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EXHIBIT 10.16
SUBORDINATED LOAN AND SECURITY AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of January 15, 1999, is
entered into by and between PlanetRx, Inc., a Delaware corporation, with its
chief executive office and principal place of business located at Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxx 000, Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx (the "Borrower") and
Comdisco, Inc., a Delaware corporation, with its principal place of business
located at 0000 Xxxxx Xxxxx Xxxx, Xxxxxxxx, Xxxxxxxx 00000 (the "Lender" or
sometimes, "Comdisco"). In consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
RECITALS
WHEREAS, Borrower has requested Lender to make available to Borrower a
loan or loans up to an aggregate principal amount of SEVEN MILLION DOLLARS
($7,000,000.00) (as the same may from time to time be amended, modified,
supplemented or revised, individually or collectively referred to as the
"Loan(s)"), which would be evidenced by Subordinated Promissory Note(s) executed
by Borrower substantially in the form of Exhibit A hereto (as the same may from
time to time be amended, modified, supplemented or restated the "Note(s)");
WHEREAS, Lender is willing to make the Loan(s) on the terms and
conditions set forth in this Agreement;
WHEREAS, Lender and Borrower agree any Loan(s) hereunder shall be
subordinate to Senior Debt (as defined herein) to the extent set forth in the
Subordination Agreement (as defined herein); and
WHEREAS, Borrower has also given Lender certain rights to purchase the
Borrower's Preferred Stock under terms and conditions set forth in this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, Borrower and Lender hereby agree as follows:
SECTION 1. DEFINITIONS
Unless otherwise defined herein, the following capitalized terms shall
have the following meanings (such meanings being equally applicable to both the
singular and plural form of the terms defined);
1.1 "ACCOUNT" means any "account" as such term is defined in
Section 9-106 of the UCC, now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest and, in any event,
shall include, without limitation, all accounts receivable, book debts and other
forms of obligations (other than forms of obligations evidenced by Chattel
Paper, Documents or Instruments) now owned or hereafter received or acquired by
or belonging or owing to Borrower (including, without limitation, under any
trade name, style or division thereof) whether arising out of goods sold or
services rendered by Borrower or from any other transaction, whether or not the
same involves the sale of goods or services by Borrower (including, without
limitation, any such obligation which may be characterized as an account or
contract right under the UCC) and all of Borrower's rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for goods or
services, and all
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of Borrower's rights to any goods represented by any of the foregoing
(including, without limitation, unpaid seller's rights of rescission, replevin,
reclamation and stoppage in transit and rights to returned, reclaimed or
repossessed goods), and all monies due or to become due to Borrower under all
purchase orders and contracts for the sale of goods or the performance of
services or both by Borrower (whether or not yet earned by performance on the
part of Borrower or in connection with any other transaction), now in existence
or hereafter occurring, including, without limitation, the right to receive the
proceeds of said purchase orders and contracts, and all collateral security and
guarantees of any kind given by any Person with respect to any of the foregoing.
1.2 "ACCOUNT DEBTOR" means any "account debtor," as such term is
defined in Section 9-105(1)(a) of the UCC.
1.3 "ADVANCE" means each installment made by the Lender to
Borrower pursuant to the Loan to be evidenced by the Note(s) secured by the
Collateral.
1.4 "ADVANCE DATE" means the funding date of any Advance of the
Loan.
1.5 "ADVANCE REQUEST" means the request by Borrower for an Advance
under the Loan, each to be substantially in the form of Exhibit C attached
hereto, as submitted by Borrower to Lender from time to time.
1.6 "CHATTEL PAPER" means any "chattel paper," as such term is
defined in Section 9-105(1)(b) of the UCC, now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
1.7 "CLOSING DATE" means the date hereof.
1.8 "COLLATERAL" shall have the meaning assigned to such term in
Section 3 of this Agreement.
1.9 "CONTRACTS" means all contracts, undertakings, franchise
agreements or other agreements (other than rights evidenced by Chattel Paper,
Documents or Instruments) in or under which Borrower may now or hereafter have
any right, title or interest, including, without limitation, with respect to an
Account, any agreement relating to the terms of payment or the terms of
performance thereof.
1.10 "COPYRIGHTS" means all of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (i) all copyrights, whether registered or unregistered, held pursuant
to the laws of the United States, any State thereof or of any other country;
(ii) registrations, applications and recordings in the United States Copyright
Office or in any similar office or agency of the United States, any state
thereof or any other country; (iii) any continuations, renewals or extensions
thereof; and (iv) any registrations to be issued in any pending applications.
1.11 "COPYRIGHT LICENSE" means any written agreement granting any
right to use any Copyright or Copyright registration now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest.
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1.12 "DOCUMENTS" means any "documents," as such term is defined in
Section 9-105(1)(f) of the UCC, now owned or hereafter acquired by Borrower or
in which Borrower now holds or hereafter acquires any interest.
1.13 "EQUIPMENT" means any "equipment," as such term is defined in
Section 9-109(2) of the UCC, now or hereafter owned or acquired by Borrower or
in which Borrower now holds or hereafter acquires any interest and any and all
additions, substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.
1.14 "EXCLUDED AGREEMENTS" means (i) the Master Lease Agreement
dated as of January 15, 1999 between Borrower, as lessee, and Lender, as lessor,
including, without limitation, any Equipment Schedules and Summary Equipment
Schedules to the Master Lease Agreement executed or delivered by Borrower
pursuant thereto and any other modifications or amendments thereof, whereby
Borrower (as lessee) leases equipment, software, or goods from Lender (as
lessor) to Borrower (as lessee) and (ii) a Warrant Agreement dated January 15,
1999, and any other warrants to acquire, or agreements governing the rights of
Lender as a holder, if applicable, of any equity securities of Borrower.
1.15 "FACILITY FEE" means one percent (1.0%) of the Maximum
Available Loan and due to Lender at the Closing Date.
1.16 "FIXTURES" means any "fixtures," as such term is defined in
Section 9-313(1)(a) of the UCC, now or hereafter owned or acquired by Borrower
or in which Borrower now holds or hereafter acquires any interest and, now or
hereafter attached or affixed to or constituting a part of, or located in or
upon, real property wherever located, together with all right, title and
interest of Borrower in and to all extensions, improvements, betterments,
renewals, substitutes, and replacements of, and all additions and appurtenances
to any of the foregoing property, and all purchases of the security constituted
thereby, immediately upon any acquisition or release thereof or any such
purchase, as the case may be.
1.17 "GENERAL INTANGIBLES" means any "general intangibles," as such
term is defined in Section 9-106 of the UCC, now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest and,
in any event, shall include, without limitation, all right, title and interest
which Borrower may now or hereafter have in or under any contract, all customer
lists, Copyrights, Trademarks, Patents, rights to Intellectual Property,
interests in partnerships, joint ventures and other business associations,
Licenses, permits, trade secrets, proprietary or confidential information,
inventions (whether or not patented or patentable), technical information,
procedures, designs, knowledge, know-how, software, data bases, data, skill,
expertise, recipes, experience, processes, models, drawings, materials and
records, goodwill (including, without limitation, the goodwill associated with
any Trademark, Trademark registration or Trademark licensed under any Trademark
License), claims in or under insurance policies, including unearned premiums,
uncertificated securities, cash and other forms of money or currency, deposit
accounts (including as defined in Section 9-105(e) of the UCC), rights to xxx
for past, present and future infringement of Copyrights, Trademarks and Patents,
rights to receive tax refunds and other payments and rights of indemnification.
1.18 "INITIAL PUBLIC OFFERING" means an initial public offering of
Borrower's securities.
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1.19 "INSTRUMENTS" means any "instrument," as such term is defined
in Section 9-105(1)(i) of the UCC, now owned or hereafter acquired by Borrower
or in which Borrower now holds or hereafter acquires any interest.
1.20 "INTELLECTUAL PROPERTY" means all Copyrights, Trademarks,
Patents, trade secrets, source codes, customer lists, proprietary or
confidential information, inventions (whether or not patented or patentable),
technical information, procedures, designs, knowledge, know-how, software, data
bases, skill, expertise, experience, processes, models, drawings, materials and
records.
1.21 "INVENTORY" means any "inventory," as such term is defined in
Section 9-109(4) of the UCC, wherever located, now or hereafter owned or
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest, and, in any event, shall include, without limitation, all inventory,
goods and other personal property which are held by or on behalf of Borrower for
sale or lease or are furnished or are to be furnished under a contract of
service or which constitute raw materials, work in process or materials used or
consumed or to be used or consumed in Borrower's business, or the processing,
packaging, promotion, delivery or shipping of the same, and all furnished goods
whether or not such inventory is listed on any schedules, assignments or reports
furnished to Lender from time to time and whether or not the same is in transit
or in the constructive, actual or exclusive occupancy or possession of Borrower
or is held by Borrower or by others for Borrower's account, including, without
limitation, all goods covered by purchase orders and contracts with suppliers
and all goods billed and held by suppliers and all inventory which may be
located on premises of Borrower or of any carriers, forwarding agents, truckers,
warehousemen, vendors, selling agents or other persons.
1.22 "LICENSE" means any Copyright License, Patent License,
Trademark License or other license of rights or interests now held or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest and any renewals or extensions thereof.
1.23 "LIEN" means any mortgage, deed of trust, pledge,
hypothecation, assignment for security, security interest, encumbrance, xxxx,
xxxx or charge of any kind, whether voluntarily incurred or arising by operation
of law or otherwise, against any property, any conditional sale or other title
retention agreement, any lease in the nature of a security interest, and the
filing of any financing statement (other than a precautionary financing
statement with respect to a lease that is not in the nature of a security
interest) under the UCC or comparable law of any jurisdiction.
1.24 "LOAN DOCUMENTS" shall mean and include this Agreement, the
Note(s), and any other documents executed in connection with the Secured
Obligations or the transactions contemplated hereby, as the same may from time
to time be amended, modified, supplemented or restated, provided, that the Loan
Documents shall not include any of the Excluded Agreements.
1.25 "MATERIAL ADVERSE EFFECT" means a material adverse effect
upon: (i) the business, operations, properties, prospects, assets or conditions
(financial or otherwise) of Borrower; or (ii) the ability of Borrower to
perform, or of Lender to enforce, the Secured Obligations.
1.26 "MATURITY DATE" means the date thirty-six (36) months from the
Advance Date of each installment of the Loan.
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1.27 "MAXIMUM LOAN AMOUNT" means Seven Million and No/100 Dollars
$(7,000,000).
1.28 "MERGER EVENT" means a capital reorganization of the shares of
the Borrower's stock (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), or a merger or
consolidation of the Borrower with or into another corporation whether or not
the Borrower is the surviving corporation, or the sale of all or substantially
all of the Borrower's properties and assets to any other person.
1.29 "PATENT LICENSE" means any written agreement granting any
right with respect to any invention on which a Patent is in existence now owned
or hereafter acquired by Borrower or in which Borrower now holds or hereafter
acquires any interest.
1.30 "PATENTS" means all of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (a) letters patent of, or rights corresponding thereto in, the United
States or any other county, all registrations and recordings thereof, and all
applications for letters patent of, or rights corresponding thereto in the
United States or any other country, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country; (b) all reissues, continuations,
continuations-in-part or extensions thereof; (c) all xxxxx patents, divisionals,
and patents of addition; and (d) all patents to issue in any such applications.
1.31 "PERMITTED LIENS" means any and all of the following:
(i) liens in favor of Lender;
(ii) liens related to, or arising in connection with,
Senior Debt;
(iii) liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being
contested in good faith by appropriate proceedings, provided the same
have no priority over any of Lender's security interests and for which
Borrower maintains adequate reserves on its books;
(iv) liens securing claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like persons or
entities imposed without action of such Parties, provided that the
payment thereof is not yet required;
(v) liens arising from judgments, decrees or attachments
in circumstances not constituting an Event of Default hereunder;
(vi) liens and security interests existing as of the date
hereof and disclosed in the Schedule hereto;
(vii) liens incurred or deposits made in the ordinary
course of Borrower's business in connection with worker's compensation,
unemployment insurance, social security and other like laws;
(viii) liens and security interests (i) upon or in any
equipment acquired or held by the Borrower to secure the purchase price
of such equipment or indebtedness
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incurred solely for the purpose of financing the acquisition of such
equipment, or (ii) existing on such equipment at the time of its
acquisition, provided that the lien and security interest is confined
solely to the property so acquired and improvements thereon, and the
proceeds of such equipment;
(ix) liens consisting of leases or subleases and licenses
and sublicenses granted to others in the ordinary course of Borrower's
business not interfering in any material respect with the business of
Borrower; and
(x) liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in
connection with the importation of goods.
1.32 "PREFERRED STOCK" means the Borrower's Series B Preferred
Stock.
1.33 "PROCEEDS" means "proceeds," as such term is defined in
Section 9-306(1) of the UCC and, in any event, shall include, without
limitation, (a) any and all Accounts, Chattel Paper, Instruments, cash or other
forms of money or currency or other proceeds payable to Borrower from time to
time in respect of the Collateral, (b) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Borrower from time to time with
respect to any of the Collateral, (c) any and all payments (in any form
whatsoever) made or due and payable to Borrower from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Collateral by any governmental authority (or any Person
acting under color of governmental authority), (d) any claim of Borrower against
third parties (i) for past, present or future infringement of any Copyright,
Patent or Patent License or (ii) for past, present or future infringement or
dilution of any Trademark or Trademark License or for injury to the goodwill
associated with any Trademark, Trademark registration or Trademark licensed
under any Trademark License and (e) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.
1.34 "PURCHASE OPTION" shall have the meaning assigned to such term
in Section 8 of this Agreement.
1.35 "RECEIVABLES" shall mean and include all of the Borrower's
accounts, instruments, documents, chattel paper and general intangibles whether
secured or unsecured, whether now existing or hereafter created or arising, and
whether or not specifically sold or assigned to Lender hereunder.
1.36 "SECURED OBLIGATIONS" shall mean and include all principal,
interest, fees, costs, or other liabilities or obligations for monetary amounts
owed by Borrower to Lender, whether due or to become due, matured or unmatured,
liquidated or unliquidated, contingent or non-contingent, and all covenants and
duties regarding such amounts, of any kind of nature, present or future, arising
under this Agreement, the Note(s), or any of the other Loan Documents, whether
or not evidenced by any Note(s), Agreement or other instrument, as the same may
from time to time be amended, modified, supplemented or restated, provided, that
the Secured Obligations shall not include any indebtedness or obligations of
Borrower arising under or in connection with the Excluded Agreements.
1.37 "SENIOR CREDITOR" means a bank, insurance company, pension
fund, or other institutional lender to be determined and identified to Lender in
accordance with the Subordination Agreement, or a syndication of such
institutional lenders that provides Senior
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Debt financing to Borrower; provided, that Senior Creditor shall not include any
officer, director, shareholder, venture capital investor, or insider of
Borrower, or any affiliate of the foregoing persons, except upon the express
written consent of Lender, which consent shall not be unreasonably withheld,
delayed or conditioned.
1.38 "SENIOR DEBT" means any and all indebtedness and obligations
for borrowed money (including, without limitation, principal, premium (if any),
interest, fees charges, expenses, costs, professional fees and expenses, and
reimbursement obligations) at any time owing by Borrower to Senior Creditor
under the Senior Loan Documents, including, but not limited to such amounts as
may accrue or be incurred before or after default or workout or the commencement
of any liquidation, dissolution, bankruptcy, receivership or reorganization by
or against Borrower (including any interest accruing with respect to any such
indebtedness after the filing of a bankruptcy petition, whether or not allowed
or allowable as a claim in the bankruptcy proceeding) provided, that Senior Debt
shall not include debt exceeding Two Million Dollars ($2,000,000.00) in
principal amount outstanding at any one time.
1.39 "SENIOR LOAN DOCUMENTS" means the loan agreement between
Borrower and Senior Creditor and any other agreement, security agreement,
document, promissory note, UCC financing statement, or instrument executed by
Borrower in favor of Senior Creditor pursuant to or in connection with the
Senior Debt or the loan agreement, as the same may from time to time be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.40 "SUBORDINATION AGREEMENT" means the Subordination Agreement of
even date herewith, entered into between Borrower, Lender and Senior Creditor.
1.41 "TRADEMARK LICENSE" means any written agreement granting any
right to use any Trademark or Trademark registration now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest.
1.42 "TRADEMARKS" means any of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (a) any and all trademarks, tradenames, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, designs
and general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and any applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof and (b) any reissues, extensions
or renewals thereof.
1.43 "UCC" shall mean the Uniform Commercial Code as the same may,
from time to time, be in effect in the State of Illinois. Unless otherwise
defined herein, terms that are defined in the UCC and used herein shall have the
meanings given to them in the UCC.
SECTION 2. THE LOANS
2.1 Lender agrees to lend to Borrower an amount not to exceed Four
Million and No/100 Dollars ($4,000,000) in the aggregate at any one time
outstanding ("Loan A") for the purposes and upon the terms and subject to the
conditions contained in this Agreement. It is the agreement of the parties
hereto that Borrower shall issue to Lender a Note hereunder on the Closing Date
in the amount of One Million Six Hundred Thousand Dollars ($1,600,000.00) and
the
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two (2) demand promissory notes issued by Borrower in favor of Lender in the
principal amounts of Six Hundred Thousand Dollars ($600,000.00) and One Million
Dollars ($1,000,000.00), dated December 23, 1998 and January 12, 1999 shall be
cancelled. Borrower further agrees to pay Lender accrued and unpaid interest on
the demand notes in an amount equal to Four Thousand Five Hundred Dollars
$4,500.00 on the Closing Date.
2.2 Lender agrees to lend to Borrower an amount not to exceed
Three Million and No/100 Dollars ($3,000,000) in the aggregate at any one time
outstanding ("Loan B") for the purposes and upon the terms and subject to the
conditions contained in this Agreement.
2.3 The Loan(s) shall be available in minimum Advances of One
Million Dollars ($1,000,000.00). Each Advance made by Lender to Borrower shall
be evidenced by a Note in the original principal amount of such Advance. The
principal balance of each Note shall bear interest thereon precomputed at the
rate of eleven percent (11.0%) per annum, and each such Note shall be due and
payable in eighteen (18) equal monthly installments of interest only, payable on
the first day of each month, followed by eighteen (18) equal monthly
installments of principal and interest, payable on the first day of each month,
to and including the Maturity Date (each, a "Payment Date"). If any payment
under a Note shall be payable on a day other than a business day, then such
payment shall be due and payable on the next succeeding business day.
2.4 In order to obtain an Advance under the Loans, Borrower shall
complete, sign and deliver an Advance Request to Lender. Each Advance Request
shall identify an Advance Date which is no less than five (5) business days from
the date of such notice. Upon receipt of an Advance Request, Lender shall verify
the information contained in the Advance Request and if Lender determines to
fund such Advance it shall deliver a Note dated the Advance Date evidencing such
Advance to Borrower for signature. Upon receipt of the signed Note, Lender will
fund the Advance in the manner requested by the Advance Request. Borrower agrees
that Lender may rely on any notice given by any person it reasonably believes to
be an authorized officer of Borrower without the necessity of independent
investigation.
2.5 Borrower shall have the option to prepay any Note, in whole or
in part, without premium after twelve (12) months from the Closing Date by
paying the principal amount thereon together with all accrued and unpaid
interest with respect to such principal amount, as of the date of such
prepayment. If Borrower prepays a Note within twelve (12) months from the
Closing Date, Borrower shall pay the principal amount together with all accrued
and unpaid interest and a prepayment premium equal to one percent (1%) of the
then outstanding principal amount prepaid. Notwithstanding the foregoing, any
such prepayment by the Borrower shall not affect Lessor's right to purchase as
described in SECTION 8 herein.
2.6 (a) Notwithstanding any provision in this Agreement, the
Note(s), or any other Loan Document, it is not the parties' intent to contract
for, charge or receive interest at a rate that is greater than the maximum rate
permissible by law which a court of competent jurisdiction shall deem applicable
hereto (which under the laws of the State of Illinois shall be deemed to be the
laws relating to permissible rates of interest on commercial loans) (the
"Maximum Rate"). If the Borrower actually pays Lender an amount of interest,
chargeable on the total aggregate principal Secured Obligations of Borrower
under this Agreement and the Note(s) (as said rate is calculated over a period
of time from the date of this Agreement through the end of time that any
principal is outstanding on the Note(s)), which amount of interest exceeds
interest calculated at the Maximum Rate on said principal chargeable over said
period of time, then such excess interest actually paid by Borrower shall be
applied first, to the
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payment of principal outstanding on the Note(s); second, after all principal is
repaid, to the payment of Lender's out of pocket costs, expenses, and
professional fees which are owed by Borrower to Lender under this Agreement or
the Loan Documents; and third, after all principal, costs, expenses, and
professional fees owed by Borrower to Lender are repaid, the excess (if any)
shall be refunded to Borrower, and the effective rate of interest will be
automatically reduced to the Maximum Rate.
(b) In the event any interest is not paid when due
hereunder, delinquent interest shall be added to principal and shall bear
interest on interest, compounded at the rate set forth in SECTION 2.3.
(c) Upon and during the continuation of an Event of
Default hereunder, all Secured Obligations, including principal, interest,
compounded interest, and professional fees, shall bear interest at a rate per
annum equal to the rate set forth in SECTION 2.3 plus five percent (5%) per
annum ("Default Rate").
SECTION 3. SECURITY INTEREST
As security for the prompt, complete and indefeasible payment when due
(whether at stated payment dates or otherwise) of all the Secured Obligations
and in order to induce Lender to make the Loan(s) upon the terms and subject to
the conditions of the Note(s), Borrower hereby assigns, conveys, mortgages,
pledges, hypothecates and transfers to Lender for security purposes only, and
hereby grants to Lender a security interest in, all of Borrower's right, title
and interest in, to and under each of the following (all of which being
hereinafter collectively called the "Collateral"):
(a) All Receivables;
(b) All Equipment;
(c) All Fixtures;
(d) All General Intangibles;
(e) All Inventory;
(f) All other goods and personal property of Borrower whether
tangible or intangible and whether now or hereafter owned or
existing, leased, consigned by or to, or acquired by, Borrower
and wherever located; and
(g) To the extent not otherwise included, all Proceeds of each of
the foregoing and all accessions to, substitutions and
replacements for, and rents, profits and products of each of
the foregoing.
SECTION 4. CONDITIONS PRECEDENT TO LOAN
The obligation of Lender to fund the Loan(s) on each Advance Date shall
be subject to Lender's discretion and satisfactory completion of its due
diligence and approval process. The obligations of the Lender to make Loans
hereunder are also subject to the satisfaction by Borrower, or waiver by Lender,
of the following conditions:
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4.1 Borrower, on or prior to the Closing Date, shall have
delivered to Lender the following:
(a) executed originals of the Agreement, the
Subordination Agreement, a Note and interest payment as set forth in
SECTION 2.1, and any other documents reasonably required by Lender to
effectuate the liens of Lender with respect to all Collateral;
(b) certified copy of resolutions of Borrower's board of
directors evidencing approval of the borrowing and other transactions
evidenced by the Loan Documents;
(c) certified copies of the Certificate of Incorporation
and the Bylaws, as amended through the Closing Date, of Borrower;
(d) certificate of good standing for Borrower from its
state of incorporation and similar certificates from all other
jurisdictions in which it does business and where the failure to be
qualified would have a Material Adverse Effect;
(e) payment of the Facility Fee;
(f) an executed Master Lease Agreement and associated
equipment schedules with Lender as lessor, in the minimum amount of One
Million Seven Hundred Fifty Thousand Dollars ($1,750,000.00); and
(g) such other documents as Lender may reasonably
request.
4.2 On each Advance Date:
(a) The Lender shall have received (i) an Advance Request
for such Advance as required by SECTION 2.4, (ii) an executed Note evidencing
such Advance and (iii) any other documents Lender may reasonably request.
(b) The representations and warranties set forth in
SECTION 5 hereof shall be true and correct in all material respects on and as of
the Advance Date with the same effect as though made on and as of such date,
except to the extent such representations and warranties expressly relate to an
earlier date.
(c) The Borrower shall be in compliance with all the
terms and provisions set forth herein and in each other Loan Document on its
part to be observed or performed, and at the time of and immediately after such
Advance no Event of Default shall have occurred and be continuing.
Each Advance Request shall be deemed to constitute a representation and
warranty by the Borrower on the Advance Date as to the matters specified in
paragraphs (B) and (C) of this SECTION 4.2.
4.3 (a) In connection with each Advance Request made under
Loan A and Loan B, Borrower shall deliver a certificate signed by its Chief
Executive Officer and Chief Financial Officer certifying that Borrower has
achieved at least seventy-five percent (75%) or more of its cumulative net
income/loss projections as set forth in its Business Plan dated December 1, 1998
for the prior six (6) month period, attached hereto as Exhibit D.
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(b) In connection with the First Advance Request made
under Loan B, Borrower shall deliver a certificate signed by its Chief Executive
Officer and Chief Financial Officer certifying that Borrower has completed the
Preferred Stock Offering (as defined in SECTION 7.12) (and such certificate
shall include true and correct copies of the principal documentation relating to
such Preferred Stock Offering).
4.4 PERFECTION OF SECURITY INTERESTS. Borrower shall have taken or
caused to be taken such actions requested by Lender to grant Lender a first
priority perfected security interest in the Collateral, subject only to
Permitted Liens. Such actions shall include, without limitation, the delivery to
Lender of all appropriate financing statements, executed by Borrower, as to the
Collateral granted by Borrower for all jurisdictions as may be necessary or
desirable to perfect the security interest of Lender in such Collateral.
4.5 ABSENCE OF EVENTS OF DEFAULTS. As of the Closing Date or the
Advance Date, no fact or condition exists that would (or would, with the passage
of time, the giving of notice, or both) constitute an Event of Default under
this Agreement or any of the Loan Documents and no fact or condition exists that
would (or would, with the passage of time, the giving of notice, or both)
constitute a default under the Senior Loan Documents between Borrower and Senior
Creditor.
4.6 MATERIAL ADVERSE EFFECT. As of the Closing Date or the Advance
Date, no event which has had or could reasonably be expected to have a Material
Adverse Effect has occurred and is continuing.
4.7 TERMINATION DATE. Notwithstanding anything in this Agreement
to the contrary, Lender's obligations to provide the Loan(s) shall (i) terminate
on January 15, 2000 and (ii) be suspended upon the occurrence and continuance of
an Event of Default pursuant to SECTION 9.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents, warrants and agrees that:
5.1 Borrower owns all right title and interest in and to the
Collateral, free of all liens, security interests, encumbrances and claims
whatsoever, except for Permitted Liens.
5.2 Borrower has the full power and authority to, and does hereby
grant and convey to the Lender, a perfected security interest in the Collateral
as security for the Secured Obligations, free of all liens, security interests,
encumbrances and claims, other than Permitted Liens and shall execute such
Uniform Commercial Code financing statements in connection herewith as the
Lender may reasonably request. Except for Permitted Liens, no other lien,
security interest, adverse claim or encumbrance has been created by Borrower or
is known by Borrower to exist with respect to any Collateral.
5.3 Borrower is a corporation duly organized, legally existing and
in good standing under the laws of the State of Delaware, and is duly qualified
as a foreign corporation in all jurisdictions in which the nature of its
business or location of its properties require such qualifications and where the
failure to be qualified would have a Material Adverse Effect.
5.4 Borrower's execution, delivery and performance of the Note(s),
this Agreement, all financing statements, all other Loan Documents, required to
be delivered or executed in
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connection herewith, have been duly authorized by all necessary corporate action
of Borrower, the individual or individuals executing the Loan Documents were
duly authorized to do so; and the Loan Documents constitute legal, valid and
binding obligations of the Borrower, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization
or other similar laws generally affecting the enforcement of the rights of
creditors.
5.5 This Agreement and the other Loan Documents do not and will
not violate any provisions of Borrower's Certificate of Incorporation, bylaws or
any contract, agreement, law, regulation, order, injunction, judgment, decree or
writ to which the Borrower is subject, or result in the creation or imposition
of any lien, security interest or other encumbrance upon the Collateral, other
than those created by this Agreement.
5.6 The execution, delivery and performance of this Agreement and
the other Loan Documents do not require the consent or approval of any other
person or entity including, without limitation, any regulatory authority or
governmental body of the United States or any state thereof or any political
subdivision of the United States or any state thereof.
5.7 No event which has had or could reasonably be expected to have
a Material Adverse Effect has occurred and is continuing.
5.8 No fact or condition exists that would (or would, with the
passage of time, the giving of notice, or both) constitute an event of default
under the Senior Loan Documents.
5.9 (a) There are no actions, suits or proceedings at law or
in equity or by or before any governmental authority now pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
business, property or rights of the Borrower (i) which involve any Loan Document
or (ii) as to which there is a reasonable possibility of an adverse
determination and which, if adversely determined, could, individually or in the
aggregate, result in a Material Adverse Effect.
(b) The Borrower is not in violation of any law, rule or
regulation, or in default with respect to any judgment, writ, injunction or
decree of any governmental authority, where such violation or default could
result in a Material Adverse Effect.
5.10 The Borrower is not in default in any manner under any
provision of any indenture or other agreement or instrument evidencing
indebtedness, or any other material agreement or instrument to which it is a
party or by which it or any of its properties or assets are or may be bound,
where such default could result in a Material Adverse Effect.
5.11 No information, report, financial statement, exhibit or
schedule furnished by or on behalf of the Borrower to the Lender in connection
with the negotiation of any Loan Document or included therein or delivered
pursuant thereto contained, contains or will contain any material misstatement
of fact or omitted, omits or will omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were, are or will be made, not misleading.
5.12 All issued and outstanding shares of Common Stock, Preferred
Stock or any other securities of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. All outstanding shares of
Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
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(i) The authorized capital stock of the Company consists
of 40,000,000 shares of Common Stock, par value $0.0001 per share (the
"Common Stock"), of which 6,665,000 shares shall be issued and
outstanding, and 21,000,000 shares of Preferred Stock, $0.0001 par
value per share, of which 14,000,000 shares shall have been designated
as Series A Preferred Stock, 7,000,000 shares shall have been
designated as Series B Preferred Stock. 10,916,000 shares of Series A
Preferred Stock, and 5,000,000 shares of Series B Preferred Stock, are
issued and outstanding. All of the issued and outstanding shares of
Preferred Stock have been duly authorized and validly issued and are
fully paid and nonassessable. All of the issued and outstanding shares
of Preferred Stock have been duly authorized and validly issued and are
fully paid and nonassessable. All of the issued and outstanding shares
of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable. There are 4,864,000 shares of Common
Stock reserved for issuance under the Company's 1998 Stock Option Plan,
of which 2,109,000 shares have been issued upon the exercise of
options, 1,503,350 shares are subject to outstanding options and
1,251,050 shares remain available for issuance. Except as set forth in
Schedule 5.14 hereto, the Certificate of Incorporation, or as provided
in this Agreement, (i) no subscription, warrant, option, convertible
security or other right (contingent or otherwise) to purchase or
acquire any shares of capital stock of the Company is authorized or
outstanding, (ii) the Company has no obligation (contingent or
otherwise) to issue any subscription, warrant, option, convertible
security or other such right or to issue or distribute to holders of a
share of its capital stock any evidences of indebtedness or assets of
the Company, and (iii) the Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend to make
any other distribution in respect thereof. All of the issued and
outstanding securities or the Company have been offered, issued and
sold by the Company is compliance with applicable federal and state
securities laws.
(ii) Except as set forth in Borrower's Amended and
Restated Investors' Rights Agreement dated January 15, 1999, no
shareholder of the Company has preemptive rights to purchase new
issuances of the Company's capital stock.
5.13 Borrower has filed and will file all tax returns, federal,
state and local, which it is required to file and has duly paid or fully
reserved for all taxes or installments thereof (including any interest or
penalties) as and when due, which have or may become due pursuant to such
returns or pursuant to any assessment received by Borrower for the three (3)
years preceding the Closing Date, if any (including any taxes being contested in
good faith and by appropriate proceedings).
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SECTION 6. INSURANCE
6.1 So long as there are any Secured Obligations outstanding,
Borrower shall cause to be carried and maintained comprehensive general
liability insurance against risks customarily insured against in Borrower's line
of business. Such risks shall include, without limitation, the risks of death,
bodily injury and property damage. So long as there are any Secured Obligations
outstanding, Borrower shall also cause to be carried and maintained insurance
upon the Collateral and Borrower's business, covering casualty, hazard and such
other property risks customarily insured against in Borrower's line of business.
Borrower shall deliver to Lender lender's loss payable endorsements (Form BFU
438 or equivalent) naming Lender as loss payee or additional insured, as
appropriate. Borrower shall use commercially reasonable efforts to cause all
policies evidencing such insurance to provide for at least thirty (30) days
prior written notice by the underwriter or insurance company to Lender in the
event of cancellation or expiration. Such policies shall be issued by such
insurers and in such amounts as are reasonably acceptable to Lender.
6.2 Borrower shall and does hereby indemnify and hold Lender, its
agents and shareholders harmless from and against any and all claims, costs,
expenses, damages and liabilities (including, without limitation, such claims,
costs, expenses, damages and liabilities based on liability in tort, including
without limitation, strict liability in tort), including reasonable attorneys'
fees, arising out of the disposition or utilization of the Collateral, other
than claims arising at or caused by Lender's gross negligence or willful
misconduct. Lender may not enter into any settlement or other compromise with
respect to any claim covered by the indemnity set forth in this section without
Borrower's prior written consent, which shall not be unreasonably withheld,
conditioned or delayed, and if a claim is settled or compromised without such
consent, Borrower shall not be obligated to provide indemnification under this
section. If Lender or any other indemnified party obtains recovery of any of the
amounts that Borrower has paid to them pursuant to the indemnity set forth in
this section, then Lender or such other indemnified party, as applicable, shall
promptly pay to Borrower the amount of such recovery.
SECTION 7. COVENANTS OF BORROWER
Borrower covenants and agrees as follows at all times while any of the
Secured Obligations remain outstanding:
7.1 Borrower shall furnish to Lender the financial statements
listed hereinafter, each prepared in accordance with generally accepted
accounting principles consistently applied (the "Financial Statements"):
(a) as soon as practicable (and in any event within
thirty (30) days) after the end of each month, unaudited interim
financial statements as of the end of such month (prepared on a
consolidated and consolidating basis, if applicable), including balance
sheet and related statements of income and cash flows accompanied by a
report detailing any material contingencies (including the commencement
of any material litigation by or against Borrower) or any other
occurrence that could reasonably be expected to have a Material Adverse
Effect, all certified by Borrower's Chief Executive Officer or Chief
Financial Officer to be true and correct;
(b) as soon as practicable (and in any event within
ninety (90) days) after the end of each fiscal year, unqualified
audited financial statements as of the end of such year (prepared on a
consolidated and consolidating basis, if applicable), including
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balance sheet and related statements of income and cash flows, and
setting forth in comparative form the corresponding figures for the
preceding fiscal year, certified by a firm of independent certified
public accountants selected by Borrower and reasonably acceptable to
Lender, accompanied by any management report from such accountants;
(c) promptly after the sending or filing thereof, as the
case may be, copies of any proxy statements, financial statements or
reports which Borrower has made available to its shareholders and
copies of any regular, periodic and special reports or registration
statements which Borrower files with the Securities and Exchange
Commission or any governmental authority which may be substituted
therefor, or any national securities exchange; and
(d) promptly, any additional information, financial or
otherwise (including, but not limited, to tax returns and names of
principal creditors) as Lender reasonably believes necessary to
evaluate Borrower's continuing ability to meet its financial
obligations.
7.2 Borrower shall permit any authorized representative of Lender
and its attorneys and accountants on reasonable notice to inspect, examine and
make copies and abstracts of the books of account and records of Borrower at
reasonable times during normal business hours. In addition, such representative
of Lender and its attorneys and accountants shall have the right to meet with
management and officers of the Borrower to discuss such books of account and
records.
7.3 Borrower will from time to time execute, deliver and file,
alone or with Lender, any financing statements, security agreements or other
documents; procure any instruments or documents as may be requested by Lender;
and take all further action that may be necessary or desirable, or that Lender
may request, to confirm, perfect, preserve and protect the security interests
intended to be granted hereby, and in addition, and for such purposes only,
Borrower hereby authorizes Lender to execute and deliver on behalf of Borrower
and to file such financing statements, security agreement and other documents
without the signature of Borrower either in Lender's name or in the name of
Borrower as agent and attorney-in-fact for Borrower. The parties agree that a
carbon, photographic or other reproduction of this Agreement shall be sufficient
as a financing statement and may be filed in any appropriate office in lieu
thereof.
7.4 Borrower shall protect and defend Borrower's title as well as
the interest of the Lender against all persons claiming any interest adverse to
Borrower or Lender and shall at all times keep the Collateral free and clear
from any legal process, liens or encumbrances whatsoever (except any placed
thereon by Lender and Permitted Liens) and shall give Lender immediate written
notice thereof.
7.5 Without Lender's prior written consent, Borrower shall not, in
a manner inconsistent with past practice and in the ordinary course of business,
(a) grant any material extension of the time of payment of any of the
Receivables, (b) to any material extent, compromise, compound or settle the same
for less than the full amount thereof, (c) release, wholly or partly, any Person
liable for the payment thereof, or allow any credit or discount whatsoever
thereon other than trade discounts granted in the ordinary course of business of
Borrower.
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7.6 Borrower shall maintain and protect its properties, assets and
facilities, including without limitation, its Equipment and Fixtures, in good
order and working repair and condition (taking into consideration ordinary wear
and tear) and from time to time make or cause to be made all necessary and
proper repairs, renewals and replacements thereto except in the case of obsolete
or excess Equipment and Fixtures, as determined in good faith by the Borrower
and shall competently manage and care for its property in accordance with
prudent industry practices.
7.7 Borrower shall not merge with and into any other entity; or
sell or convey all or substantially all of its assets or stock to any other
person or entity without notifying Lender no later than the date notice thereof
is provided to Borrower's shareholders and requesting Lender's consent to the
assignment of all of Borrower's Secured Obligations hereunder to the successor
entity in form and substance satisfactory to Lender. Lender hereby consents to
any Merger in which the acquiring entity has a Xxxxx'x Bond Rating of BA3 or
better or a commercially acceptable measure of creditworthiness as reasonably
determined by Lender. In the event Lender does not consent to such assignment
the parties agree Borrower shall prepay the Loan in accordance with Section 2.2
hereof, but without payment of any prepayment premium thereunder.
7.8 Borrower shall not, without the prior written consent of
Lender, such consent not to be unreasonably withheld, declare or pay any cash
dividend or make a distribution on any class of stock, other than pursuant to
employee repurchase plans upon an employee's death or termination of employment
or transfer, sell, lease, lend or in any other manner convey any equitable,
beneficial or legal interest in any material portion of the assets of Borrower
(except (i) Inventory sold in the normal course of business, and (ii) obsolete
or excess Equipment and Fixtures disposed of in the ordinary course of
business).
7.9 Upon the request of Lender, Borrower shall, during business
hours, make the Inventory and Equipment available to Lender for inspection at
the place where it is normally located and shall make Borrower's log and
maintenance records pertaining to the Inventory and Equipment available to
Lender for inspection. Borrower shall take all action necessary to maintain such
logs and maintenance records in a correct and complete fashion.
7.10 Borrower covenants and agrees to pay when due, all taxes, fees
or other charges of any nature whatsoever (together with any related interest or
penalties) now or hereafter imposed or assessed against Borrower, Lender or the
Collateral or upon Borrower's ownership, possession, use, operation or
disposition thereof or upon Borrower's rents, receipts or earnings arising
therefrom. Borrower shall file on or before the due date therefor all personal
property tax returns in respect of the Collateral. Notwithstanding the
foregoing, Borrower may contest, in good faith and by appropriate proceedings,
taxes for which Borrower maintains adequate reserves therefor in accordance with
GAAP.
7.11 Borrower shall not relocate any item of the Collateral (other
than sale of inventory in the ordinary course of business) except: (i) with the
prior written consent of the Lender, not to be unreasonably withheld; and (ii)
if such relocation shall be within the continental United States. If permitted
to relocate Collateral pursuant to the foregoing sentence, unless otherwise
agreed in writing by Lender, Borrower shall first (a) cause to be filed and/or
delivered to the Lender all Uniform Commercial Code financing statements,
certificates or other documents or instruments necessary to continue in effect
the perfected security interest of the Lender in the Collateral, and (b) have
given the Lender no less than thirty (30) days prior written notice of such
relocation.
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7.12 Following the Closing Date, Borrower shall use its best
efforts to obtain one or more investors other than Lender to purchase a minimum
of Ten Million Dollars ($10,000,000.00) of its Preferred Stock "Preferred Stock
Offering"; provided that in connection with the Preferred Stock Offering, Lender
shall have the right to purchase up to Two Hundred fifty Thousand Dollars
($250,000.00) of such Preferred Stock under the same terms and conditions as the
other investors in the Preferred Stock Offering.
SECTION 8. PURCHASE OPTION
8.1 In addition to its rights to participate in the Preferred
Stock Offering, Lender shall have the right to purchase shares of Borrower's
Preferred Stock with an aggregate value of up to fifty percent (50%) of the
Maximum Loan Amount (subject to increase as provided in Section 8.2) at any
time, at Lender's sole and absolute discretion (the "Purchase Option"). The
Purchase Option shall be exercisable by Lender upon the earlier of either (i)
the Borrower's Initial Public Offering, or (ii) Merger Event at a purchase price
equal to $5.00 per share (the "Purchase Price"). The number and purchase price
of such shares are subject to adjustment as provided in this Section 8.
8.2 If the Borrower has not repaid the outstanding principal
amount under a Note in its entirety by the Maturity Date (as defined in the
applicable Note(s)), then for each additional month, or portion thereof,
thereafter that the outstanding principal is not paid, Lender shall have the
right to purchase from the Borrower, at the Purchase Price (adjusted, as set
forth and defined in Section 8.3 herein), an additional amount of Preferred
Stock with a value equal to the product of (x) the outstanding principal amount
which is due but unpaid and (y) one (1%); provided, however, that this right
shall accrue for no more than six (6) months, commencing on the Maturity Date.
8.3 The Purchase Price per share and the number of shares of
Preferred Stock purchasable hereunder are subject to adjustment, as follows:
(a) If the Borrower at any time shall, by combination,
reclassification, exchange or subdivision of securities as to which purchase
rights under this Purchase Option exist into the same or a different number of
securities of any other class or classes, this Purchase Option shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities which
were subject to the purchase rights under this Purchase Option immediately prior
to such classification, exchange, subdivision or other change.
(b) If the Borrower at any time shall combine or
subdivide its Preferred Stock, the Purchase Price shall be proportionately
decreased in the case of a subdivision, or proportionately increased in the case
of a combination.
(c) If the Borrower at any time shall pay a dividend payable in,
or make any other distribution (except any distribution specifically provided
for in the foregoing subsections (a) or (b)) of the Borrower's Preferred Stock,
then the Purchase Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Borrower's
Preferred Stock outstanding immediately prior to such dividend or distribution,
and (ii) the denominator of which shall be the total number of all shares of the
Borrowers Preferred Stock outstanding
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immediately after such dividend or distribution. The Lender shall thereafter be
entitled to purchase, at the Purchase Price resulting from such adjustment, the
number of shares of Preferred Stock (calculated to the nearest whole share)
obtained by multiplying the Purchase Price in effect immediately prior to such
adjustment by the number of shares of Preferred Stock issuable upon the exercise
hereof immediately prior to such adjustment and dividing the product thereof by
the Purchase Price resulting from such adjustment.
(d) Additional antidilution rights applicable to the
Preferred Stock purchasable hereunder are as set forth in the Borrower's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit E (the "Charter"). The
Borrower shall promptly provide the Lender with any restatement, amendment,
modification or waiver of the Charter. The Preferred Stock purchasable hereunder
shall have the benefit of the same antidilution rights applicable to such
Preferred Stock as designated in the Borrower's Charter, and the Borrower shall
provide Lender with all notices and information at the time and to the extent it
is required to do so to the holders of Preferred Stock.
(e) If: (i) the Borrower shall declare any dividend or
distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Borrower shall offer for subscription prorata to the
holders of any class of its preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be an Initial Public Offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Borrower; then, in
connection with each such event, the Borrower shall send to the Lender: (A) no
later than the date such notice is provided to Borrower's shareholders prior
written notice of the date on which the books of the Borrower shall close or a
record shall be taken for such dividend, distribution, subscription rights
(specifying the date on which the holders of Preferred Stock shall be entitled
thereto) or for determining rights to vote in respect of such Merger Event,
dissolution, liquidation or winding up; (B) in the case of any such dissolution,
liquidation or winding up, no later than the date such notice is provided to
Borrower's shareholders prior written notice of the date when the same shall
take place (and specifying the date on which the holders of Preferred Stock
shall be entitled to exchange their Preferred Stock for securities or other
property deliverable upon dissolution, liquidation or winding up); and (C) in
the case of a Initial Public Offering or Merger Event, the Borrower shall give
the Lender no later than the date such notice is provided to Borrower's
shareholders written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Purchase Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Lender, at the address as shown on the books of the Lender.
(f) Failure to timely provide such notice required by
subsection (e) above shall entitle Lender to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Lender.
8.4 The Purchase Option is exercisable by the Lender, in whole or
in part, at any time, or from time to time, prior to the earlier of (i) Initial
Public Offering, or (ii) Merger Event. Lender may exercise its Purchase Option
by tendering to the Borrower at its principal office a notice of exercise in the
form attached hereto as Exhibit F (the "Notice of Purchase"), duly completed and
executed together with payment in an amount equal to the Purchase Price for that
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portion of the Purchase Option so exercised, in cash or by bank cashier's or
certified check; provided that Lender may satisfy all or a portion of the
Purchase Price by tender of one or more Note(s), the outstanding principal and
interest of which shall be credited against the Purchase Price, with the
balance, if any, of the Purchase Price payable in cash or by check as provided
above. In such event, the Note(s) so tendered will be deemed satisfied in full
and will be cancelled by the Borrower and the Borrower will have no further
obligation to the Lender under such Note(s).
Promptly upon receipt of the Notice of Purchase and the payment of
the Purchase Price in accordance with the terms set forth below, Borrower shall
execute the acknowledgment of exercise in the form attached hereto as Exhibit G
(the "Acknowledgment of Purchase") indicating the number of shares which remain
subject to future purchases, if any. Subject to Lender's right of withdrawal, no
later than twenty-one (21) days thereafter, the Borrower shall issue to the
Lender a certificate for the number of shares of Preferred Stock purchased.
8.5 (a) During the term of this Purchase Option, the Borrower
will at all times have authorized and reserved a sufficient number of shares of
its Preferred Stock to provide for the exercise of the rights to purchase
Preferred Stock as provided for herein.
(b) If any shares of Preferred Stock required to be
reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any
similar Federal statute then enforced, or any state securities law, required by
reason of any transfer involved in such purchase), or listing on any domestic
securities exchange, before such shares may be issued upon purchase, the
Borrower will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered, listed or approved for
listing on such domestic securities exchange, as the case may be.
8.6 No fractional shares or scrip representing fractional shares
shall be issued upon the exercise of the Purchase Option, but in lieu of such
fractional shares the Borrower shall make a cash payment therefor upon the basis
of the Purchase Price then in effect.
8.7 This Purchase Option does not entitle the Lender to any voting
rights or other rights as a shareholder of the Borrower prior to the exercise of
the Purchase Option.
8.8 Lender shall have the right to exercise its Purchase Option
subject to the successful completion of such Merger Event or Initial Public
Offering. If such closing does not take place, the Borrower shall promptly
notify the Lender that such proposed transaction has been terminated, and the
Lender may rescind any exercise of its Purchase Option promptly after such
notice of termination of the proposed transaction if the exercise of this
Purchase Option has occurred after the Borrower notified the Lender that the
Merger Event was proposed.
SECTION 9. DEFAULT
The occurrence of any one or more of the following events (herein
called "Events of Default") shall constitute a default hereunder and under the
Note(s) and other Loan Documents:
9.1 Borrower defaults in the payment of any principal, interest or
other Secured Obligation involving the payment of money under this Agreement,
the Note(s) or any of the
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other Loan Documents, and such default continues for more than five (5) days
after the due date thereof; or
9.2 Borrower defaults in the performance of any other covenant
or Secured Obligation of Borrower hereunder or under the Note(s) or any of the
other Loan Documents, and such default continues for more than thirty (30) days
after Lender has given notice of such default to Borrower.
9.3 Any representation or warranty made herein by Borrower shall
prove to have been false or misleading in any material respect as of the date
deemed made; or
9.4 Borrower shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts as they
become due, or shall file a voluntary petition in bankruptcy, or shall file any
petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation pertinent to such circumstances, or
shall seek or consent to or acquiesce in the appointment of any trustee,
receiver, or liquidator of Borrower or of all or any substantial part (33-1/3%
or more) of the properties of Borrower; or Borrower or its directors or majority
shareholders shall take any action initiating the dissolution or liquidation of
Borrower; or
9.5 Sixty (60) days shall have expired after the commencement of
an action by or against Borrower seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, without such action being
dismissed or all orders or proceedings thereunder affecting the operations or
the business of Borrower being stayed; or a stay of any such order or
proceedings shall thereafter be set aside and the action setting it aside shall
not be timely appealed; or Borrower shall file any answer admitting or not
contesting the material allegations of a petition filed against Borrower in any
such proceedings; or the court in which such proceedings are pending shall enter
a decree or order granting the relief sought in any such proceedings; or
9.6 Sixty (60) days shall have expired after the appointment,
without the consent or acquiescence of Borrower, of any trustee, receiver or
liquidator of Borrower or of all or any substantial part of the properties of
Borrower without such appointment being vacated; or
9.7 The default by Borrower under any Excluded Agreement(s), any
other promissory note or agreement for borrowed money, or any other agreement
between Borrower and Lender. The Event of Default under this SECTION 9.7 caused
by the occurrence of a default under another agreement described in this SECTION
9.7 shall be automatically cured for purposes of this Agreement upon the cure or
waiver of the default under the other agreement; or
9.8 The occurrence of any default under any lease or other
agreement or obligation of Borrower involving an amount in excess of $100,000.00
that would permit the other party to such lease, agreement or obligation to
accelerate payment of Borrower's obligations thereunder, or having a Material
Adverse Effect; or the entry of any judgment against Borrower involving an award
in excess of $100,000.00 that would have a Material Adverse Effect, that has not
been bonded or stayed on appeal within thirty (30) days. The Event of Default
under this SECTION 9.8 caused by the occurrence of a default under another
agreement described in this SECTION 9.8 shall be automatically cured for
purposes of this Agreement upon the cure or waiver of the default under the
other agreement; or
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9.9 The occurrence of any event of default under the Senior Loan
Documents. The Event of Default under this SECTION 9.9 caused by the occurrence
of a default under another agreement described in this SECTION 9.9 shall be
automatically cured for purposes of this Agreement upon the cure or waiver of
the default under the other agreement.
SECTION 10. REMEDIES
During the continuance of any one or more Events of Default, Lender, at
its option, may declare the Note and all of the other Secured Obligations to be
accelerated and immediately due and payable (provided, that upon the occurrence
of an Event of Default of the type described in SECTIONS 9.4 OR 9.5, the Note(s)
and all of the other Secured Obligations shall automatically be accelerated and
made due and payable without any further act), whereupon the unpaid principal of
and accrued interest on such Note(s) and all other outstanding Secured
Obligations shall become immediately due and payable, and shall thereafter bear
interest at the Default Rate set forth in, and calculated according to, SECTION
2.3 (c) of this Agreement. Lender may exercise all rights and remedies with
respect to the Collateral under the Loan Documents or otherwise available to it
under applicable law, including the right to release, hold or otherwise dispose
of all or any part of the Collateral and the right to occupy, utilize, process
and commingle the Collateral.
Upon the happening and during the continuance of any Event of Default,
Lender may then, or at any time thereafter and from time to time, apply,
collect, sell in one or more sales, lease or otherwise dispose of, any or all of
the Collateral, in its then condition or following any commercially reasonable
preparation or processing, in such order as Lender may elect, and any such sale
may be made either at public or private sale at its place of business or
elsewhere. Borrower agrees that any such public or private sale may occur upon
ten (10) calendar days' prior written notice to Borrower. Lender may require
Borrower to assemble the Collateral and make it available to Lender at a place
in the San Francisco bay area designated by Lender which is reasonably
convenient to Lender and Borrower. The proceeds of any sale, disposition or
other realization upon all or any part of the Collateral shall be distributed by
Lender in the following order of priorities:
First, to Lender in an amount sufficient to pay in full Lender's costs
and professionals' and advisors' fees and expenses;
Second, to Lender in an amount equal to the then unpaid amount of the
Secured Obligations in such order and priority as Lender may choose in
its sole discretion; and
Finally, upon payment in full of all of the Secured Obligations, to
Borrower or its representatives or as a court of competent jurisdiction
may direct.
Lender shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it complies with the
obligations of a secured party under Section 9-207 of the UCC.
Lender's rights and remedies hereunder are subject to the terms of the
Subordination Agreement.
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SECTION 11. MISCELLANEOUS
11.1 CONTINUATION OF SECURITY INTEREST. This is a continuing
Agreement and the grant of a security interest hereunder shall remain in full
force and effect and all the rights, powers and remedies of Lender hereunder
shall continue to exist until the Secured Obligations are paid in full as the
same become due and payable and until Lender has executed a written termination
statement (which Lender shall promptly execute after full payment of the Secured
Obligations hereunder), reassigning to Borrower, without recourse, the
Collateral and all rights conveyed hereby and returning possession of the
Collateral to Borrower. The rights, powers and remedies of Lender hereunder
shall be in addition to all rights, powers and remedies given by statute or rule
of law and are cumulative. The Purchase of any one or more of the rights, powers
and remedies provided herein shall not be construed as a waiver of or election
of remedies with respect to any other rights, powers and remedies of Lender.
11.2 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective only to the extent
and duration of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
11.3 NOTICE. Except as otherwise provided herein, all notices and
service of process required, contemplated, or permitted hereunder or with
respect to the subject matter hereof shall be in writing, and shall be deemed to
have been validly served, given or delivered upon the earlier of: (i) the first
business day after transmission by facsimile or hand delivery or deposit with an
overnight express service or overnight mail delivery service; or (ii) the third
calendar day after deposit in the United States mails, with proper first class
postage prepaid, and shall be addressed to the party to be notified as follows:
(A) IF TO LENDER:
COMDISCO, INC.
Legal Department
Attention: General Counsel
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
WITH A COPY TO:
COMDISCO, INC./COMDISCO VENTURES
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
(B) IF TO BORROWER:
PLANETRX, INC.
Attention: _______________
000 Xxxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxx Xxx Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Phone: (000) 000-0000
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or to such other address as each party may designate for itself by like notice.
11.4 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Note(s), and
the other Loan Documents constitute the entire agreement and understanding of
the parties hereto in respect of the subject matter hereof and thereof, and
supersede and replace in their entirety any prior proposals, term sheets,
letters, negotiations or other documents or agreements, whether written or oral,
with respect to the subject matter hereof or thereof including, without
limitation, Lender's proposal letter dated December 7, 1998, all of which are
merged herein and therein. None of the terms of this Agreement, the Note(s) or
any of the other Loan Documents may be amended except by an instrument executed
by each of the parties hereto.
11.5 HEADINGS. The various headings in this Agreement are inserted
for convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
11.6 NO WAIVER. The powers conferred upon Lender by this Agreement
are solely to protect its interest in the Collateral and shall not impose any
duty upon Lender to exercise any such powers. No omission, or delay, by Lender
at any time to enforce any right or remedy reserved to it, or to require
performance of any of the terms, covenants or provisions hereof by Borrower at
any time designated, shall be a waiver of any such right or remedy to which
Lender is entitled, nor shall it in any way affect the right of Lender to
enforce such provisions thereafter.
11.7 SURVIVAL. All agreements, representations and warranties
contained in this Agreement, the Note(s) and the other Loan Documents or in any
document delivered pursuant hereto or thereto shall be for the benefit of Lender
and shall survive the execution and delivery of this Agreement and the
expiration or other termination of this Agreement.
11.8 SUCCESSOR AND ASSIGNS. The provisions of this Agreement and
the other Loan Documents shall inure to the benefit of and be binding on
Borrower and its permitted assigns (if any). Borrower shall not assign its
obligations under this Agreement, the Note(s) or any of the other Loan Documents
without Lender's express written consent, and any such attempted assignment
shall be void and of no effect. Lender may assign, transfer, or endorse its
rights hereunder and under the other Loan Documents without prior notice to
Borrower, and all of such rights shall inure to the benefit of Lender's
successors and assigns.
11.9 FURTHER INDEMNIFICATION. Borrower agrees to pay, and to save
Lender harmless from, any and all liabilities with respect to, or resulting from
any delay in paying, any and all excise, sales or other similar taxes which may
be payable or determined to be payable with respect to any of the Collateral or
in connection with any of the transactions contemplated by this Agreement.
11.10 GOVERNING LAW. This Agreement, the Note(s) and the other Loan
Documents have been negotiated and delivered to Lender in the State of Illinois,
and shall not become effective until accepted by Lender in the State of
Illinois. Payment to Lender by Borrower of the Secured Obligations is due in the
State of Illinois. This Agreement, the Note(s) and the other Loan Documents
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Illinois, excluding conflict of laws principles that would cause
the application of laws of any other jurisdiction.
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11.11 CONSENT TO JURISDICTION AND VENUE. All judicial proceedings
arising in or under or related to this Agreement, the Note(s) or any of the
other Loan Documents may be brought in any state or federal court of competent
jurisdiction located in the State of Illinois. By execution and delivery of this
Agreement, each party hereto generally and unconditionally: (a) consents to
personal jurisdiction in Xxxx County, State of Illinois; (b) waives any
objection as to jurisdiction or venue in Xxxx County, State of Illinois; (c)
agrees not to assert any defense based on lack of jurisdiction or venue in the
aforesaid courts; and (d) irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement, the Note(s) or the other
Loan Documents. Service of process on any party hereto in any action arising
out of or relating to this agreement shall be effective if given in accordance
with the requirements for notice set forth in Section 11.3, above and shall be
deemed effective and received as set forth in Section 11.3, above. Nothing
herein shall affect the right to serve process in any other manner permitted by
law or shall limit the right of either party to bring proceedings in the courts
of any other jurisdiction.
11.12 MUTUAL WAIVER OF JURY TRIAL. Because disputes arising in
connection with complex financial transactions are most quickly and economically
resolved by an experienced and expert person and the parties wish applicable
state and federal laws to apply (rather than arbitration rules), the parties
desire that their disputes be resolved by a judge applying such applicable laws.
EACH OF BORROWER AND LENDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL
BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY
CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, "CLAIMS") ASSERTED BY BORROWER AGAINST
LENDER OR ITS ASSIGNEE AND/OR BY LENDER OR ITS ASSIGNEE AGAINST BORROWER. This
waiver extends to all such Claims, including, without limitation, Claims which
involve persons or entities other than Borrower and Lender; Claims which arise
out of or are in any way connected to the relationship between Borrower and
Lender; and any Claims for damages, breach of contract arising out of this
Agreement, any other Loan Document or any of the Excluded Agreements, specific
performance, or any equitable or legal relief of any kind.
11.13 CONFIDENTIALITY. Lender acknowledges that certain items of
Collateral, including, but not limited to trade secrets, source codes, customer
lists and certain other items of Intellectual Property, and any Financial
Statements provided pursuant to Section 7 hereof, constitute proprietary and
confidential information of the Borrower (the "Confidential Information").
Accordingly, Lender agrees that any Confidential Information it may obtain in
the course of acquiring, perfecting or foreclosing on the Collateral or
otherwise provided under this Agreement, provided such Confidential Information
is marked as confidential by Borrower at the time of disclosure, shall be
received in the strictest confidence and will not be disclosed to any other
person or entity in any manner whatsoever, in whole or in part, without the
prior written consent of the Borrower.
11.14 COUNTERPARTS. This Agreement and any amendments, waivers,
consents or supplements hereto may be executed in any number of counterparts,
and by different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.
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IN WITNESS WHEREOF, the Borrower and the Lender have duly executed and delivered
this Agreement as of the day and year first above written.
BORROWER: PLANETRX, INC.
Signature: /s/Xxxxxxx X. Xxxxxxx
--------------------------
Print Name: Xxxxxxx X. Xxxxxxx
--------------------------
Title: Chairman & CEO
--------------------------
ACCEPTED IN ROSEMONT, ILLINOIS:
------------------------------
LENDER: COMDISCO, INC.
Signature: /s/Xxxxx X. Xxxx
--------------------------
Print Name: Xxxxx X. Xxxx
--------------------------
Title: President
Comdisco Ventures Division
--------------------------
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