EXHIBIT 10.40
LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of March 5,1999 by and between Empower
Health Corporation, a Texas corporation (the "Company"), and the investor
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("Investor") whose name appears on the attached signature page.
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1. The Loan.
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1.1. The Loan. Investor agrees, on the terms of and subject to the
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conditions specified in this Agreement, to lend to the Company the
aggregate amount of money set forth below such Investor's name on the
attached signature page (the "Sum"). The Company may, at any time or
from time to time, prior to the earlier of (i) a Liquidating Event (as
defined below), and (ii) March 5, 2000, borrow from Investor a
principal amount determined by the Company in accordance with this
Agreement (each such transaction a "Loan"); provided, however, that
the aggregate principal amount of the Loans outstanding shall not
exceed the Sum. Investor's Loans shall each be evidenced by a
convertible promissory note (each a "Note") in the form of Exhibit A
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dated as of the applicable Closing Date.
1.2. Place and Date of Closing. The closing of this Loan Agreement will be
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held at the offices of the Company on March 5, 1999 or at such other
time and place as the parties shall mutually agree. The closing of
each Loan provided for herein (each a "Closing") will be held at the
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offices of the Company within 15 days of receipt of notice (as defined
in accordance with Section 6. 10) by Investor of the Company's intent
to borrow funds pursuant to this Loan Agreement (each a "Closing Date.
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1.3. Delivery. At each Closing, the Company will deliver to Investor a Note
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in the principal amount requested in writing by the Company in
accordance with the terms of this Agreement. Investor shall deliver to
the Company the principal amount requested by the Company by check or
wire transfer.
2. Representations and Warranties of the Company. The Company hereby
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represents and warrants to Investor as follows:
2.1. Organization and Standing. The Company is a corporation duly organized
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and validly existing under, and by virtue of, the laws of the State of
Texas and is in good standing under such laws. The Company has the
requisite corporate power to own and operate its properties and
assets, and to carry on its business as presently conducted and as
proposed to be conducted.
2.2. Corporate Power. The Company will have at the Closing all requisite
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legal and corporate power to execute and deliver this Agreement, to
issue the Notes and to carry out and perform its obligations under the
terms of this Agreement.
2.3. Authorization. The execution, delivery and performance of this
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Agreement by the Company has been duly authorized by all requisite
corporate action, and constitutes the valid and binding obligations of
the Company enforceable in accordance with its terms, subject as to
enforcement of remedies to applicable bankruptcy, insolvency,
reorganization, or similar laws relating to or affecting the
enforcement of creditors' rights.
2.4. Litigation. There is no action, suit, proceeding or investigation
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pending or currently threatened against the Company that might result
in any material change in the assets, condition, affairs or prospects
of the Company, financially or otherwise, or any change in the current
equity ownership of the Company. There is no action , suit, proceeding
or investigation by the Company currently pending or which the Company
intends to initiate.
3. Representations and Warranties of the Investor and Restrictions on Transfer
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Imposed by the Securities Act of 1933.
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3.1. Representations and Warranties of the Investor. Investor represents
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and warrants to the Company as of the Closing Date and upon conversion
of any Note as follows (the Notes and the securities issuable upon
conversion of the Notes are collectively referred to as the
"Securities"):
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(a) All action on the part of the Investor for the authorization,
execution, delivery and performance by the Investor of this
Agreement has been taken, and this Agreement constitutes a valid
and binding obligation of the Investor, enforceable in accordance
with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, or similar laws relating
to or affecting the enforcement of creditors' rights.
(b) The Investor is experienced in evaluating and investing in new
companies such as the Company. The Investor is a sophisticated
investor with such knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and
risks of a prospective investment in the Securities and who is
capable of bearing the economic risks of such investment.
(c) The Investor is acquiring the Securities for investment for its
own account and not with a view to, or for resale in connection
with, any distribution in contravention of applicable law. The
Investor understands that the Securities to be acquired have not
been registered under the Securities Act of 1933, as amended (the
"Act"), by reason of a specific exemption from the registration
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provisions of the Act which depends upon, among other things, the
bona fide nature of the investment intent as expressed herein.
Investor is an "Accredited Investor" as such term is defined in
Rule 501 under the Act.
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(d) The Investor acknowledges that the Securities must be held
indefinitely unless subsequently registered under the Act or
unless an exemption from such registration is available. The
Investor is aware of the provisions of Rule 144 promulgated under
the Act which permits limited resale of securities purchased in a
private placement subject to the satisfaction of certain
conditions, including, in case the Investor has held the
securities for less than two years or is an affiliate of the
Company, among other things: the availability of certain current
public information about the Company, the resale occurring not
less than one year after a party has purchased and paid for the
securities to be sold, the sale being through a "broker's
transaction" or in transactions directly with a "market maker,"
and the number of shares being sold during any three-month period
not exceeding specified limitations.
(e) The Investor understands that no public market now exists for any
of the securities issued by the Company and there has been and
can be no assurance that a public offering will be successfully
completed by the Company or that a public market will ever exist
for the Securities.
(f) The Investor has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's
senior management and an opportunity to review the Company's
facilities. The Investor understands that such discussions, as
well as the written information issued by the Company, were
intended to describe the aspects of the Company's business and
prospects which it believes to be material but were not
necessarily a thorough or exhaustive description.
3.2. Legends. Each certificate representing the Securities shall be
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endorsed with the following legend (in addition to any legend required
under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY STATE SECURITIES LAW. SUCH SECURITIES MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH SALE OR
TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENT OF SAID ACT. COPIES OF THE AGREEMENT COVERING THE
ACQUISITION OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
TIES CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE CORPORATION.
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The Company need not record a transfer of Securities, unless the
conditions specified in the foregoing legends are satisfied. The
Company may also instruct its transfer agent not to record the
transfer of any of the Securities unless the conditions specified in
the foregoing legends are satisfied.
4. Conversion of the Notes. Each Note shall be convertible according to the
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following terms:
4.1. Conversion. The principal and accrued interest of each Note shall,
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contemporaneously with the closing of a Liquidating Event and solely
at the option of Investor, either (i) be converted into the number of
shares of Common Stock determined by dividing the sum of such
principal and interest by the Conversion Price in effect at the time
of such conversion or (ii) be due and payable immediately upon the
closing of a Liquidating Event. In the event the closing of a
Liquidating Event does not occur before March 5, 2000, the principal
and accrued interest of each Note shall be due and payable on March 5,
2000.
4.2. Conversion Price. The initial Conversion Price shall be $18.57. The
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Conversion Price is subject to proportionate adjustment for any stock
split, stock dividend, merger, reclassification or similar structural
change in the Company effected from the date of this loan agreement
through the date of conversion as set forth above.
4.3. Fractional Shares. Upon the conversion of each Note into shares of
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Common Stock, in lieu of any fractional shares to which the holder of
the Note would otherwise be entitled, the Company shall pay cash equal
to such fraction multiplied by $18.57.
4.4. Liquidating Event. A Liquidating Event shall mean a (i) firm
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commitment underwritten public offering of the Company's securities
under the Securities Act of 1933, as amended, (ii) transaction or
series of transactions in which the Company consolidates or merges
with any other business entity, after which the holders of the
company's outstanding equity securities immediately before such
consolidation or merger do not, immediately after such consolidation
or merger, retain stocks or other equity interests representing a
majority of the voting power of the surviving business entity or (iii)
sale of all or substantially all of the assets or capital stock of the
Company.
5. Defaults and Remedies.
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5.1. Events of Default. The following events shall be considered Events of
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Default with respect to each Note:
(a) The Company shall default in the payment or conversion of any
part of the principal or accrued interest on any Note for more
than thirty (30) days
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after the same shall become due and payable, whether at maturity
or at a date fixed for prepayment or by acceleration or
otherwise;
(b) The Company shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its
debts as they become due, or shall file a voluntary petition for
bankruptcy, or shall file any petition or answer seeking for
itself any reorganization, arrangement, composition,
readjustment, dissolution or similar relief under any present or
future statute, law or regulation, or shall file any answer
admitting the material allegations of a petition filed against
the Company in any such proceeding, or shall seek or consent to
or acquiesce in the appointment of any trustee, receiver or
liquidator of the Company, or of all or any substantial part of
the properties of the Company, or the Company or its respective
directors or majority shareholders shall take any action looking
to the dissolution or liquidation of the Company; or
(c) Within thirty (30) days after the commencement of any proceeding
against the Company seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation,
such proceeding shall not have been dismissed or, within thirty
(30) days after the appointment without the consent or
acquiescence of the Company of any trustee, receiver or
liquidator of the Company or of all or any substantial part of
the properties of the Company, such appointment shall not have
been vacated.
5.2. Remedies. Upon the occurrence of an Event of Default under Section 5.1
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hereof, at the option and upon the declaration of the holder of the
Note, (i) the entire unpaid principal and accrued interest on the Note
held by such holder shall, without presentment, demand, protest, or
notice of any kind, all of which are hereby expressly waived, be
forthwith due and payable, and the holder may, immediately and without
expiration of any period of grace, enforce payment of all amounts due
and owing under such Note and exercise any and all other remedies
granted to it at law, in equity, or otherwise.
6. Miscellaneous.
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6.1. Waivers and Amendments. With the written consent of the record holder
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of the Securities and the Company, the obligations of the Company and
the lights of the holders of the Securities under this Agreement may
be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of
time or indefinitely). Neither this Agreement nor any provisions
hereof may be changed, waived, discharged or terminated orally, but
only by a signed statement in writing.
6.2. Further Assurances; Subordination. Upon request of the Company,
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Investor will acknowledge in writing its subordination undertakings as
set forth in the Note.
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6.3. Governing Law. This Agreement shall be governed in all respects by
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the laws of the State of Texas.
6.4. Survival. The representations and warranties made herein shall
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survive for a period of one year following the Closing Date.
6.5. Successors and Assigns. Except as otherwise expressly provided
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herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
6.6. Entire Agreement. This Agreement and the other documents delivered
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pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and
thereof.
6.7. Severability of this Agreement. In case any provision of this
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Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
6.8. Titles and Subtitles. The titles of the Sections and Subsections of
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this Agreement are for convenience of reference only and are not to
be considered in construing this Agreement.
6.9. Delays or Omissions. It is agreed that no delay or omission to
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exercise any right, power or remedy accruing to the Investor, upon
any breach or default of the Company under this Agreement or the
Notes, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach or default, or any
acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. It is further agreed that any waiver,
permit, consent or approval of any kind or character by the Investor
of any breach or default under this Agreement, or any waiver by the
Investor of any provisions or conditions of this Agreement must be in
writing and shall be effective only to the extent specifically set
forth in writing and that all remedies, either under this Agreement,
or by law or otherwise afforded to the Investor, shall be cumulative
and not alternative.
6.10. Notices. Any notices, claims or demand or other communications
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hereunder shall be in writing and shall be deemed to be duly given if
personally given or if sent by telecopier, nationally-recognized
overnight courier or by registered or certified mail, return receipt
required and postage prepaid, addressed to such party in accordance
herewith or as otherwise stated in any notice given in accordance
herewith. Any such notice shall be deemed to have been received (a)
in the case of personal delivery or delivery by telecopier, on the
date of such delivery, (b) in the case of a nationally-recognized
overnight courier, on the next business day after the date sent and
(c) in the case of mailing, on the third business day following that
on which the piece of mail containing such communications is posted.
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To the Company:
Empower Health Corporation
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxxx, Xxxxx 00000
Copy to:
Xxxxxx & Xxxxxxx
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
To the Investor:
At the address set forth on the signature page to this
Agreement
6.11. Counterparts. This Agreement may be executed by facsimile and in any
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number of counterparts, each of which shall be deemed an original,
and all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Loan Agreement to be duly
executed and delivered as of the day and year first written above.
EMPOWER HEALTH CORPORATION
By: _____________________________
Chief Executive Officer
INVESTOR:
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_________________________________
Name:
Address: ________________________
________________________
Principal Amount: $
7
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAW. SUCH SECURITIES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS
SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENT OF SAID ACT. COPIES OF THE
AGREEMENT COVERING THE ACQUISITION OF THESE SECURITIES AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF TIES CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES
OF THE CORPORATION.
Date: _______________________ $ __________________
EMPOWER HEALTH CORPORATION
CONVERTIBLE PROMISSORY NOTE
Empower Health Corporation, a Texas corporation (the "Company"), for value
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received, promises to pay to __________________ (the "Investor"), the principal
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sum of $________, in lawful money of the United States of America and in
immediately available funds, plus simple interest of 7% per annum on the
principal amount hereof. Interest shall be computed on the basis of a year of
365 days for the actual number of days elapsed. The principal and accrued but
unpaid interest due hereunder shall, contemporaneously with the closing of a
Liquidating Event and solely at the option of Investor, either be converted into
shares of Common Stock or be due and payable immediately upon the closing of a
Liquidating Event in accordance with Section 4 of the Loan Agreement. In the
event the closing of a Liquidating Event does not occur before March 2000, the
principal and accrued interest of this Note shall be due and payable on March
2000.
1. Definitions. Unless the context indicates otherwise, capitalized terms used
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herein shall have the meanings given them in the Loan Agreement, provided
that the following terms used herein shall have the following meanings:
1.1. "Investor" means the investor whose name appears on the signature page
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attached to the Loan Agreement.
1.2. "Loan Agreement" means the Loan Agreement dated as of March ___, 1999
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between the Investor and the Company.
1.3. "Noteholder," "holder," or similar terms, when the context refers to a
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holder of a Note, means any person who shall at the time be the holder
of this Note.
A-1
2. No Prepayment. The principal amount of this Note may not be paid by the
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Company prior to maturity without the written consent of the holder of this
Note.
3. Subordination. The indebtedness represented by this Note is hereby
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expressly subordinated in right of payment to the prior payment in full of
all of the Company's indebtedness for money borrowed to banks, insurance
companies, lease financing institutions or other lending institutions
regularly engaged in the business of lending money.
4. Attorneys' Fees and Costs. If any amount is not paid as and when due
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hereunder or if the Note is not converted in accordance with the Loan
Agreement promptly after the closing of the EPO, as applicable, the Company
promises to pay all costs of collection and enforcement and reasonable
attorneys' fees which the Investor may incur.
5. Loan Agreement. This Note is subject to the provisions of the Loan
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Agreement and is entitled to all the benefits provided therein. Reference
is made to the Loan Agreement for the Events of Default and the fights of
acceleration of the maturity upon an Event of Default.
6. Governing Law. This Agreement shall be governed in all respects by the laws
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of the State of Texas.
EMPOWER HEALTH CORPORATION
____________________________
Xxxxxx X. Xxxxxxx
Chief Executive Officer
X-0
Xxxxx 0, 0000
Xxxxxxx Health Corporation ("Empower") hereby consents and agrees with
Investor that promptly following the closing of the transactions contemplated
under the Loan Agreement of even date herewith Empower shall use its best
efforts to obtain registration rights for Investor such that upon Conversion of
the Loan the Investor will be entitled to registration rights commensurate with
the holders of the Company's Series B or Series C Preferred stock.
The parties acknowledge that the foregoing action will be taken in
consideration of Investor's agreement on this date to execute and deliver the
Loan Agreement of even date herewith.
Empower Health Corporation Investor
By: _________________________ By: ______________________
Name: Name:
Title:
