fixed rate per annum of eight and 40/100 percent (8.40%), and
a Terminal Payment in the sum of [10% of face amount] Dollars ($_______)
payable on the Maturity Date.
This Note is one of the Notes referred to in, and is entitled to all the
benefits of, a Loan and Security Agreement dated [Agreement Date], between
Borrower and Lender (the "Loan Agreement"). Each capitalized term not otherwise
defined herein shall have the meaning set forth in the Loan Agreement. The Loan
Agreement contains provisions for the acceleration of the maturity of this Note
upon the happening of certain stated events.
Principal of and interest on this Note shall be payable as follows:
On the Borrowing Date, Borrower shall pay (i) Basic Interest, in advance,
on the outstanding principal balance of this Note at the Designated Rate for
the period from the Borrowing Date through [THE LAST DAY OF THE SAME MONTH];
and (ii) a first (1st) amortization installment of principal and Basic Interest
in the amount of _______________, in advance for the month of [first full month
after Borrowing Date] and (iii) a 36th [last] amortization installment of
principal and Basic Interest in the amount of $________________, in advance for
the month [date of last regular amortization payment].
Commencing of the first day of the second full month after the Borrowing
Date, and continuing on the first day of each consecutive month thereafter,
principal and Basic Interest shall be payable, in advance, in [thirty-three
(33) equal consecutive installments of ___________________ Dollars ($________)
each, with a [thirty-fourth (34th)] installment equal to the entire unpaid
principal balance and accrued Basic Interest on ___________, 2000_. The
Terminal Payment amount shall be payable on [ONE MONTH LATER], 200_.
Any unpaid payments of principal or interest on this Note shall bear
interest from their respective maturities, whether scheduled or accelerated, at
a rate per annum equal to the Default Rate. Borrower shall pay such interest on
demand.
Interest, charges and fees shall be calculated for actual days elapsed on
the basis of a 360-day year, which results in higher interest, charge or fee
payments than if a 365-day year were used. In no event shall Borrower be
obligated to pay interest, charges or fees at a rate in excess of the highest
rate permitted by applicable law from time to time in effect.
If Borrower is late in making any payment under this Note by more than
five (5) days, Borrower agrees to pay a "late charge" of five percent (5%) of
the installment due, but not less than fifty dollars ($50.00) for any one such
delinquent payment. This late charge may be charged by Lender for the purpose
of defraying the expenses
21
incidental to the handling of such delinquent amounts. Borrower acknowledges
that such late charge represents a reasonable sum considering all of the
circumstances existing on the date of this Note and represents a fair and
reasonable estimate of the costs that will be sustained by Lender due to the
failure of Borrower to make timely payments. Borrower further agrees that proof
of actual damages would be costly and inconvenient. Such late charge shall be
paid without prejudice to the right of Lender to collect any other amounts
provided to be paid or to declare a default under this Note or any of the other
Loan Documents or from exercising any other rights and remedies of Lender.
This Note shall be governed by, and construed in accordance with, the laws
of the State of California.
NEW FOCUS, INC.
By: ___________________________________
Name: _________________________________
Its: __________________________________
22
EXHIBIT B
BORROWING REQUEST
_______________, ___
Venture Lending & Leasing II, Inc.
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Re: NEW FOCUS, INC.
Gentlemen:
Reference is made to the two Loan and Security Agreement dated as of
_________ (as the same have been and may be amended from time to time, the
"Loan Agreement", the capitalized terms used herein as defined therein),
between Venture Lending & Leasing II, Inc. on one hand and New Focus, Inc. (the
"Company") on the other.
The undersigned is an Officer of the Company, authorized to borrow under
The Loan Agreement, and hereby requests Loan under the Loan Agreement, and in
that connection certifies as follows:
1. The aggregate amount of the proposed Loan is $________. The Business
Day of the proposed Loan is ________, 199X.
2. As of this date, no Default or Event of Default has occurred and is
continuing, or will result from the making of the proposed Loan, and the
representations and warranties of the Company contained in the Loan Agreement
are true and correct.
3. No Material Adverse Change has occurred since the date of the most
recent financial statements submitted to you by the Company.
The Company agrees to notify you promptly before the funding of the Loan
if any of the matters to which I have certified above shall not be true and
correct on the Borrowing Date.
Very Truly Yours,
By: ___________________________________
Name: _________________________________
Its: __________________________________
23
EXHIBIT C
COMPLIANCE CERTIFICATE
Venture Lending & Leasing II, Inc.
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Re:_________________
Gentlemen:
Reference is made to the two Loan and Security Agreement dated as of
______ (as the same have been and may be amended from time to time, the "Loan
Agreement", the capitalized terms used herein as defined therein), between
Venture Lending & Leasing II, Inc. on one hand and __________ (the "Company")
on the other.
The undersigned authorized representative of the Company hereby certifies that
in accordance with the terms and conditions of the Loan Agreement, the Company
is in complete compliance for the period ending _____ of all required
conditions and terms except as noted below. Attached herewith are the required
documents supporting the above certification. The representative further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles and are consistent from one period to the next except as
explained below.
Indicate compliance status by circling Yes/No under "Complies"
REPORTING REQUIREMENT REQUIRED COMPLIES
--------------------- -------- --------
Interim Financial Statements Monthly within 45 days YES/NO
Audited Financial Statements FYE within 90 days YES/NO
FINANCIAL COVENANTS REQUIRED COMPLIES
------------------- -------- --------
REQUIRED EXPLANATIONS:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Very Truly Yours,
By: ____________________
Name: ____________________
Its: ____________________
24
EXHIBIT D
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR
THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
WARRANT TO PURCHASE
35,000 SHARES OF SERIES D PREFERRED STOCK OF
NEW FOCUS, INC.
(Void after December 31, 2004)
This certifies that VENTURE LENDING & LEASING II, INC., a Maryland corporation,
or assigns (the "Holder"), for value received, is entitled to purchase from NEW
FOCUS, INC., a California corporation (the "Company"), 35,000 fully paid and
nonassessable shares of the Company's Series D Preferred Stock ("Preferred
Stock") for cash at a price of $4.00 per share (the "Stock Purchase Price") at
any time or from time to time up to and including 5:00 p.m. (Pacific time) on
December 31, 2004 (the "Expiration Date"), upon surrender to the Company at its
principal office at 0000 Xxxxx Xxxxxx, Xxxxx Xxxxx, XX 00000-0000, (or at such
other location as the Company may advise Holder in writing) of this Warrant
properly endorsed with the Form of Subscription attached hereto duly filled in
and signed and upon payment in cash or by check of the aggregate Stock Purchase
Price for the number of shares for which this Warrant is being exercised
determined in accordance with the provisions hereof. The Stock Purchase Price
and the number of shares purchasable hereunder are subject to adjustment as
provided in Section 4 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payments for Shares.
(a) Unless an election is made pursuant to clause (b) of this
Section 1, this Warrant shall be exercisable at the option of the Holder, at
any time or from time to time, on or before the Expiration Date for all or any
portion of the shares of Preferred Stock (but not for a fraction of a share)
which may be purchased hereunder for the Stock Purchase Price multiplied by the
number of shares to be purchased. In the event, however, that pursuant to the
Company's Articles of Incorporation, as amended, an event causing automatic
conversion of the Company's Preferred Stock shall have occurred prior to the
exercise of this Warrant, in whole or in part, then this Warrant shall be
exercisable for the number of shares of Common Stock of the Company into which
the Preferred Stock not purchased upon any prior exercise of the Warrant would
have been so converted (and, where the context requires, reference to
"Preferred Stock" shall be deemed to include such Common Stock). The Company
agrees that the shares of Preferred Stock purchased under this Warrant shall be
and are deemed to be issued to the holder hereof as the record owner of such
shares as of the close of business on the date on which the form of
subscription shall have been delivered and payment made for such shares.
Subject to the provisions of Section 2, certificates for the shares of
Preferred Stock so purchased, together with any other securities or property to
which the Holder hereof is entitled upon such exercise, shall be delivered to
the Holder hereof by the Company at the Company's expense within a reasonable
time after the rights represented by this Warrant have been so exercised.
Except as provided in clause (b) of this Section 1, in case of a purchase of
less than all the shares which may be purchased under this Warrant, the Company
shall cancel this Warrant and execute and deliver a new Warrant or Warrants of
like tenor for the balance of the shares purchasable under the Warrant
surrendered upon such purchase to the Holder hereof within a reasonable time.
Each stock certificate so delivered shall be in such denominations of
25
Preferred Stock as may be requested by the Holder hereof and shall be
registered in the name of such Holder or such other name as shall be designated
by such Holder, subject to the limitations contained in Section 2.
(b) The Holder, in lieu of exercising this Warrant by the
payment of the Stock Purchase Price pursuant to clause (a) of this Section 1,
may elect, at any time on or before the Expiration Date, to receive that
number of shares of Preferred Stock equal to the quotient of: (i) the
difference between (A) the Per Share Price (as hereinafter defined) of the
Preferred Stock, less (B) the Stock Purchase Price then in effect, multiplied
by the number of shares of Preferred Stock the Holder would otherwise have
been entitled to purchase hereunder pursuant to clause (a) of this Section 1
(or such lesser number of shares as the Holder may designate in the case of a
partial exercise of this Warrant); over (ii) the Per Share Price. Election to
exercise under this section (b) may be made by delivering a signed form of
subscription to the Company via facsimile, to be followed by delivery of the
warrant.
(c) For purposes of clause (b) of this Section 1, "Per Share
Price" means the product of: (i) the greater of (A) the closing price of the
Company's Common Stock as quoted by NASDAQ or listed on any exchange,
whichever is applicable, as published in the Western Edition of the Wall
Street Journal for the trading day immediately prior to the date of the
Holder's election hereunder or, (B) if applicable at the time of or in
connection with the exercise under clause (b) of this Section 1, the gross
sales price of one share of the Company's Common Stock pursuant to a
registered public offering or that amount which shareholders of the Company
will receive for each share of Common Stock pursuant to a merger,
reorganization or sale of assets; and (ii) that number of shares of Common
Stock into which each share of Preferred Stock is convertible. If the
Company's Common Stock is not quoted by NASDAQ or listed on an exchange, the
Per Share Price of the Preferred Stock (or the equivalent number of shares of
Common Stock into which such Preferred Stock is convertible) shall be the
price per share which the Company would obtain from a willing buyer for
shares sold by the Company from authorized but unissued shares as such price
shall be agreed upon by the Holder and the Company or, if agreement cannot be
reached within ten (10) business days of the Holder's election hereunder, as
such price shall be determined by a panel of three (3) appraisers, one (1) to
be chosen by the Company, one (1) to be chosen by the Holder and the third to
be chosen by the first two (2) appraisers. If the appraisers cannot reach
agreement within 30 days of the Holder's election hereunder, then each
appraiser shall deliver its appraisal and the appraisal which is neither the
highest nor the lowest shall constitute the Per Share Price. In the event
either party fails to choose an appraiser within 30 days of the Holder's
election hereunder, then the appraisal of the sole appraiser shall constitute
the Per Share Price. Each party shall bear the cost of the appraiser selected
by such party and the cost of the third appraiser shall be borne one-half by
each party. In the event either party fails to choose an appraiser, the cost
of the sole appraiser shall be borne one-half by each party.
2. Limitation on Transfer.
(a) The Warrant and the Preferred Stock shall not be transferable
except upon the conditions specified in this Section 2, which conditions are
intended to insure compliance with the provisions of the Securities Act of
1933, as amended (the "Securities Act"). Each holder of this Warrant or the
Preferred Stock issuable hereunder will cause any proposed transferee of the
Warrant or Preferred Stock to agree to take and hold such securities subject to
the provisions and upon the conditions specified in this Section 2.
(b) Each certificate representing (i) this Warrant, (ii) the
Preferred Stock, (iii) shares of the Company's Common Stock issued upon
conversion of the Preferred Stock and (iv) any other securities issued in
respect to the Preferred Stock or Common Stock issued upon conversion of the
Preferred Stock upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall (unless otherwise permitted by the
provisions of this Section 2 or unless such securities have been registered
under the Securities Act or sold under Rule 144) be stamped or otherwise
imprinted with a legend substantially in the following form (in addition to any
legend required under applicable state securities laws):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR
2
26
THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
(c) The Holder of this Warrant and each person to whom this Warrant
is subsequently transferred represents and warrants to the Company (by
acceptance of such transfer) that it will not transfer the Warrant (or
securities issuable upon exercise hereof unless a registration statement under
the Securities Act was in effect with respect to such securities at the time of
issuance thereof) except pursuant to (i) an effective registration statement
under the Securities Act, (ii) Rule 144 under the Securities Act (or any other
rule under the Securities Act relating to the disposition of securities), or
(iii) an opinion of counsel, reasonably satisfactory to counsel for the
Company, that an exemption from such registration is available.
3. Shares to be Fully Paid; Reservation of Shares. The Company covenants
and agrees that all shares of Preferred Stock which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof (other than taxes in respect of transfer
occurring contemporaneously or as otherwise specified herein). The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times
have authorized and reserved, for the purpose of issue or transfer upon
exercise of the subscription rights evidenced by this Warrant, a sufficient
number of share of authorized but unissued Preferred Stock, or other securities
and property, when and as required to provide for the exercise of the rights
represented by this Warrant. The Company will take all such action as may be
necessary to assure that such shares of Preferred Stock may be issued as
provided herein without violation of any applicable law or regulation, or of
any requirements of any domestic securities exchange upon which the Preferred
Stock may be listed. The Company will not take any action which would result in
any adjustment of the Stock Purchase Price (as defined in Section 4 hereof) (i)
if the total number of shares of Preferred Stock issuable after such action
upon exercise of all outstanding warrants, together with all shares of Preferred
Stock then outstanding and all shares of Preferred Stock then issuable upon
exercise of all options and upon the conversion of all convertible securities
then outstanding, would exceed the total number of shares of Preferred Stock
then authorized by the Company's Articles of Incorporation, or (ii) if the
total number of shares of Common Stock issuable after such action upon the
conversion of all such shares of Preferred Stock together with all shares of
Common Stock then outstanding and then issuable upon exercise of all options
and upon the conversion of all convertible securities then outstanding would
exceed the total number of shares of Common Stock then authorized by the
Company's Articles of Incorporation.
4. Adjustment of Stock Purchase Price Number of Shares. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 4. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the
number of shares obtained by multiplying the Stock Purchase Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment, and dividing the product
thereof by the Stock Purchase Price resulting from such adjustment.
4.1 Subdivision or Combination of Stock. In case the Company shall
at any time subdivide its outstanding shares of Preferred Stock into a greater
number of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Preferred Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
4.2 Dividends in Preferred Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the holders of Preferred
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to
receive, without payment therefor,
(a) Preferred Stock, or any shares of stock or other securities
whether or not such securities are at any time directly or indirectly
convertible into or exchangeable for Preferred Stock, or any rights or
3
27
options to subscribe for, purchase or otherwise acquire any of the foregoing by
way of dividend or other distribution, or
(b) any cash paid or payable otherwise than as a cash dividend, or
(c) Preferred Stock or other or additional stock or other securities
or property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than shares of
Preferred Stock issued as a stock split, adjustments in respect of which shall
be covered by the terms of Section 4.1 above).
Then and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of
Preferred Stock receivable thereupon, and without payment of any additional
consideration therefore, the amount of stock and other securities and property
(including cash in the cases referred to in clauses (b) and (c) above) which
such Holder would hold on the date of such exercise had he been the holder of
record of such Preferred Stock as of the date on which holders of Preferred
Stock received or became entitled to receive such shares and/or all other
additional stock and other securities and property.
4.3 Reorganization, Reclassification, Consolidation, Merger or Sale. If
any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation shall be effected
in such a way that holders of Preferred Stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for Preferred Stock
(Corporate Event), then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive (in lieu of the shares of the Preferred Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby) such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for a number of outstanding
shares of such Preferred Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, provided, however, in the event that 1) the effective
price of such Corporate Event is in excess of the exercise price hereof
effective at the time of the Corporate Event, 2) the consideration received in
such Corporate Event is cash or shares that are of a publicly traded company
listed on a national market or exchange, without restrictions within 90 days of
the close of such Corporate Event, except for those of Rule 144 or 145, and 3)
the Company's shareholders own less than 50% of the voting securities of the
surviving entity, then this Warrant shall be deemed exercised in accordance with
the provisions of section 1(b) upon the closing of the Corporate Event. In any
such case, appropriate provision shall be made with respect to the rights and
interests of the holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Stock Purchase
Price and of the number of shares purchasable and receivable upon the exercise
of this Warrant) shall thereafter be applicable, as nearly as may be possible,
in relation to any share of stock, securities or assets thereafter deliverable
upon the exercise hereof.
4.4 Sale or Issuance Below Purchase Price. If the Company shall at any
time or from time to time issue or sell any of its Common Stock, Preferred
Stock, options to acquire (or rights to acquire such options), or any other
securities convertible into or exercisable for Common Stock, for a
consideration per share less than the Stock Purchase Price in effect
immediately prior to the time of such issue or sale, the Conversion ratio shall
be adjusted in accordance with the Company's Articles of Incorporation.
4.5 Notice of Adjustment. Upon any adjustment of the Stock Purchase
Price, and/or any increase or decrease in the number of shares purchasable upon
the exercise of this Warrant the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company. The
notice, which may be substantially in the form of Exhibit "A" attached hereto,
shall be signed by the Company's chief financial officer and shall state the
Stock Purchase Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which calculation is based.
4
28
4.6 Other Notices. If at any time:
(a) the Company shall declare any cash dividend upon its
Preferred Stock;
(b) the Company shall declare any dividend upon its Preferred
Stock payable in stock or make any special dividend or other distribution to
the holders of its Preferred Stock;
(c) the Company shall offer for subscription pro rata to the
holders of its Preferred Stock any additional shares of stock of any class or
other rights;
(d) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its assets
to, another corporation;
(e) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(f) the Company shall take or propose to take any other action,
notice of which is actually provided to holders of the Preferred Stock;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the holder of this Warrant at the address of
such holder as shown on the books of the Company, (i) at least 20 day's prior
written notice of the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights or
for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, or other action and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, or other action, at least 20 day's written notice of the date when
the same shall take place. Any notice given in accordance with the foregoing
clause (i) shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Preferred Stock shall be
entitled thereto. Any notice given in accordance with the foregoing clause (ii)
shall also specify the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, or other action as the case may
be.
4.7 Certain Events. If any change in the outstanding Preferred Stock
of the Company or any other event occurs as to which the other provisions of
this Section 4 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the Holder of the Warrant in accordance
with the essential intent and principles of such provisions, then the Board of
Directors of the Company shall make an adjustment in the number and class of
shares available under the Warrant, the Stock Purchase Price and/or the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such purchase rights as aforesaid. The adjustment
shall be such as will give the Holder of the Warrant upon exercise for the same
aggregate Stock Purchase Price the total number, class and kind of shares as he
would have owned had the Warrant been exercised prior to the event and had he
continued to hold such shares until after the event requiring adjustment.
5. Issue Tax. The issuance of certificates for shares of Preferred Stock
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax in respect thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of the then Holder of the Warrant being exercised.
6. Closing of Books. Provided that the Holder shall be in compliance
with the terms of this Agreement, including but not limited to, Section 2, the
Company will at no time close its transfer books against the transfer of any
Warrant or of any shares of Preferred Stock issued or issuable upon the
exercise of any warrant.
5
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7. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent as a shareholder in respect of meetings
of shareholders for the election of directors of the Company or any other
matters or any rights whatsoever as a shareholder of the Company. No dividends
or interest shall be payable or accrued in respect of this Warrant or the
interest represented hereby or the shares purchasable hereunder until, and only
to the extent that, this Warrant shall have been exercised. No provisions
hereof, in the absence of affirmative action by the holder to purchase shares
of Preferred Stock, and no mere enumeration herein of the rights or privileges
of the Holder hereof, shall give rise to any liability of such Holder for the
Stock Purchase Price or as a shareholder of the Company, whether such liability
is asserted by the Company or by its creditors.
8. Intentionally Omitted.
9. Registration Rights. The Holder hereof shall be entitled, with
respect to the shares of Preferred Stock issued upon exercise hereof or the
shares of Common Stock or other securities issued upon conversion of such
Preferred Stock as the case may be, to, and bound by, all of the registration
rights and obligations set forth in the First Amended and Restated Registration
Rights Agreement dated as of July 31, 1998 to the same extent and on the same
terms and conditions as possessed by the Investors thereunder. The Company
shall take such action as may be reasonably necessary to assure that the
granting of such registration rights to the Holder does not violate the
provisions of such agreement or any of the Company's charter documents or rights
of prior Grantees of registration rights.
10. Rights and Obligations Survive Exercise of Warrant. The rights and
obligations of the Company, of the Holder of this Warrant and of the holder of
shares of Preferred Stock issued upon exercise of this Warrant, contained in
Sections 6 and 9 shall survive the exercise of this Warrant.
11. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
12. Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
deemed to have been given (i) upon receipt if delivered personally or by
courier (ii) upon confirmation of receipt if by telecopy or (iii) three business
days after deposit in the US mail, with postage prepaid and certified or
registered, to each such holder at its address as shown on the books of the
Company or to the Company at the address indicated therefor in the first
paragraph of this Warrant.
13. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Preferred Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors or assign of the holder hereof. The Company will, at the time of the
exercise of this Warrant, in whole or in part, upon request of the Holder
hereof but at the Company's expense, acknowledge in writing its continuing
obligation to the Holder hereof in respect of any rights (including, without
limitation, any right to registration of the shares of Common Stock) to which
the holder hereof shall continue to be entitled after such exercise in
accordance with this Warrant; provided, that the failure of the holder hereof
to make any such request shall not affect the continuing obligation of the
Company to the Holder hereof in respect to such rights.
14. Descriptive Headings and Governing Law. The descriptive headings of
the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of California.
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15. Lost Warrants or Stock Certificates. The Company represents and
warrants to the Holder hereof that upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
any Warrant or stock certificate and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant or stock certificate, the Company at its expense will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
16. Fractional Shares. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price.
17. Representations of Holder. With respect to this Warrant, Holder
represents and warrants to the Company as follows:
17.1 Experience. It is experienced in evaluating and investing in
companies engaged in businesses similar to that of the Company; it understands
that investment in the Warrant involves substantial risks; it has made detailed
inquiries concerning the Company, its business and services, its officers and
its personnel; the officers of the Company have made available to Holder any
and all written information it has requested; the officers of the Company have
answered to Holder's satisfaction all inquiries made by it; in making this
investment it has relied upon information made available to it by the Company;
and it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of investment in the Company
and it is able to bear the economic risk of that investment.
17.2 Investment. It is acquiring the Warrant for investment for
its own account and not with a view to, or for resale in connection with, any
distribution thereof. It understands that the Warrant, the shares of
Preferred Stock issuable upon exercise thereof and the shares of Common Stock
issuable upon conversion of the Preferred Stock, have not been registered
under the Securities Act of 1933, as amended, nor qualified under applicable
state securities laws.
17.3 Rule 144. It acknowledges that the Warrant, the Preferred
Stock and the Common Stock must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. It has been advised or is aware of the provisions of
Rule 144 promulgated under the Securities Act.
17.4 Access to Data. It has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management and has had the opportunity to inspect the Company's facilities.
18. Additional Representations and Covenants of the Company. The
Company hereby represents, warrants and agrees as follows:
18.1 Corporate Power. The Company has all requisite corporate
power and corporate authority to issue this Warrant and to carry out and
perform its obligations hereunder.
18.2 Authorization. All corporate action on the part of the
Company, its directors and shareholders necessary for the authorization,
execution, delivery and performance by the Company of this has been taken. This
Warrant is a valid and binding obligation of the Company, enforceable in
accordance with its terms.
18.3 Offering. Subject in part to the truth and accuracy of
Holder's representations set forth in Section 17 hereof, the offer, issuance
and sale of the Warrant is, and the issuance of Preferred Stock upon exercise
of the Warrant and the issuance of Common Stock upon conversion of the
Preferred Stock will be exempt from the registration requirements of the
Securities Act, and are exempt from the qualification requirements of any
applicable state securities laws; and neither the Company nor anyone acting on
its behalf will take any action hereafter that would cause the loss of such
exemptions.
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18.4 Stock Issuance. Upon exercise of the Warrant, the Company will
use its best efforts to cause stock certificates representing the shares of
Preferred Stock purchased pursuant to the exercise to be issued in the
individual names of Holder, its nominees or assignees, as appropriate at the
time of such exercise. Upon conversion of the shares of Preferred Stock to
shares of Common Stock, the Company will issue the Common Stock in the
individual names of Holder, its nominees or assignees, as appropriate.
18.5 Articles and By-Laws. The Company has provided Holder with true
and complete copies of the Company's Articles or Certificate of Incorporation,
By-Laws, and each Certificate of Determination or other charter document
setting, forth any rights, preferences and privileges of Company's capital
stock, each as amended and in effect on the date of issuance of this Warrant.
18.6 Conversion of Preferred Stock. As of the date hereof, each share
of the Preferred Stock is convertible into one share of the Common Stock.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its officers, thereunto duly authorized this 1st day of February, 1999.
NEW FOCUS, INC.
By:
----------------------------
Title:
------------------------
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FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To:
------------------------------
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and
to purchase thereunder, (1) See Below ______________________ (________)
shares (the "Shares") of Stock of _______ and herewith makes payment of
______________ Dollars ($_____) therefor, and requests that the
certificates for such shares be issued in the name of, and delivered to,
____________, whose address is ________________________.
The undersigned hereby elects to convert ___ percent (___%) of the value of
the Warrant pursuant to the provisions of Section 1(b) of the Warrant.
The undersigned represents that it is acquiring such Common Stock for its own
account for investment and not with a view to or for sale in connection with any
distribution thereof (subject, however, to any requirement of law that the
disposition thereof shall at all times be within its control.
Dated ______________________
Holder: ______________________
By: ______________________
Its: ______________________
(Address)
______________________________
______________________________
(1) Insert here the number of shares called for on the face of the Warrant (or,
in the case of a partial exercise, the portion thereof as to which the
Warrant is being exercised), in either case without making any adjustment
for additional Preferred Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of the
Warrant, may be deliverable upon exercise.
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned, the holder of the within Warrant, hereby
sells, assigns and transfers all of the rights of the undersigned under the
within Warrant, with respect to the number of shares of Preferred Stock covered
thereby set forth hereinbelow, unto:
Name of Assignee Address No. of Shares
--------------------------------------------------------------------------------
Dated:
-----------------------------------
Holder:
-----------------------------------
By:
-----------------------------------
Its:
-----------------------------------
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EXHIBIT "A"
[On letterhead of the Company]
Reference is hereby made to that certain Warrant dated
________________________, 199__, issued by ____________________________________,
a ______________________________ corporation (the "Company"), to VENTURE
LENDING & LEASING II, INC., a Maryland corporation (the "Holder").
[IF APPLICABLE] The Warrant provides that the actual number of shares
of the Company's capital stock issuable upon exercise of the Warrant and the
initial exercise price per share are to be determined by reference to one or
more events or conditions subsequent to the issuance of the Warrant. Such
events or conditions have now occurred or lapsed, and the Company wishes to
confirm the actual number of shares issuable and the initial exercise price.
The provisions of this Supplement to Warrant are incorporated into the Warrant
by this reference, and shall control the interpretation and exercise of the
Warrant.
[IF APPLICABLE] Notice is hereby given pursuant to Section 4.5 of the
Warrant that the following adjustment(s) have been made to the Warrant:
[describe adjustments, setting forth details regarding method of calculation
and facts upon which calculation is based].
This certifies that the Holder is entitled to purchase from the Company
______________________________ (__________________________) fully paid and
nonassessable shares of the Company's ___________ Stock at a price of
______________________________ Dollars ($________________) per share (the
"Stock Purchase Price"). The Stock Purchase Price and the number of shares
purchasable under the Warrant remain subject to adjustment as provided in
Section 4 of the Warrant.
Executed this ___ day of ________________________, 199___.
[COMPANY]
By: _______________________________
Name: _____________________________
Title: ____________________________
11
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THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR
THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
WARRANT TO PURCHASE
35,000 SHARES OF SERIES D PREFERRED STOCK OF
NEW FOCUS, INC.
(Void after December 31, 2004)
This certifies that VENTURE LENDING & LEASING II, INC., a Maryland corporation,
or assigns (the "Holder"), for value received, is entitled to purchase from NEW
FOCUS, INC., a California corporation (the "Company"), 35,000 fully paid and
nonassessable shares of the Company's Series D Preferred Stock ("Preferred
Stock") for cash at a price of $4.00 per share (the "Stock Purchase Price") at
any time or from time to time up to and including 5:00 p.m. (Pacific time) on
December 31, 2004 (the "Expiration Date"), upon surrender to the Company at its
principal office at 0000 Xxxxx Xxxxxx, Xxxxx Xxxxx, XX 00000-0000, (or at such
other location as the Company may advise Holder in writing) of this Warrant
properly endorsed with the Form of Subscription attached hereto duly filled in
and signed and upon payment in cash or by check of the aggregate Stock Purchase
Price for the number of shares for which this Warrant is being exercised
determined in accordance with the provisions hereof. The Stock Purchase Price
and the number of shares purchasable hereunder are subject to adjustment as
provided in Section 4 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares.
(a) Unless an election is made pursuant to clause (b) of
this Section 1, this Warrant shall be exercisable at the option of the Holder,
at any time or from time to time, on or before the Expiration Date for all or
any portion of the shares of Preferred Stock (but not for a fraction of a
share) which may be purchased hereunder for the Stock Purchase Price multiplied
by the number of shares to be purchased. In the event, however, that pursuant
to the Company's Articles of Incorporation, as amended, an event causing
automatic conversion of the Company's Preferred Stock shall have occurred prior
to the exercise of this Warrant, in whole or in part, then this Warrant shall
be exercisable for the number of shares of Common Stock of the Company into
which the Preferred Stock not purchased upon any prior exercise of the Warrant
would have been so converted (and, where the context requires, reference to
"Preferred Stock" shall be deemed to include such Common Stock). The Company
agrees that the shares of Preferred Stock purchased under this Warrant shall be
and are deemed to be issued to the holder hereof as the record owner of such
shares as of the close of business on the date on which the form of
subscription shall have been delivered and payment made for such shares.
Subject to the provisions of Section 2, certificates for the shares of
Preferred Stock so purchased, together with any other securities or property to
which the Holder hereof is entitled upon such exercise, shall be delivered to
the Holder hereof by the Company at the Company's expense within a reasonable
time after the rights represented by this Warrant have been so exercised.
Except as provided in clause (b) of this Section 1, in case of a purchase of
less than all the shares which may be purchased under this Warrant, the Company
shall cancel this Warrant and execute and deliver a new Warrant or Warrants of
like tenor for the balance of the shares purchasable under the Warrant
surrendered upon such purchase to the Holder hereof within a reasonable time.
Each stock certificate so delivered shall be in such denominations of
36
Preferred Stock as may be requested by the Holder hereof and shall be
registered in the name of such Holder or such other name as shall be designated
by such Holder, subject to the limitations contained in Section 2.
(b) The Holder, in lieu of exercising this Warrant by the payment of
the Stock Purchase Price pursuant to clause (a) of this Section 1, may elect,
at any time on or before the Expiration Date, to receive that number of shares
of Preferred Stock equal to the quotient of: (i) the difference between (A) the
Per Share Price (as hereinafter defined) of the Preferred Stock, less (B) the
Stock Purchase Price then in effect, multiplied by the number of shares of
Preferred Stock the Holder would otherwise have been entitled to purchase
hereunder pursuant to clause (a) of this Section 1 (or such lesser number of
shares as the Holder may designate in the case of a partial exercise of this
Warrant); over (ii) the Per Share Price. Election to exercise under this
section (b) may be made by delivering a signed form of subscription to the
Company via facsimile, to be followed by delivery of the warrant.
(c) For purposes of clause (b) of this Section 1, "Per Share Price"
means the product of: (i) the greater of (A) the closing price of the Company's
Common Stock as quoted by NASDAQ or listed on any exchange, whichever is
applicable, as published in the Western Edition of The Wall Street Journal for
the trading day immediately prior to the date of the Holder's election hereunder
or, (B) if applicable at the time of or in connection with the exercise under
clause (b) of this Section 1, the gross sales price of one share of the
Company's Common Stock pursuant to a registered public offering or that amount
which shareholders of the Company will receive for each share of Common Stock
pursuant to a merger, reorganization or sale of assets; and (ii) that number of
shares of Common Stock into which each share of Preferred Stock is convertible.
If the Company's Common Stock is not quoted by NASDAQ or listed on an exchange,
the Per Share Price of the Preferred Stock (or the equivalent number of shares
of Common Stock into which such Preferred Stock is convertible) shall be the
price per share which the Company would obtain from a willing buyer for shares
sold by the Company from authorized but unissued shares as such price shall be
agreed upon by the Holder and the Company or, if agreement cannot be reached
within ten (10) business days of the Holder's election hereunder, as such price
shall be determined by a panel of three (3) appraisers, one (1) to be chosen by
the Company, one (1) to be chosen by the Holder and the third to be chosen by
the first two (2) appraisers. If the appraisers cannot reach agreement within 30
days of the Holder's election hereunder, then each appraiser shall deliver its
appraisal and the appraisal which is neither the highest nor the lowest shall
constitute the Per Share Price. In the event either party fails to choose an
appraiser within 30 days of the Holder's election hereunder, then the appraisal
of the sole appraiser shall constitute the Per Share Price. Each party shall
bear the cost of the appraiser selected by such party and the cost of the third
appraiser shall be borne one-half by each party. In the event either party fails
to choose an appraiser, the cost of the sole appraiser shall be borne one-half
by each party.
2. Limitation on Transfer.
(a) The Warrant and the Preferred Stock shall not be transferable
except upon the conditions specified in this Section 2, which conditions are
intended to insure compliance with the provisions of the Securities Act of
1933, as amended (the "Securities Act"). Each holder of this Warrant or the
Preferred Stock issuable hereunder will cause any proposed transferee of the
Warrant or Preferred Stock to agree to take and hold such securities to the
provisions and upon the conditions specified in this Section 2.
(b) Each certificate representing (i) this Warrant, (ii) the
Preferred Stock, (iii) shares of the Company's Common Stock issued upon
conversion of the Preferred Stock and (iv) any other securities issued in
respect to the Preferred Stock or Common Stock issued upon conversion of the
Preferred Stock upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall (unless otherwise permitted by the
provisions of this Section 2 or unless such securities have been registered
under the Securities Act or sold under Rule 144) be stamped or otherwise
imprinted with a legend substantially in the following form (in addition to any
legend required under applicable state securities laws):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT COVERING SUCH SECURITIES. THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR
2
37
THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
(c) The Holder of this Warrant and each person to whom this Warrant
is subsequently transferred represents and warrants to the Company (by
acceptance of such transfer) that it will not transfer the Warrant (or
securities issuable upon exercise hereof unless a registration statement under
the Securities Act was in effect with respect to such securities at the time of
issuance thereof) except pursuant to (i) an effective registration statement
under the Securities Act, (ii) Rule 144 under the Securities Act (or any other
rule under the Securities Act relating to the disposition of securities), or
(iii) an opinion of counsel, reasonably satisfactory to counsel for the Company,
that an exemption from such registration is available.
3. Shares to be Fully Paid; Reservation of Shares. The Company
covenants and agrees that all shares of Preferred Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof (other than taxes in respect of transfer
occurring contemporaneously or as otherwise specified herein). The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized and reserved, for the purpose of issue or transfer upon exercise of
the subscription rights evidenced by this Warrant, a sufficient number of shares
of authorized but unissued Preferred Stock, or other securities and property,
when and as required to provide for the exercise of the rights represented by
this Warrant. The Company will take all such action as may be necessary to
assure that such shares of Preferred Stock may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements of
any domestic securities exchange upon which the Preferred Stock may be listed.
The Company will not take any action which would result in any adjustment of the
Stock Purchase Price (as defined in Section 4 hereof) (i) if the total number of
shares of Preferred Stock issuable after such action upon exercise of all
outstanding warrants, together with all shares of Preferred Stock then
outstanding and all shares of Preferred Stock then issuable upon exercise of all
options and upon the conversion of all convertible securities then outstanding,
would exceed the total number of shares of Preferred Stock then authorized by
the Company's Articles of Incorporation, or (ii) if the total number of shares
of Common Stock issuable after such action upon the conversion of all such
shares of Preferred Stock together with all shares of Common Stock then
outstanding and then issuable upon exercise of all options and upon the
conversion of all convertible securities then outstanding would exceed the total
number of shares of Common Stock then authorized by the Company's Articles of
Incorporation.
4. Adjustment of Stock Purchase Price Number of Shares. The Stock
Purchase Price and the number of shares purchaseable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 4. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the
number of shares obtained by multiplying the Stock Purchase Price in effect
immediately prior to such adjustment by the number of shares purchaseable
pursuant hereto immediately prior to such adjustment, and dividing the product
thereof by the Stock Purchase Price resulting from such adjustment.
4.1 Subdivision or Combination of Stock. In case the Company shall
at any time subdivide its outstanding shares of Preferred Stock into a greater
number of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Preferred Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
4.2 Dividends in Preferred Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the holders of Preferred
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(a) Preferred Stock or any shares of stock or other securities
whether or not such securities are at any time directly or indirectly
convertible into or exchangeable for Preferred Stock, or any rights or
3
38
options to subscribe for, purchase or otherwise acquire any of the foregoing by
way of dividend or other distribution, or
(b) any cash paid or payable otherwise than as a cash dividend,
or
(c) Preferred Stock or other or additional stock or other
securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement,
(other than shares of Preferred Stock issued as a stock split, adjustments in
respect of which shall be covered by the terms of Section 4.1 above).
Then and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of
Preferred stock receivable thereupon, and without payment of any additional
consideration therefore, the amount of stock and other securities and property
(including cash in the cases referred to in clauses (b) and (c) above) which
such Holder would hold on the date of such exercise had he been the holder of
record of such Preferred Stock as of the date on which holders of Preferred
Stock received or became entitled to receive such shares and/or all other
additional stock and other securities and property.
4.3 Reorganization, Reclassification, Consolidation, Merger or Sale.
If any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale
of all or substantially all of its assets to another corporation shall be
effected in such a way that holders of Preferred Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for
Preferred Stock (Corporate Event), then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provisions
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive (in lieu of the shares of the Preferred Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby) such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Preferred Stock equal to the number of shares of
such stock immediately theretofore purchasable and receivable upon the exercise
of the rights represented hereby, provided, however, in the event that 1) the
effective price of such Corporate Event is in excess of the exercise price
hereof effective at the time of the Corporate Event, 2) the consideration
received in such Corporate Event is cash or shares that are of a publicly
traded company listed on a national market or exchange, without restrictions
within 90 days of the close of such Corporate Event, except for those of Rule
144 or 145, and 3) the Company's shareholders own less than 50% of the voting
securities of the surviving entity, then this Warrant shall be deemed exercised
in accordance with the provisions of section 1(b) upon the closing of the
Corporate Event. In any such case, appropriate provision shall be made with
respect to the rights and interests of the holder of this Warrant to the end
that the provisions hereof (including, without limitation, provisions for
adjustments of the Stock Purchase Price and of the number of shares purchasable
and receivable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be possible, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise hereof.
4.4 Sale or Issuance Below Purchase Price. If the Company shall at
any time or from time to time issue or sell any of its Common stock, Preferred
Stock, options to acquire (or rights to acquire such options), or any other
securities convertible into or exercisable for Common Stock, for a
consideration per share less than the Stock Purchase Price in effect
immediately prior to the time of such issue or sale, the Conversion ratio shall
be adjusted in accordance with the Company's Articles of Incorporation.
4.5 Notice of Adjustment. Upon any adjustment of the Stock Purchase
Price, and/or any increase or decrease in the number of shares purchasable upon
the exercise of this Warrant the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company. The
notice, which may be substantially in the form of Exhibit "A" attached hereto,
shall be signed by the Company's chief financial officer and shall state the
Stock Purchase Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
4
39
4.6 Other Notices. If at any time:
(a) the Company shall declare any cash dividend upon its
Preferred Stock;
(b) the Company shall declare any dividend upon its Preferred
Stock payable in stock or make any special dividend or other distribution to
the holders of its Preferred Stock;
(c) the Company shall offer for subscription pro rata to the
holders of its preferred Stock any additional shares of stock of any class or
other rights;
(d) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation;
(e) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(f) the Company shall take or propose to take any other action,
notice of which is actually provided to holders of the Preferred Stock;
then, in any one or more of said cases, the Company shall give,
by first class mail, postage prepaid, addressed to the holder of this Warrant at
the address of such holder as shown on the books of the Company, (i) at least 20
day's prior written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, or other action and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, or other action, at least 20 day's written notice of the date when
the same shall take place. Any notice given in accordance with the foregoing
clause (i) shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Preferred Stock shall be
entitled thereto. Any notice given in accordance with the foregoing clause (ii)
shall also specify the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, or other action as the case may
be.
4.7 Certain Events. If any change in the outstanding Preferred Stock
of the Company or any other event occurs as to which the other provisions of
this Section 4 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the Holder of the Warrant in accordance
with the essential intent and principles of such provisions, then the Board of
Directors of the Company shall make an adjustment in the number and class of
shares available under the Warrant, the Stock Purchase Price and/or the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such purchase rights as aforesaid. The adjustment
shall be such as will give the Holder of the Warrant upon exercise for the same
aggregate Stock Purchase Price the total number, class and kind of shares as he
would have owned had the Warrant been exercised prior to the event and had he
continued to hold such shares until after the event requiring adjustment.
5. Issue Tax. The issuance of certificates for share of Preferred Stock
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax in respect thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of the then Holder of the Warrant being exercised.
6. Closing of Books. Provided that the Holder shall be in compliance
with the terms of this Agreement, including but not limited to, Section 2, the
Company will at no time close its transfer books against the transfer of any
Warrant or of any shares of Preferred Stock issued or issuable upon the
exercise of any warrant.
5
40
7. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent as a shareholder in respect of meetings
of shareholders for the election of directors of the Company or any other
matters or any rights whatsoever as a shareholder of the Company. No dividends
or interest shall be payable or accrued in respect of this Warrant or the
interest represented hereby or the shares purchasable hereunder until, and only
to the extent that, this Warrant shall have been exercised. No provisions
hereof, in the absence of affirmative action by the holder to purchase shares of
Preferred Stock, and no more enumeration herein of the rights or privileges of
the Holder hereof, shall give rise to any liability of such Holder for the Stock
Purchase Price or as a shareholder of the Company, whether such liability is
asserted by the Company or by its creditors.
8. Intentionally Omitted.
9. Registration Rights. The Holder hereof shall be entitled, with respect
to the shares of Preferred Stock issued upon exercise hereof or the shares of
Common Stock or other securities upon conversion of such Preferred Stock as the
case may be, to, and bound by, all of the registration rights and obligations
set forth in the First Amended and Restated Registration Rights Agreement dated
as of July 31, 1998 to the same extent and on the same terms and conditions as
possessed by the Investors thereunder. The Company shall take such action as may
be reasonably necessary to assure that the granting of such registration rights
to the Holder does not violate the provision of such agreement or any of the
Company's charter documents or rights of prior Grantees of registration rights.
10. Rights and Obligations Survive Exercise of Warrant. The rights and
obligations of the Company, of the Holder of this Warrant and of the holder of
shares of Preferred Stock issued upon exercise of this Warrant, contained in
Sections 6 and 9 shall survive the exercise of this Warrant.
11. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
12. Notices. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be deemed to
have been given (i) upon receipt if delivered personally or by courier (ii)
upon confirmation of receipt if by telecopy or (iii) three business days after
deposit in the US mail, with postage prepaid and certified or registered, to
each such holder at its address as shown on the books of the Company or to the
Company at the address indicated therefor in the first paragraph of this
Warrant.
13. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Preferred Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof. The Company will, at the time of
the exercise of this Warrant in whole or in part, upon request of the Holder
hereof but at the Company's expense, acknowledge in writing its continuing
obligation to the Holder hereof in respect of any rights (including, without
limitation, any right to registration of the shares of Common Stock) to which
the holder hereof shall continue to be entitled after such exercise in
accordance with this Warrant; provided, that the failure of the holder hereof
to make any such request shall not affect the continuing obligation of the
Company to the Holder hereof in respect of such rights.
14. Descriptive Headings and Governing Law. The descriptive headings of
the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of California.
6
41
15. Lost Warrants or Stock Certificates. The Company represents
and warrants to the Holder hereof that upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
any Warrant or stock certificate and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant or stock certificate, the Company at its expense will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
16. Fractional Shares. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price.
17. Representations of Holder. With respect to this Warrant,
Holder represents and warrants to the Company as follows:
17.1 Experience. It is experienced in evaluating and
investing in companies engaged in businesses similar to that of the Company; it
understands that investment in the Warrant involves substantial risks; it has
made detailed inquiries concerning the Company, its business and services, its
officers and its personnel; the officers of the Company have made available to
Holder any and all written information it has requested; the officers of the
Company have answered to Holder's satisfaction all inquiries made by it; in
making this investment it has relied upon information made available to it by
the Company; and it has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of investment in
the Company and it is able to bear the economic risk of that investment.
17.2 Investment. It is acquiring the Warrant for
investment for its own account and not with a view to, or for resale in
connection with, any distribution thereof. It understands that the Warrant, the
shares of Preferred Stock issuable upon exercise thereof and the shares of
Common Stock issuable upon conversion of the Preferred Stock, have not been
registered under the Securities Act of 1933, as amended, nor qualified under
applicable state securities laws.
17.3 Rule 144. It acknowledges that the Warrant, the
Preferred Stock and the Common Stock must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. It has been advised or is aware of the provisions of
Rule 144 promulgated under the Securities Act.
17.4 Access to Data. It has had an opportunity to discuss
the Company's business, management and financial affairs with the Company's
management and has had the opportunity to inspect the Company's facilities.
18. Additional Representations and Covenants of the Company. The
Company hereby represents, warrants and agrees as follows:
18.1 Corporate Power. The Company has all requisite
corporate power and corporate authority to issue this Warrant and to carry out
and perform its obligations hereunder.
18.2 Authorization. All corporate action on the part of
the Company, its directors and shareholders necessary for the authorization,
execution, delivery and performance by the Company of this has been taken. This
Warrant is a valid and binding obligation of the Company, enforceable in
accordance with its terms.
18.3 Offering. Subject in part to the truth and accuracy
of Holder's representations set forth in Section 17 hereof, the offer, issuance
and sale of the Warrant is, and the issuance of Preferred Stock upon exercise
of the Warrant and the issuance of Common Stock upon conversion of the
Preferred Stock will be exempt from the registration requirements of the
Securities Act, and are exempt from the qualification requirements of any
applicable state securities laws; and neither the Company nor anyone acting on
its behalf will take any action hereafter that would cause the loss of such
exemptions.
7
42
18.4 Stock Issuance. Upon exercise of the Warrant, the Company will use
its best efforts to cause stock certificates representing the shares of
Preferred Stock purchased pursuant to the exercise to be issued in the
individual names of Holder, its nominees or assignees, as appropriate at the
time of such exercise. Upon conversion of the shares of Preferred Stock to
shares of Common Stock, the Company will issue the Common Stock in the
individual names of Holder, its nominees or assignees, as appropriate.
18.5 Articles and By-Laws. The Company has provided Holder with true and
complete copies of the Company's Articles or Certificate of Incorporation,
By-Laws, and each Certificate of Determination or other charter document
setting, forth any rights, preferences and privileges of Company's capital
stock, each as amended and in effect on the date of issuance of this Warrant.
18.6 Conversion of Preferred Stock. As of the date hereof, each share of
the Preferred Stock is convertible into one share of the Common Stock.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its officers, thereunto duly authorized this 1st day of February, 1999.
NEW FOCUS, INC.
By: /s/ XXXXXXX X. XXXXXXXX
-------------------------
Title: President & CEO
-------------------------
8
43
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To:___________________
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and
to purchase thereunder, (1) See Below _________ (____) shares (the
"Shares") of Stock of ________ and herewith makes payment of _________
Dollars ($______) therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to, ________, whose address
is _________.
The undersigned hereby elects to convert _____ percent (__%) of the value
of the Warrant pursuant to the provisions of Section 1(b) of the Warrant.
The undersigned represents that it is acquiring such Common Stock for its own
account for investment and not with a view to or for sale in connection with
any distribution thereof (subject, however, to any requirement of law that the
disposition thereof shall at all times be within its control.
Dated __________________
Holder: __________________
By: __________________
Its:
__________________
(Address)
__________________________
__________________________
(1) Insert here the number of shares called for on the face of the Warrant (or,
in the case of a partial exercise, the portion thereof as to which the
Warrant is being exercised), in either case without making any adjustment
for additional Preferred Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of the
Warrant, may be deliverable upon exercise.
9
44
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned, the holder of the within Warrant, hereby
sells, assigns and transfers all of the rights of the undersigned under the
within Warrant, with respect to the number of shares of Preferred Stock covered
thereby set forth hereinbelow, unto:
Name of Assignee Address No. of Shares
--------------------------------------------------------------------------------
Dated ______________________
Holder: ____________________
By: ________________________
Its: _______________________
10
45
EXHIBIT "A"
[On letterhead of the Company]
Reference is hereby made to that certain Warrant dated ________, 199__,
issued by ____________, a __________ corporation (the "Company"), to VENTURE
LENDING & LEASING II, INC., a Maryland corporation (the "Holder").
[IF APPLICABLE] The Warrant provides that the actual number of shares of
the Company's capital stock issuable upon exercise of the Warrant and the
initial exercise price per share are to be determined by reference to one or
more events or conditions subsequent to the issuance of the Warrant. Such
events or conditions have now occurred or lapsed, and the Company wishes to
confirm the actual number of shares issuable and the initial exercise price.
The provisions of this Supplement to Warrant are incorporated in the Warrant by
this reference, and shall control the interpretation and exercise of the
Warrant.
[IF APPLICABLE] Notice is hereby given pursuant to Section 4.5 of the
Warrant that the following adjustment(s) have been made to the Warrant:
[describe adjustments, setting forth details regarding method of calculation
and facts upon which calculation is based].
This certifies that the Holder is entitled to purchase from the Company
____________ (________) fully paid and nonassessable shares of the Company's
________ Stock at a price of _________________ Dollars ($______) per share (the
"Stock Purchase Price"). The Stock Purchase Price and the number of shares
purchasable under the Warrant remain subject to adjustment as provided in
Section 4 of the Warrant.
Executed this ___ day of ________, 199__.
[COMPANY]
By: ______________________________
Name: ____________________________
Title: ___________________________
11
46
SECRETARY'S CERTIFICATE AS TO INCUMBENCY AND RESOLUTIONS
The undersigned certifies that he is the duly elected Secretary of New Focus,
Inc., a California corporation (the "Company"), and that, as such, he is
authorized to execute this Certificate on behalf of the Company, and further
certifies that:
(a) Attached hereto is a true and correct copy of the resolutions duly
adopted by the Board of Directors of the Company on February 9, 1999 by
proceedings in accordance with the Articles or Certificate of Incorporation and
bylaws of the Company, and that said resolutions have not been amended and are
in full force and effect on the date hereof:
(b) Each of the offices of the Company listed below is held by the person
whose name is indicated opposite such office, each such person has been duly
elected to such office, and the signatures opposite their respective names are
their authentic signatures:
Office Name Signature
------ ---- ---------
President Xxxxxxx X. Xxxxxxxx /s/ XXXXXXX X. XXXXXXXX
----------------------- -------------------------
Vice President
Controller XXXXX X. XXXXXXXX /s/ XXXXX X. XXXXXXXX
----------------------- -------------------------
Secretary Xxxxxx X. X'Xxxxx
----------------------- -------------------------
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Company as of the 9th day of February, 1999
/s/ XXXXXX X. X'XXXXX
------------------------- Secretary
47
RESOLUTIONS
OF
THE BOARD OF DIRECTORS OF
NEW FOCUS, INC.
WHEREAS, it is in the best interest of the Corporation to enter into like Loan
Agreements (the "Agreements") with VENTURE LENDING & LEASING II, INC., as
Lender ("Lender") providing for equipment or other financing, and as partial
consideration therefor, to grant to Lender warrants to purchase shares of the
Corporation's Series D Preferred Stock.
WHEREAS, it is also in the interests of the Corporation to avail itself from
time to time during the Agreement of managerial assistance offered by Lenders
or its agents or affiliates, in areas such as advice on equipment financing,
cash flow management, and general financing opportunities.
NOW, THEREFORE, BE IT RESOLVED that the President, any Vice President or Chief
Financial Officer be, and they each hereby are, acting singly, authorized,
empowered and directed, on the Corporation's behalf, to:
1) execute, deliver and perform the Agreement and Promissory Notes and other
documents related, and
2) execute and deliver Warrants for 35,000 shares of the Corporation's Series
D Preferred Stock thereto,
under the terms contemplated in the Commitment letter dated November 13, 1998
and to enter into any arrangement with Lenders or other third parties for
consulting services relating to the Corporation's management, operations or
business objectives, on such terms and conditions as any such officer may deem
necessary or appropriate.
FURTHER RESOLVED, that the officers of the Corporation be, and they each hereby
are, authorized, empowered and directed to do and perform any and all other
acts and deeds that they (or any one of them) may deem necessary or appropriate
to carry out and give effect to the foregoing resolution, including (but not
limited to) pledging such cash collateral or other security as may be required
from time to time under the Agreement and from time to time entering into,
executing and delivering, on behalf of the Corporation, any Promissory Notes
and/or other documents now or hereafter required by Lender in connection with
the Agreement, providing for the authorization and reservation for issuance of
shares of Preferred Stock issuable upon exercise of the Warrants and shares of
its Common Stock issuable upon conversion of such Preferred Stock.
FURTHER RESOLVED, that Lender is authorized to rely upon the foregoing
resolutions until receipt by it of written notice of any change, which changes
of whatever nature shall not be effective as to such Lender to the extent that
it has theretofore relied upon the foregoing resolutions as set forth above.
48
RESOLVED: That the officers of the Company are authorized and directed to enter
into a Loan and Security Agreement (the "Agreement") with Venture Lending &
Leasing II, Inc. (the "Lender") on substantially the terms presented to this
Board of Directors with such changes as the officers of the Company may deem
necessary or appropriate;
RESOLVED FURTHER: That pursuant to the Agreement, the officers of the Company
are authorized and directed to issue a warrant (the "Warrant") to the Lender to
purchase 35,000 shares of the Company's Series D Preferred Stock with an
exercise price of $4.00 per share.
RESOLVED FURTHER: That the Company hereby reserves an aggregate of 35,000
shares of Series D Preferred Stock for issuance upon exercise of the Warrant.
RESOLVED FURTHER: That the Company hereby reserves an aggregate of 35,000
shares of Common Stock to provide for the issuance of such shares upon the
conversion of the Series D Preferred Stock.
RESOLVED FURTHER: That, subject to obtaining all applicable consents, at the
time of the Company's next round of financing, the shares of Common Stock
issuable upon conversion of the shares shall be included as "Registrable
Securities" under an amendment to the Company's First Amended and Restated
Registration Rights Agreement, and the officers of the Company are hereby
authorized and directed to obtain such consents to such amendment.
RESOLVED FURTHER: That the resolutions attached hereto as Exhibit __ and
incorporated herein by this reference are hereby approved.
RESOLVED FURTHER: That the officers of the Company are hereby authorized and
directed to take whatever other actions they deem necessary or appropriate,
including the filing of all applications, exhibits, fees, notices and other
documents and amendments as may be required by federal and state securities
laws, to fulfill the intent of the foregoing resolutions and whatever actions
the officers have previously taken are hereby ratified and approved.
49
CERTIFICATE CONCERNING CAPITALIZATION
As Chief Financial Officer or other authorized officer of New Focus, Inc.
("Borrower"), I hereby certify that as of the date hereof the following shares
of the Borrower's securities (listed by common and preferred by series) were
issued and outstanding:
Number of Shares*
-----------------
PREFERRED STOCK SERIES A 3,790,000
PREFERRED STOCK SERIES B 250,000
PREFERRED STOCK SERIES C 150,000
PREFERRED STOCK SERIES D 994,250
Options Outstanding 1,995,897
COMMON STOCK 573,813
---------
TOTAL 7,753,960
=========
Signature: /s/ XXXXXXX X. XXXXXXXX
------------------------
Title: President & CEO
----------------------------
As of Date: 3 Feb 99
-----------------------
--------------------------------------------------------------------------------
* Number of shares of Preferred Stock are stated in terms of number of shares
of Common Stock into which each series is convertible.
50
INSURANCE AUTHORIZATION LETTER
In accordance with the insurance coverage requirements of the Loan and Security
Agreement dated February 1, 1999 (the "Agreement") between VENTURE LENDING &
LEASING II, INC. ("Lender"), and NEW FOCUS, INC. ("Borrower"), coverage is to
be provided as set forth below:
COVERAGE: All risk including liability and property damage covering
equipment financed under the Agreement.
INSURED: NEW FOCUS, INC.
0000 Xxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000
LOCATION(s) OF
EQUIPMENT: Madison, WI (Fab Facility)
Insuring Agent: XXX XXXXXX, XXXXXX INS. BROKERS
---------------------------------
Address: 0000 XXXXXX XX, XXXXX 000
---------------------------------
XXXXXXXXXX, XX 00000
---------------------------------
Phone Number: (000) 000-0000
---------------------------------
ADDITIONAL INSURED AND LOSS PAYEE:
Lenders and their Assignees, as their respective interests may
appear.
LENDERS: VENTURE LENDING & LEASING II, INC.
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
ASSIGNEE: FLEET BANK N.A. AS AGENT
(if any) 0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxxxx
The above coverage is to be provided prior to funding the Agreement. Borrower
hereby agrees to pay for the coverage above and by signing below acknowledges
its obligation to do so.
Signature: /s/ XXXXXXX X. XXXXXXXX
---------------------------------
Title: Xxxxxxx X. Xxxxxxxx
---------------------------------
Date: 3 Feb '99
---------------------------------
51
Note No. 2060-001
PROMISSORY NOTE
$800,000.00 February 26, 0000
Xxx Xxxx, Xxxxxxxxxx
The undersigned ("Borrower") promises to pay to the order of VENTURE
LENDING & LEASING II, INC., a Maryland corporation ("Lender") at its office at
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, Xxxxxxxxxx 00000, or at such
other place as Lender may designate in writing, in lawful money of the United
States of America, the principal sum of Eight Hundred Thousand Dollars
($800,000.00), with Basic Interest thereon from the date hereof until maturity,
whether scheduled or accelerated, at a fixed rate per annum of eight and 40/100
percent (8.40%), and a Terminal Payment in the sum of Eighty Thousand Dollars
($80,000.00) payable on the Maturity Date.
This Note is one of the Notes referred to in, and is entitled to all the
benefits of, a Loan and Security Agreement dated February 9, 1999, between
Borrower and Lender (the "Loan Agreement"). Each capitalized term not otherwise
defined herein shall have the meaning set forth in the Loan Agreement. The Loan
Agreement contains provisions for the acceleration of the maturity of this Note
upon the happening of certain stated events.
Principal of and interest on this Note shall be payable as follows:
On the Borrowing Date, Borrower shall pay (i) Basic Interest, in advance,
on the outstanding principal balance of this Note at the Designated Rate for
the period from the Borrowing Date through February 28, 1999; and (ii) a first
(1st) amortization installment of principal and Basic Interest in the amount of
$25,040.00, in advance for the month of March, 1999 and (iii) a 36th last
amortization installment of principal and Basic Interest in the amount of
$25,040.00, in advance for the month of February, 2002.
Commencing on the first day of the second full month after the Borrowing
Date, and continuing on the first day of each consecutive month thereafter,
principal and Basic Interest shall be payable, in advance, in thirty-three (33)
equal consecutive installments of Twenty Five Thousand Forty Dollars
($25,040.00) each, with a thirty-fourth (34th) installment equal to the entire
unpaid principal balance and accrued Basic Interest on January 1, 2002. The
Terminal Payment amount shall be payable on March 1, 2002.
Any unpaid payments of principal or interest on this Note shall bear
interest from their respective maturities, whether scheduled or accelerated, at
a rate per annum equal to the Default Rate. Borrower shall pay such interest on
demand.
Interest, charges and fees shall be calculated for actual days elapsed on
the basis of a 360-day year, which results in higher interest, charge or fee
payments than if a 365-day year were used. In no event shall Borrower be
obligated to pay interest, charges or fees at a rate in excess of the highest
rate permitted by applicable law from time to time in effect.
If Borrower is late in making any payment under this Note by more than
five (5) days, Borrower agrees to pay a "late charge" of five percent (5%) of
the installment due, but not less than fifty dollars ($50.00) for any one such
delinquent payment. This late charge may be charged by Lender for the purpose
of defraying the expenses incidental to the handling of such delinquent
amounts. Borrower acknowledges that such late charge represents a reasonable
sum considering all of the circumstances existing on the date of this Note and
represents a fair and reasonable estimate of the costs that will be sustained
by Lender due
52
to failure of Borrower to make timely payments. Borrower further agrees that
proof of actual damages would be costly and inconvenient. Such late charge
shall be paid without prejudice to the right of Lender to collect any other
amounts provided to be paid or to declare a default under this Note or any of
the other Loan Documents or from exercising any other rights and remedies of
Lender.
This Note shall be governed by, and construed in accordance with, the laws
of the State of California.
NEW FOCUS, INC.
By: /s/ XXXXX X. XXXXXXXX
Name: Xxxxx X. Xxxxxxxx
Its: Controller
53
BORROWING REQUEST
February 23, 1999
Venture Lending & Leasing II, Inc.
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Re: NEW FOCUS, INC.
Gentlemen:
Reference is made to the two Loan and Security Agreement dated as of
February 9, 1999 (as the same have been and may be amended from time to time,
the "Loan Agreement", the capitalized terms used herein as defined therein),
between Venture Lending & Leasing II, Inc. on one hand and New Focus, Inc. (the
"Company") on the other.
The undersigned is an Officer of the Company, authorized to borrow under
The Loan Agreement, and hereby requests Loan under the Loan Agreement, and in
that connection certifies as follows:
1. The aggregate amount of the proposed Loan is $800,000.00. The Business
Day of the proposed Loan is February 26, 1999.
2. As of this date, no Default or Event of Default has occurred and is
continuing, or will result from the making of the proposed Loan, and the
representations and warranties of the Company contained in the Loan Agreement
are true and correct.
3. No Material Adverse Change has occurred since the date of the most
recent financial statements submitted to you by the Company.
The Company agrees to notify you promptly before the funding of the Loan
if any of the matters to which I have certified above shall not be true and
correct on the Borrowing Date.
Very Truly Yours,
By: /s/ XXXXX X. XXXXXXXX
Name: Xxxxx X. Xxxxxxxx
Its: Controller
54
CERTIFICATE OF CHIEF FINANCIAL OFFICER
As Chief Financial Officer of New Focus, Inc. ("Borrower") hereby certify
that all financial statements heretofore and hereafter delivered to VENTURE
LENDING & LEASING II, INC. ("LENDER"), by or upon behalf of Borrower, and any
statements and data submitted in writing to Lender in connection with a Loan and
Security Agreement dated February 9, 1999 (the "Agreement"), are true and
correct and fairly present the financial condition of Borrower for the periods
involved, and have been prepared in accordance with generally accepted
accounting principles consistently applied. Furthermore, since the date of the
financial statements dated December 31, 1998, I am certifying that there has
been no material adverse change in the condition, financial or otherwise, of the
Borrower.
Signature: /s/ XXXXX X. XXXXXXXX
----------------------------
Title: Controller
----------------------------
Date: 2/24/99
----------------------------
55
[WESTERN TECHNOLOGY INVESTMENT LETTERHEAD]
February 23, 1999
Xx. Xxxxx Xxxxxxxx
Controller
New Focus, Inc.
0000 Xxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000-0000
RE: Loan and Security Agreement dated February 9, 1999 between New Focus, Inc.,
as Borrower, and VENTURE LENDING & LEASING II, INC., as Lender and related
Note No. 2060-001 dated February 26, 1999 for $800,000.00 ("Note")
Dear Xxxxx:
Pursuant to the above referenced Note, Principal and Basic Interest and
Terminal payments are due as follows:
Advance Payments - Due at Funding:
Description Payments Payment Date
----------- -------- ------------
Partial Interim Payment 560.00 Due in Advance
Principal and Basic Interest 50,080.00 Due in Advance
First and Last
Expenses Collected 1,000.00 Due at First Funding
----------
$51,640.00
For a term of thirty-six (36) months followed by 1 final payment, commencing on
March 1, 1999 through March 1, 2002, thirty-seven (37) consecutive installments
of principal and Basic Interest payments and Terminal Payment payable on the
first day of the month as indicated for Loan No. 2060-001 on the attached
Payment Summaries which will be amended with each additional funding.
Commencing on April 1, 1999, please send your remittance to the following
addresses using the loan transaction Numbers indicated below on each remittance.
Your checks should be made payable to Venture Lending & Leasing II, Inc. If you
prefer to make paymentS by wire transfer in the future, please let us know so it
can be arranged.
56
VENTURE LENDING AND LEASING II, INC.
NEW FOCUS, INC.
PAYMENT SUMMARY AS OF 03/01/99
LOAN TOTAL TOTAL PAYMENT TOTAL TOTAL
NUMBER PAYMENT DUE PAYMENT PAYMENT
# TO REFERENCE DUE 04/01/99 THRU DUE DUE
ON CHECK 3/1/99 1/1/02 2/1/02 3/1/02
-----------------------------------------------------------------------
2060-001 $ - $25,040.00 $ - $80,000.00
--------------------------------------------------------------------------------
REGULAR MAIL: OVERNIGHT DELIVERY ADDRESS:
--------------------------------------------------------------------------------
BANK OF BOSTON BANK OF BOSTON
LOCKBOX 414334 LOCK XXX XXXXXXXXXX
XXXXXX, XX 00000-0000 0 XXXXXXXX XXXX.
XXXXXXXXXX, XX 00000
REF: LOCKBOX#414334
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
*PAYMENT IS DUE ON THE FIRST OF EACH MONTH
--------------------------------------------------------------------------------
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT US AT 000-000-0000 EXT 12
Page 1
57
Xx. Xxxxx Xxxxxxxx
2/23/99
Page 2
Loan Payment Remittance Address:
Bank of Boston
Lockbox 414334
Xxxxxx, XX 00000-0000
Loan Transaction Xx. 0000-000
XXXXXX XX ADVISED THAT THIS IS THE ONLY PAYMENT NOTICE YOU WILL RECEIVE. WE DO
NOT PROCESS MONTHLY INVOICES.
Please acknowledge your receipt of this letter by signing the enclosed
counterpart of this letter where indicated below.
Sincerely,
/s/ Xxxxx Xxxxx
-----------------
Xxxxx Xxxxx
Acknowledged and agreed to:
NEW FOCUS, INC.
/s/ XXXXX X. XXXXXXXX
By: ____________________________________
CONTROLLER
Title: _________________________________
2/24/99
Date: __________________________________
