EXHIBIT 2.1
LOAN AGREEMENT
Dated as of December 17, 2001
between
LIFEF/X, INC.
and
LIFEF/X NETWORKS, INC.
and
SAFEGUARD 2001 CAPITAL, L.P.
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.............................................................................................1
SECTION 1.01 Certain Defined Terms..................................................................1
SECTION 1.02 Accounting Terms.......................................................................6
SECTION 1.03 Interpretation.........................................................................6
ARTICLE II THE LOANS..............................................................................................7
SECTION 2.01 The Loans..............................................................................7
SECTION 2.02 Borrowing Procedure....................................................................7
(a) Notice of Borrowing...........................................................7
(b) Use of Proceeds...............................................................7
SECTION 2.03 Interest...............................................................................7
SECTION 2.04 Default Rate of Interest...............................................................7
SECTION 2.05 Computations...........................................................................7
SECTION 2.06 Highest Lawful Rate....................................................................7
SECTION 2.07 Repayment of the Loans.................................................................8
SECTION 2.08 Prepayments of the Loans...............................................................8
SECTION 2.09 Obligation to Borrow Full Commitment...................................................8
SECTION 2.10 Payments...............................................................................8
(a) Payments......................................................................8
(b) Extension.....................................................................8
(c) Application...................................................................9
SECTION 2.11 Right of Set-Off.......................................................................9
ARTICLE III CONDITIONS PRECEDENT..................................................................................9
SECTION 3.01 Conditions Precedent to Initial Loan...................................................9
(a) Representations and Warranties; No Default....................................9
(b) Loan Documents................................................................9
(c) Documents and Actions Relating to Collateral..................................9
(d) Notice of Borrowing..........................................................10
(e) Additional Closing Documents.................................................10
(f) Annex A......................................................................10
(g) Uniservices Certificate......................................................10
(h) Assignment of Inventions Agreements..........................................10
(i) Legal Opinion................................................................10
(j) Additional Documents.........................................................11
SECTION 3.02 Certain Additional Conditions Precedent to Each Subsequent Loan.......................11
(a) Conditions in Section 3.01...................................................11
(b) Material Adverse Effect......................................................11
(c) Representations and Warranties; No Default...................................11
(d) Fees and Expenses............................................................11
(e) Notice of Borrowing..........................................................11
i.
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(f) Additional Closing Documents.................................................11
(g) Annex A......................................................................12
(h) Additional Documents.........................................................12
(i) Approval of Management and Employee Compensation.............................12
(j) Adoption and Approval of Business Plan.......................................12
(k) Schedule of Proprietary Rights...............................................12
ARTICLE IV REPRESENTATIONS AND WARRANTIES........................................................................12
SECTION 4.01 Representations and Warranties of Company.............................................12
(a) Organization and Powers......................................................12
(b) Authorization; No Conflict...................................................12
(c) Binding Obligation...........................................................13
(d) Consents.....................................................................13
(e) No Defaults..................................................................13
(f) Litigation...................................................................13
(g) SEC Reports; Financial Statements............................................13
(h) Capitalization...............................................................14
(i) Valid Issuance of Securities.................................................14
(j) Securities Law...............................................................14
(k) Liabilities..................................................................14
(l) Taxes........................................................................15
(m) Patents and Other Rights.....................................................15
(n) Insurance....................................................................15
(o) Title to Properties; Liens...................................................16
(p) Environmental Laws...........................................................16
(q) Employment Matters...........................................................16
(r) ERISA........................................................................16
(s) Subsidiaries.................................................................16
(t) Notice(s) of Borrowing.......................................................16
(u) Disclosure...................................................................16
SECTION 4.02 Representations and Warranties of Lender..............................................17
(a) Suitability..................................................................17
(b) Restrictions on Resale.......................................................17
ARTICLE V COVENANTS..............................................................................................17
SECTION 5.01 Reporting Covenants...................................................................17
(a) Financial Statements and Other Reports.......................................17
(b) Additional Information.......................................................18
SECTION 5.02 Affirmative Covenants.................................................................18
(a) Preservation of Existence, Etc...............................................18
(b) Payment of Taxes, Etc........................................................18
(c) Maintenance of Insurance.....................................................18
(d) Keeping of Records and Books of Account......................................19
(e) Inspection Rights............................................................19
(f) Compliance with Laws, Etc....................................................19
ii.
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(g) Maintenance of Properties, Etc...............................................19
(h) Licenses.....................................................................19
(i) Use of Proceeds..............................................................19
(j) Appointment and Removal of Corporate Officers................................20
(k) Safeguard Designee...........................................................20
(l) Further Assurances and Additional Acts.......................................20
SECTION 5.03 Negative Covenants....................................................................20
(a) Indebtedness.................................................................20
(b) Liens; Negative Pledges......................................................21
(c) Change in Nature of Business.................................................21
(d) Restrictions on Fundamental Changes..........................................21
(e) Sales of Assets; Proprietary Rights..........................................21
(f) Distributions................................................................22
(g) Loans and Investments........................................................22
(h) Transactions with Related Parties............................................22
(i) Amendments of Certain Documents..............................................23
(j) Redemption of Subordinated Debt..............................................23
(k) Business Plans, Strategies and Budgets.......................................23
(l) Compensation Arrangements....................................................23
(m) Employees; Independent Contractors...........................................23
(n) Significant Cash Expenditures................................................23
(o) Additional Equity Incentives.................................................23
ARTICLE VI EVENTS OF DEFAULT.....................................................................................23
SECTION 6.01 Events of Default.....................................................................23
(a) Payments.....................................................................23
(b) Representations and Warranties...............................................24
(c) Failure by Company to Perform Certain Covenants..............................24
(d) Failure by Company to Perform Other Covenants................................24
(e) Insolvency...................................................................24
(f) Dissolution, Etc.............................................................24
(g) Default or Acceleration Under Other Indebtedness.............................24
(h) Default Under Uniservices or Kodak Agreements................................25
(i) Judgments....................................................................25
(j) Material Adverse Change......................................................25
(k) Collateral Documents.........................................................25
(l) Consents, Etc................................................................25
(m) ERISA........................................................................25
SECTION 6.02 Effect of Event of Default............................................................25
ARTICLE VII MISCELLANEOUS........................................................................................26
SECTION 7.01 Amendments and Waivers................................................................26
SECTION 7.02 Notices. 26
SECTION 7.03 No Waiver; Cumulative Remedies........................................................26
SECTION 7.04 Costs and Expenses; Indemnity.........................................................26
iii.
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(a) Costs and Expenses...........................................................26
(b) Other Charges................................................................27
(c) Indemnification..............................................................27
SECTION 7.05 Survival..............................................................................27
SECTION 7.06 Benefits of Agreement.................................................................28
SECTION 7.07 Binding Effect; Assignment............................................................28
SECTION 7.08 Governing Law.........................................................................28
SECTION 7.09 Waiver of Jury Trial..................................................................28
SECTION 7.10 Submission to Jurisdiction............................................................28
SECTION 7.11 Entire Agreement......................................................................29
SECTION 7.12 Severability..........................................................................29
SECTION 7.13 Counterparts..........................................................................29
SECTION 7.14 Exchange of Warrants..................................................................29
SCHEDULES, EXHIBITS AND ANNEXES
Schedule 1 Existing Liens
Schedule 2 Subsidiaries
EXHIBIT A Notice of Borrowing
---------
EXHIBIT B Opinion of Counsel to the Company
---------
Annex A Additional Terms and Conditions of Funding
iv.
LOAN AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement"), dated as of December 17, 2001, is
made between Lifef/x, Inc., a Nevada corporation, and Lifef/x Networks, Inc., a
Delaware corporation (together, the "Company"), and Safeguard 2001 Capital,
L.P., a Delaware limited partnership (the "Lender").
The Company has requested the Lender to make a term loan to the Company in
an aggregate principal amount of up to four million dollars ($4,000,000.00). The
Lender is willing to make such loan to the Company upon the terms and subject to
the conditions set forth in this Agreement, which terms include the exchange of
certain warrants to purchase the Company's capital stock currently held by the
Lender for a new warrant to purchase the Company's capital stock, with the
parties acknowledging and agreeing that the option inherent in such new warrant
having nominal value.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"AFFILIATE" means any Person which, directly or indirectly, controls, is
controlled by or is under common control with another Person. For purposes of
the foregoing, "control," "controlled by" and "under common control with" with
respect to any Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"ALTERNATIVE FINANCING" means any transaction in which the Company, in
exchange for cash, issues and sells equity securities or securities convertible
into, exchangeable or exercisable for, equity securities, of the Company, other
than (i) issuance of stock options for and shares of Common Stock to employees,
officers, directors and consultants pursuant to stock incentive plans in
existence on the date hereof or pursuant to subsequent stock incentive plans
approved by the Lender, which issuance has been approved by the Lender and (ii)
issuances of securities upon exercise of stock options or warrants outstanding
as of the date hereof.
"AVAILABILITY TERM" means the period beginning on December 1, 2001 and
ending on December 1, 2002.
"BUSINESS DAY" means a day of the year on which commercial banks are not
required or authorized by law to close in Philadelphia,
Pennsylvania.
"CLOSING DATE" means the date hereof.
1.
"COLLATERAL" means the property described in the Collateral Documents, and
all other property now existing or hereafter acquired which may at any time be
or become subject to a Lien in favor of the Lender pursuant to the Collateral
Documents or otherwise, securing the payment and performance of the Obligations.
"COLLATERAL DOCUMENTS" means the Security Agreement any other agreement
pursuant to which the Company or any other Person provides a Lien on its assets
in favor of the Lender and all filings, documents and agreements made or
delivered pursuant thereto.
"COMMITMENT" means the Lender's commitment to lend the Company four million
dollars ($4,000,000.00) or, where the context so requires, the obligation of the
Lender to make the Loans up to such amount on the terms and conditions set forth
in this Agreement.
"COMPANY" has the meaning set forth in the recital of parties to this
Agreement.
"COMPANY REPORTS" has the meaning set forth in Section 4.01(g).
"DEFAULT" means an Event of Default or an event or condition which with
notice or lapse of time or both would constitute an Event of Default.
"DISCLOSURE LETTER" means the letter, if any, of even date herewith from
the Company to the Lender setting forth exceptions to, and disclosures with
respect to, Article IV (which letter shall expressly indicate the Sections of
Article IV to which such disclosures relate).
"DOLLARS" and the sign "$" each means lawful money of the United States.
"ENVIRONMENTAL LAWS" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directives, requests, licenses, authorizations and
permits of, and agreements with (including consent decrees), any governmental
agencies or authorities, in each case relating to or imposing liability or
standards of conduct concerning public health, safety and environmental
protection matters.
"ERISA" means the Employee Retirement Income Security Act of 1974,
including (unless the context otherwise requires) any rules or regulations
promulgated thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not incorporated)
which is under common control with the Company within the meaning of Section
4001(a)(14) of ERISA and Sections 414(b), (c) and (m) of the Internal Revenue
Code.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" means, for any security:
2.
(i) If traded on a stock exchange, the fair market value of the security
shall be deemed to be the average of the closing selling prices of
the security on the stock exchange determined by the Board to be the
primary market for the security over the ten (10) trading day period
(or such shorter period immediately following the closing of an
initial public offering) ending on the date prior to the date that
the net issue election is made, as such prices are officially quoted
in the composite tape of transactions on such exchange;
(ii) If traded over-the-counter, the fair market value of the security
shall be deemed to be the average of the closing bid prices (or, if
such information is available, the closing selling prices) of the
security over the ten (10) trading day period (or such shorter period
immediately following the closing of an initial public offering)
ending on the date prior to the date that the net issue election is
made, as such prices are reported by the National Association of
Securities Dealers through its Nasdaq system, any successor system or
any exchange on which it is listed, whichever is applicable; or
(iii) If there is no public market for the security, then the fair market
value shall be determined by the Board of Directors of the Company in
good faith.
"FINAL MATURITY DATE" means the earlier of (i) January 1, 2003, or (ii) the
closing date of an Alternative Financing.
"FUNDING DATE" has the meaning set forth in Section 3.01.
"GAAP" means generally accepted principles of good accounting practice in
the United States, consistently applied.
"HAZARDOUS SUBSTANCES" means any toxic or hazardous substances, materials,
wastes, contaminants or pollutants, including asbestos, PCBs, petroleum products
and byproducts, and any substances defined or listed as "hazardous substances,"
"hazardous materials," "hazardous wastes" or "toxic substances" (or similarly
identified), regulated under or forming the basis for liability under any
applicable Environmental Law.
"INDEBTEDNESS" means, for any Person, (i) all indebtedness or other
obligations of such Person for borrowed money or for the deferred purchase price
of property or services; (ii) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced incurred
in connection with the acquisition of property, assets or businesses; (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person; (iv) all
reimbursement and other obligations of such Person in respect of letters of
credit and bankers acceptances and all net obligations in respect of interest
rate swaps, caps, floors and collars, currency swaps, and other similar
financial products; (v) all obligations under leases which shall have been or
should be, in accordance with GAAP, recorded as capital leases; and (vi) all
indebtedness of another Person of
3.
the types referred to in clauses (i) through (v) guaranteed directly or
indirectly in any manner by the Person for whom Indebtedness is being
determined, or in effect guaranteed directly or indirectly by such Person
through an agreement to purchase or acquire such indebtedness, to advance or
supply funds for the payment or purchase of such indebtedness or otherwise
assure a creditor against loss, or secured by any Lien upon or in property owned
by the Person for whom Indebtedness is being determined, whether or not such
Person has assumed or become liable for the payment of such indebtedness of such
other Person.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, including
(unless the context otherwise requires) any rules or regulations promulgated
thereunder.
"INVESTOR RIGHTS AGREEMENT" means an Investor Rights Agreement between the
Company and the Lender, in form and substance satisfactory to the Lender.
"KODAK AGREEMENT" means that certain Marketing and Distribution Agreement,
dated January __, 20001, by and between the Company and ▇▇▇▇▇▇▇ Kodak Company.
"LENDER" has the meaning set forth in the recital of parties to this
Agreement.
"LIEN" means any mortgage, pledge, security interest, assignment, deposit
arrangement, charge or encumbrance, lien or other type of preferential
arrangement (other than a financing statement filed by a lessor in respect of an
operating lease not intended as security).
"LOAN DOCUMENTS" means this Agreement, the Collateral Documents, the
Warrant and all other certificates, documents, agreements and instruments
delivered to the Lender under or in connection with this Agreement.
"LOAN" or "LOANS" has the meaning set forth in Section 2.01.
"MATERIAL ADVERSE EFFECT" means any circumstance, change in, or effect on
the business conduct or success or current state of competitiveness of the
parties to this Agreement and their respective subsidiaries (if any) that,
individually or in the aggregate with any other circumstances, changes in, or
effects on, parties to this Agreement and their respective subsidiaries (if any)
which is, or could be, materially adverse to: (i) the business, operations,
assets or liabilities, employee relationships, customer or supplier
relationships, prospects, results of operations or the condition (financial or
otherwise) of the parties to this Agreement and their respective subsidiaries
(if any), taken as a whole; (ii) the ability of the Company or any other Person
to perform or observe its obligations under or in respect of the Loan Documents;
or (iii) the legality, validity, binding effect or enforceability of any of the
Loan Documents or the perfection or priority of any Lien granted to the Lender
under any of the Collateral Documents.
"NOTICE OF BORROWING" has the meaning set forth in Section 2.02(a).
"OBLIGATIONS" means the indebtedness, liabilities and other obligations of
the Company to the Lender under or in connection with the Loan Documents,
including the Loans, all interest accrued thereon, all fees due under this
Agreement and all other amounts payable by the Company to the Lender thereunder
or in connection therewith.
4.
"PERMITTED LIENS" means: (i) Liens in favor of the Lender; (ii) the
existing Liens listed in SCHEDULE 1 or incurred in connection with the
extension, renewal or refinancing of the Indebtedness secured by such existing
Liens, PROVIDED that any extension, renewal or replacement Lien shall be limited
to the property encumbered by the existing Lien and the principal amount of the
Indebtedness being extended, renewed or refinanced does not increase; (iii)
Liens for taxes, fees, assessments or other governmental charges or levies,
either not delinquent or being contested in good faith by appropriate
proceedings and which are adequately reserved for in accordance with GAAP,
PROVIDED the same does not have priority over any of the Lender's Liens and no
notice of tax lien has been filed of record; (iv) Liens of materialmen,
mechanics, warehousemen, carriers or employees or other similar Liens PROVIDED
for by mandatory provisions of law and securing obligations either not
delinquent or being contested in good faith by appropriate proceedings and which
do not in the aggregate materially impair the use or value of the property or
risk the loss or forfeiture thereof; and (v) Liens consisting of deposits or
pledges to secure the performance of bids, trade contracts, leases, public or
statutory obligations, or other obligations of a like nature incurred in the
ordinary course of business (other than for Indebtedness).
"PERSON" means an individual, corporation, partnership, joint venture,
trust, unincorporated organization or any other entity of whatever nature or any
governmental agency or authority.
"PLAN" means any employee pension benefit plan as defined in Section 3(2)
of ERISA (including any multiemployer plan) and any employee welfare benefit
plan, as defined in Section 3(1) of ERISA (including any plan providing benefits
to former employees or their survivors).
"PROPRIETARY RIGHTS" has the meaning set forth in Section 4.01(m).
"RESPONSIBLE OFFICER" means, with respect to any Person, the chief
executive officer, any co-president, the chief financial officer, the controller
or the treasurer of such Person, or any other senior officer of such Person
having substantially the same authority and responsibility.
"SAFEGUARD DESIGNEE" has the meaning set forth in Section 5.02(k).
"SEC" means the U.S. Securities and Exchange Commission. ---
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY AGREEMENT" means a Security Agreement between the Company and the
Lender, in form and substance satisfactory to the Lender.
"SUBSIDIARY" means any corporation, association, partnership, joint venture
or other business entity of which more than 50% of the voting stock or other
equity interest is owned directly or indirectly by any Person or one or more of
the other Subsidiaries of such Person or a combination thereof.
5.
"UNISERVICES AGREEMENTS" means the CMISS/Animation License Agreement
between Auckland Uniservices Limited, Lifef/x Networks, Inc., and Lifef/x, Inc.,
dated January 26, 2001, the Lifef/x Player Agreement between Auckland
Uniservices Limited, Lifef/x Networks, Inc., and Lifef/x, Inc., dated January
26, 2001, and the Development Agreement between Auckland Uniservices Limited and
Lifef/x Networks, Inc., dated January 26, 2001.
"UNITED STATES" and "U.S." each means the United States of America.
"WARRANT" means the Warrant to purchase shares of Common Stock of the
company issued by the Company to the Lender on the date hereof.
"WARRANT SHARES" means the shares of Common Stock receivable upon exercise
of the Warrant.
"WILLFUL DEFAULT" means a Default with respect to any covenant contained in
Article V of this Agreement resulting from action or inaction by or on behalf of
the Company which was taken, or in the case of inaction, not taken, with (i) an
intent to cause such a Default, or (ii) reckless disregard for the occurrence of
such a Default.
SECTION 1.02 ACCOUNTING TERMS. Unless otherwise defined or the context
otherwise requires, all accounting terms not expressly defined herein shall be
construed, and all accounting determinations and computations required under
this Agreement or any other Loan Document shall be made, in accordance with
GAAP.
SECTION 1.03 INTERPRETATION. In the Loan Documents, except to the extent
the context otherwise requires: (i) any reference to an Article, a Section, a
Schedule or an Exhibit is a reference to an article or section thereof, or a
schedule or an exhibit thereto, respectively, and to a subsection or a clause
is, unless otherwise stated, a reference to a subsection or a clause of the
Section or subsection in which the reference appears; (ii) the words "hereof,"
"herein," "hereto," "hereunder" and the like mean and refer to this Agreement or
any other Loan Document as a whole and not merely to the specific Article,
Section, subsection, paragraph or clause in which the respective word appears;
(iii) the meaning of defined terms shall be equally applicable to both the
singular and plural forms of the terms defined; (iv) the words "including,"
"includes" and "include" shall be deemed to be followed by the words "without
limitation;" (v) references to agreements and other contractual instruments
shall be deemed to include all subsequent amendments and other modifications
thereto, but only to the extent such amendments and other modifications are not
prohibited by the terms of the Loan Documents; (vi) references to statutes or
regulations are to be construed as including all statutory and regulatory
provisions consolidating, amending or replacing the statute or regulation
referred to; (vii) any table of contents, captions and headings are for
convenience of reference only and shall not affect the construction of this
Agreement or any other Loan Document; and (viii) in the computation of periods
of time from a specified date to a later specified date, the word "from" means
"from and including"; the words "to" and "until" each mean "to but excluding";
and the word "through" means "to and including."
6.
ARTICLE II
THE LOANS
SECTION 2.01 THE LOANS. The Lender agrees, on the terms and conditions
hereinafter set forth, to make one or more term loans (each a "Loan" and,
collectively, the "Loans") to the Company during the Availability Term, in a
principal amount up to but not exceeding the Commitment. Any amount of any Loan
repaid may not be reborrowed.
SECTION 2.02 BORROWING PROCEDURE.
(a) NOTICE OF BORROWING. Each Loan shall be made upon written notice from
the Company to the Safeguard Designee and the Lender, which notice shall be
received by the Safeguard Designee and the Lender not later than 10:00 A.M.
(Philadelphia,
Pennsylvania time) at least two Business Days prior to the
proposed borrowing date. Such notice shall be a Notice of Borrowing in the form
attached hereto as EXHIBIT A (the "Notice of Borrowing"). The Notice of
Borrowing shall be irrevocable and binding on the Company and shall specify the
proposed date of the borrowing (which shall be a Business Day), the amount of
the borrowing (which shall be no more than necessary to fulfill the purpose of
borrowing), the purpose to which the proceeds of the borrowing shall be put, and
payment instructions with respect to the funds to be made available to the
Company. Upon the approval of the Safeguard Designee and the fulfillment of the
conditions set forth in Article III, as and when determined by Lender, the
Lender shall make the applicable Loan available to the Company in next day
funds, or such other funds as shall separately be agreed upon by the Company and
the Lender, in accordance with the payment instructions provided to the Lender.
(b) USE OF PROCEEDS. The Company shall not request any borrowing, and the
Lender shall not be obligated to advance funds with respect to, any borrowing
for which the use of proceeds as set forth in the Notice of Borrowing or as
actually applied by the Company shall be other than as set forth on ANNEX A.
SECTION 2.03 INTEREST. Subject to Section 2.05, the Company shall pay
interest on the unpaid principal amount of each Loan from the date of
advancement of funds pursuant to such Loan until the maturity thereof, at a rate
per annum equal at all times to 12% per annum, compounded quarterly, on the date
of any prepayment of such Loan and at maturity.
SECTION 2.04 DEFAULT RATE OF INTEREST. In the event that any amount of
principal of or interest on the Loans, or any other amount payable hereunder or
under the Loan Documents, is not paid in full when due (whether at stated
maturity, by acceleration or otherwise), the Company shall pay interest on such
unpaid principal, interest or other amount, from the date such amount becomes
due until the date such amount is paid in full, payable on demand, at a rate per
annum equal at all times to 15% per annum, compounded monthly.
SECTION 2.05 COMPUTATIONS. All computations of fees and interest hereunder
shall be made on the basis of a year of 360 days for the actual number of days
occurring in the period for which any such interest or fee is payable.
SECTION 2.06 HIGHEST LAWFUL RATE. Anything herein to the contrary
notwithstanding, if during any period for which interest is computed hereunder,
the applicable
7.
interest rate, together with all fees, charges and other payments which are
treated as interest under applicable law, as provided for herein or in any other
Loan Document, would exceed the maximum rate of interest which may be charged,
contracted for, reserved, received or collected by the Lender in connection with
this Agreement under applicable law (the "Maximum Rate"), the Company shall not
be obligated to pay, and the Lender shall not be entitled to charge, collect,
receive, reserve or take, interest in excess of the Maximum Rate, and during any
such period the interest payable hereunder shall be limited to the Maximum Rate.
SECTION 2.07 REPAYMENT OF THE LOANS. The Company shall repay to the Lender
the principal amount of each Loan and all accrued but unpaid interest in full on
the Final Maturity Date or such earlier date as shall be otherwise required by
the terms of this Agreement. All payments required hereunder shall be made in
U.S. dollars in immediately available funds by check or wire transfer according
to mailing or wire transfer instructions, as the case may be, specified by the
Lender.
SECTION 2.08 PREPAYMENTS OF THE LOANS. The Company may not prepay the
outstanding amount of any Loan or Loans without the prior written consent of the
Lender.
SECTION 2.09 OBLIGATION TO BORROW FULL COMMITMENT.
If at any time there exists principal under the Commitment which the
Company has not borrowed, then the Lender may require the Company to borrow
up to the amount of such available principal. The Lender shall notify the
Company in writing of its election to exercise the rights provided under this
Section 2.09 and the amount of the available principal the Company is
required to borrow. Promptly after receipt of the notice described in the
previous sentence, the Company shall follow the procedure set forth in
Section 2.02. In the event that the Company is not able to satisfy any of the
conditions set forth in Article III, it shall notify the Lender of such
inability immediately in writing specifying the condition which it is unable
to satisfy and the reason for such inability to satisfy. After receiving the
notice described in the preceding sentence, the Lender shall determine
whether to continue requiring the Company to borrow under this section. In
the event Lender determines to continue to require the Company to borrow
under this section, the specific conditions which the Company notified the
Lender it was unable to satisfy shall be deemed waived by the Lender.
SECTION 2.10 PAYMENTS.
(a) PAYMENTS. The Company shall make each payment under the Loan Documents,
unconditionally in full without set-off, counterclaim or, to the extent
permitted by applicable law, other defense, and free and clear of, and without
reduction for or on account of, any present and future taxes or withholdings,
and all liabilities with respect thereto. Each payment shall be made not later
than 11:00 A.M. (Philadelphia,
Pennsylvania time) on the day when due to the
Lender in Dollars and in same day funds, or such other funds as shall be
separately agreed upon by the Company and the Lender, in accordance with the
Lender's payment instructions.
(b) EXTENSION. Whenever any payment hereunder shall be stated to be due, or
whenever any interest payment date or any other date specified hereunder would
otherwise
8.
occur, on a day other than a Business Day, then, except as otherwise provided
herein, such payment shall be made, and such interest payment date or other date
shall occur, on the next succeeding Business Day, and such extension of time
shall in such case be included in the computation of payment of interest or per
annum fee hereunder.
(c) APPLICATION. Each payment by or on behalf of the Company hereunder
shall, unless a specific determination is made by the Lender with respect
thereto, be applied (i) first, to any fees, costs, expenses and other amounts
(other than principal and interest) due the Lender; (ii) second, to accrued and
unpaid interest due the Lender; and (iii) third, to principal due the Lender.
SECTION 2.11 RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default the Lender hereby is authorized at any time
and from time to time, without notice to the Company (any such notice being
expressly waived by the Company), to set off and apply any obligations or
indebtedness at any time owing by the Lender to the Company against any and all
of the Obligations of the Company now or hereafter existing under this Agreement
and the other Loan Documents, irrespective of whether or not the Lender shall
have made any demand under this Agreement or any such other Loan Document and
although such Obligations may be unmatured. The Lender agrees promptly to notify
the Company after any such set-off and application made by the Lender; PROVIDED
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of the Lender under this Section 2.11 are in
addition to other rights and remedies (including other rights of set-off) which
the Lender may have.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01 CONDITIONS PRECEDENT TO INITIAL LOAN. The obligation of the
Lender to make the initial Loan hereunder on the date that funds are advanced by
the Lender hereunder shall be subject to the satisfaction of each of the
following conditions precedent before or concurrently with the making of such
Loan, unless waived in writing by the Lender:
(a) REPRESENTATIONS AND WARRANTIES; NO DEFAULT. On the date of the initial
Loan, both before and after giving effect thereto and to the application of
proceeds of any Loan: (i) the representations and warranties contained in
Section 4.01 and in the other Loan Documents shall be true, correct and complete
on and as of the date of each Loan as though made on and as of such date; and
(ii) no Default shall have occurred and be continuing or shall result from the
making of the Loans or of any Loan.
(b) LOAN DOCUMENTS. The Lender shall have received the following Loan
Documents: (i) the Warrant, executed by the Company; (ii) the Collateral
Documents, executed by each of the respective parties thereto; and (iii) the
Investor Rights Agreement, executed by each of the respective parties thereto.
(c) DOCUMENTS AND ACTIONS RELATING TO COLLATERAL. The Lender shall have
received, in form and substance satisfactory to it, results of such Lien
searches as it shall reasonably request, and evidence that all filings,
registrations and recordings have been made in
9.
the appropriate governmental offices, and all other action has been taken, which
shall be necessary to create, in favor of the Lender, a perfected first priority
Lien on the Collateral.
(d) NOTICE OF BORROWING. The Lender shall have received a Notice of
Borrowing with respect to the initial Loan according to the requirements of
Section 2.02 hereof, which Notice of Borrowing shall request that $1,500,000 be
advanced as the initial loan.
(e) ADDITIONAL CLOSING DOCUMENTS. The Lender shall have received the
following, in form and substance satisfactory to it: (i) evidence of completion
to the satisfaction of the Lender of such investigations, reviews, appraisals
and audits with respect to the Company and its operations and properties as the
Lender may deem appropriate; (ii) certificates of one or more nationally
recognized insurance brokers or other insurance specialists acceptable to the
Lender, dated as of a recent date prior to the Closing Date, certifying the
insurance maintained by the Company as required hereunder and under the
Collateral Documents is in full force and effect, together with copies of all
policies (including all endorsements thereto) evidencing such insurance; (iii) a
copy of the Disclosure Letter, if any; (iv) evidence that all (A) authorizations
or approvals of any governmental agency or authority, and (B) approvals or
consents of any other Person, required in connection with the execution,
delivery and performance of the Loan Documents shall have been obtained; and (v)
a certificate of the Secretary or other appropriate officer of the Company,
dated the Closing Date, certifying (A) copies of the articles or certificate of
incorporation, and bylaws, of the Company and the resolutions and other actions
taken or adopted by the Company authorizing the execution, delivery and
performance of the Loan Documents, which shall include the authorization by a
majority of disinterested directors of the Board of Directors, and (B) the
incumbency, authority and signatures of each officer of the Company authorized
to execute and deliver the Loan Documents and act with respect thereto.
(f) ANNEX A. Lender shall have determined, in its sole discretion, that the
additional conditions set forth on ANNEX A hereto have been satisfied.
(g) UNISERVICES CERTIFICATE. The Lender shall have receive a certificate
from Auckland Uniservices Limited certifying its: (i) consent to the
securitization of the Uniservices Agreements as collateral for the Loan(s); (ii)
consent to assignment of the Uniservices Agreements; (iii) estoppel from
claiming the unenforceability of the Uniservices Agreements as of the date
hereof; and (iv) waiver of certain remedies it may have due to the insolvency of
the Company, in form and substance satisfactory to the Lender in its sole
discretion.
(h) ASSIGNMENT OF INVENTIONS AGREEMENTS. The Company shall have received
assignments of Proprietary Rights with respect to all work and inventions
relating to the Company from a number of employees of the Company satisfactory
to Lender in its sole discretion.
(i) LEGAL OPINION. The Lender shall have received an opinion of legal
counsel to the Company, dated as of the date of this Agreement, in form and
substance satisfactory to the Lender as further set forth on EXHIBIT B hereto.
10.
(j) ADDITIONAL DOCUMENTS. The Lender shall have received, in form and
substance satisfactory to it, such additional approvals, opinions, documents and
other information as the Lender may reasonably request.
SECTION 3.02 CERTAIN ADDITIONAL CONDITIONS PRECEDENT TO EACH SUBSEQUENT
LOAN. The obligation of the Lender to make each Loan (or the Loans) subsequent
to the initial Loan made hereunder on each date that funds are advanced by the
Lender hereunder (each, a "Funding Date")shall also be subject to the
satisfaction of each of the following conditions precedent before or
concurrently with the making of such Loan, unless waived in writing by the
Lender:
(a) CONDITIONS IN SECTION 3.01.
Each of the conditions set forth in Section 3.01 shall have been
satisfied or waived in writing by the Lender.
(b) MATERIAL ADVERSE EFFECT. On and as of any Funding Date, Lender shall
have determined, in its sole discretion, that there has occurred no Material
Adverse Effect since the date of this Agreement.
(c) REPRESENTATIONS AND WARRANTIES; NO DEFAULT. On each Funding Date, both
before and after giving effect thereto and to the application of proceeds of any
Loan: (i) the representations and warranties contained in Section 4.01 and in
the other Loan Documents shall be true, correct and complete on and as of the
date of each Loan as though made on and as of such date; and (ii) no Default
shall have occurred and be continuing or shall result from the making of the
Loans or of any Loan. The giving of any Notice of Borrowing and the acceptance
by the Company of the proceeds of any Loan shall be deemed a certification to
the Lender that on and as of the date of such Loan such statements are true.
(d) FEES AND EXPENSES. The Company shall have paid all invoiced costs and
expenses then due hereunder.
(e) NOTICE OF BORROWING. The Lender shall have received a Notice of
Borrowing with respect to such Closing Date according to the requirements of
Section 2.02 hereof.
(f) ADDITIONAL CLOSING DOCUMENTS. The Lender shall have received the
following, in form and substance satisfactory to it: (i) evidence of completion
to the satisfaction of the Lender of such investigations, reviews, appraisals
and audits with respect to the Company and its operations and properties as the
Lender may deem appropriate; (ii) certificates of one or more nationally
recognized insurance brokers or other insurance specialists acceptable to the
Lender, dated as of a recent date prior to the Closing Date, certifying the
insurance maintained by the Company as required hereunder and under the
Collateral Documents is in full force and effect, together with copies of all
policies (including all endorsements thereto) evidencing such insurance; (iii) a
copy of the Disclosure Letter, if any; (iv) evidence that all (A) authorizations
or approvals of any governmental agency or authority, and (B) approvals or
consents of any other Person, required in connection with the execution,
delivery and performance of the Loan Documents shall have been obtained; and (v)
a certificate of the Secretary or other appropriate officer of the Company,
dated the Closing Date, certifying (A) copies of the articles or certificate
11.
of incorporation, and bylaws, of the Company and the resolutions and other
actions taken or adopted by the Company authorizing the execution, delivery and
performance of the Loan Documents, which shall include the authorization by a
majority of disinterested directors of the Board of Directors, and (B) the
incumbency, authority and signatures of each officer of the Company authorized
to execute and deliver the Loan Documents and act with respect thereto.
(g) ANNEX A. Lender shall have determined, in its sole discretion, that the
additional conditions set forth on ANNEX A hereto have been satisfied.
(h) ADDITIONAL DOCUMENTS. The Lender shall have received, in form and
substance satisfactory to it, such additional approvals, opinions, documents and
other information as the Lender may reasonably request.
(i) APPROVAL OF MANAGEMENT AND EMPLOYEE COMPENSATION. The Company shall
have provided Lender with reasonable opportunity to review the then-existing
duties and compensation arrangements of each member of senior management of the
Company in order to assess (i) the expertise of the management team relative to
the requirements of the then current business plan and (ii) the alignment of
compensation structures, including cash and equity components, to individual
responsibilities, and such arrangements shall be satisfactory to Lender in its
sole discretion.
(j) ADOPTION AND APPROVAL OF BUSINESS PLAN. The Company shall have
formulated and adopted a business plan for the following 12 months with detailed
projections through the next complete fiscal quarter, and such business plan
shall be satisfactory to Lender in its sole discretion.
(k) SCHEDULE OF PROPRIETARY RIGHTS. The Company shall have provided Lender
with a schedule setting forth a list and brief description of all property or
technology used by the Company in the operation of its business which it regards
as proprietary, whether it regards itself as the owner or its is the licensee.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 REPRESENTATIONS AND WARRANTIES OF COMPANY. The Company
represents and warrants to the Lender that, except as set forth in the
Disclosure Letter:
(a) ORGANIZATION AND POWERS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite power and authority to execute, deliver and
perform its obligations under the Loan Documents. Each of the Company and its
Subsidiaries is qualified to do business and is in good standing in each
jurisdiction in which the failure so to qualify or be in good standing would
result in a Material Adverse Effect and has all requisite power and authority to
own its assets and carry on its business.
(b) AUTHORIZATION; NO CONFLICT. The execution, delivery and performance by
the Company of the Loan Documents have been duly authorized by all necessary
corporate action of the Company and do not and will not (i) contravene the terms
of the articles or certificate of
12.
incorporation, or bylaws, of the Company, or result in a breach of or constitute
a default under any material lease, instrument, contract or other agreement to
which the Company is a party or by which it or its properties may be bound or
affected; (ii) violate any provision of any law, rule, regulation, order,
judgment, decree or the like binding on or affecting the Company; or (iii)
except as contemplated by this Agreement, result in, or require, the creation or
imposition of any Lien upon or with respect to any of the properties, assets or
revenues of the Company.
(c) BINDING OBLIGATION. The Loan Documents constitute, or when delivered
under this Agreement will constitute, legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or other similar laws relating to the enforcement of creditors'
rights generally.
(d) CONSENTS. No authorization, consent, approval, license, exemption of,
or filing or registration with, any governmental agency or authority, or
approval or consent of any other Person, is required for the due execution,
delivery or performance by the Company of any of the Loan Documents.
(e) NO DEFAULTS. Neither the Company nor any of its Subsidiaries is in
default under any contract, lease, agreement, judgment, decree or order to which
it is a party or by which it or its properties may be bound which default could
have a Material Adverse Effect on the Company or any of its Subsidiaries.
(f) LITIGATION. There are no actions, suits or proceedings pending or, to
the best of the Company's knowledge, threatened against or affecting the Company
or any of its Subsidiaries or the properties of the Company or any of its
Subsidiaries before any governmental agency or authority or arbitrator which if
determined adversely to the Company or any such Subsidiary would result in a
Material Adverse Effect.
(g) SEC REPORTS; FINANCIAL STATEMENTS. The Company has previously furnished
or made available to the Lender its (i) Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, (ii) Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 2001, (iii) Definitive Proxy Statement filed
with the SEC on March 15, 2001, and (iv) all other periodic and current reports
filed by the Company with the SEC under the Exchange Act since November 16, 2001
in each case, as amended prior to the date hereof, (collectively, the "Company
Reports"). As of their respective dates the Company Reports (or, if any of the
Company Reports shall have been amended, as of the date of such amendment),
complied in all material respects with applicable requirements of the Exchange
Act and did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading. The Company has timely filed with the SEC, and the
Company Reports constitute, all reports required to be filed under Sections 13,
14 or 15(d) of the Exchange Act since December 31, 2000. The audited financial
statements and unaudited interim financial statements of the Company and its
Subsidiaries included in the Company Reports (i) comply as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, (ii) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered thereby (except as may be
13.
indicated therein or in the notes thereto, and in the case of quarterly
financial statements, as permitted by Form 10-Q under the Exchange Act), (iii)
fairly present the consolidated financial condition, results of operations and
cash flows of the Company as of the respective dates thereof and for the periods
referred to therein and (iv) are consistent with the books and records of the
Company.
(h) CAPITALIZATION. As of the date hereof the authorized capital stock of
the Company consists of 100,000,000 shares of Common Stock, par value $0.001, of
which 33,615,724 shares are issued and outstanding. All of such shares of
capital stock have been duly authorized for issuance, and all of such shares
which are issued and outstanding have been validly issued and are fully paid,
nonassessable and free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof. The Company has
reserved 10,539,944 shares of Common Stock for issuance to officers, directors,
employees, consultants or Affiliates under the Company's 1999 Long-Term
Incentive Plan, of which 9,148,474 are subject to outstanding options granted
thereunder. All shares of Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, are duly authorized and will be validly issued, fully
paid and nonassessable. Other than warrants for the purchase of an aggregate of
16,675,747 shares of Common Stock, of which warrants for the purchase of
15,628,295 shares will be returned to the Company for cancellation in connection
with this Agreement, and as set forth above in this paragraph, there are no
other equity securities, options, warrants, calls, rights, commitments or
agreements of any character to which the Company is a party or by which it is
bound obligating the Company to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any shares of the
capital stock of the Company or obligating the Company to grant, extend or enter
into any such equity security, option, warrant, right, call, commitment or
agreement. Except as disclosed in the Company Reports or on the Disclosure
Letter, to the Company's knowledge there are no stockholder agreements, voting
agreements or voting trusts relating to any shares of capital stock of the
Company.
(i) VALID ISSUANCE OF SECURITIES. The Warrant Shares have been duly and
validly reserved for issuance and, upon issuance, sale and delivery in
accordance with the terms of the Warrant will be duly and validly issued, fully
paid, nonassessable and free of preemptive rights binding on the Company.
(j) SECURITIES LAW. Assuming the accuracy of the representations and
warranties made by the Lender in Section 4.02 hereof, no change in applicable
law and no unlawful distribution of this Agreement, the Warrant or the Warrant
Shares by the Lender or other Person, this Agreement, the Warrant and the
Warrant Shares, if any, will be issued to the Lender in compliance with
applicable exemptions from (i) the registration and prospectus delivery
requirements of the Securities Act, and (ii) the registration and qualification
requirements of all applicable securities laws of the states of the United
States.
(k) LIABILITIES. Neither the Company nor any of its Subsidiaries has any
liabilities, fixed or contingent, exceeding $5,000 that are not reflected in the
financial statements included in the Company Reports, in the notes thereto or
otherwise disclosed in writing to the Lender, other than liabilities arising in
the ordinary course of business since September 30, 2001.
14.
(l) TAXES. Each of the Company and its Subsidiaries has duly filed all tax
and information returns required to be filed, and has paid all taxes, fees,
assessments and other governmental charges or levies that have become due and
payable, except to the extent such taxes or other charges are being contested in
good faith and are adequately reserved against in accordance with GAAP. All
Federal and state returns have been filed by each of the Company and its
Subsidiaries for all periods for which returns due with respect to employee
income tax withholding, social security and unemployment taxes, and the amounts
shown thereon to be due and payable have been paid in full or adequate
provisions therefor have been made.
(m) PATENTS AND OTHER RIGHTS. The Company has sole title and ownership of,
or full right to use in the conduct of its business, all patents, trademarks,
service marks, trade names, designs, mask works and copyrights (including,
without limitation, all applications therefor), and all trade secrets,
information, databases, inventions, and proprietary rights and processes
necessary for its business as now conducted and as proposed to be conducted
(collectively, "Proprietary Rights") and without any conflict with or
infringement or misappropriation of the rights of others. There are no
outstanding options, licenses, or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the Proprietary Rights of any other
person or entity. The Company has not received any communications or become
aware of any claim alleging that the Company or any of its employees has
violated or, by conducting its business as currently conducted or as proposed to
be conducted, would violate any Proprietary Rights of any other person or
entity. To the knowledge of the Company, none of its employees is obligated
under any contract (including licenses, covenants or commitments of any nature)
or other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of the Company, or that would conflict with the
Company's business as currently conducted or as proposed to be conducted.
Neither the execution and delivery of the Loan Documents, nor the carrying on of
the Company's business by the employees of the Company, nor the conduct of the
Company's business as currently conducted or as proposed to be conducted, will
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of such employees or any non-employee equity owners acting for the Company
is now obligated. The Company and its employees and non-employee equity owners
acting for the Company, are not utilizing or practicing, nor will it be
necessary to utilize or practice at any time hereafter in the conduct of the
Company's business, any inventions (whether or not patented) of any of the
Company's employees or any non-employee equity owners acting for the Company (or
people it currently intends to hire) made, conceived or put to practice prior to
their employment by the Company. The Company has obtained a written
confidentiality agreement and assignment of Proprietary Rights with respect to
all work and inventions relating to the Company from each present employee and
consultant of the Company and from each non-employee equity owner acting for the
Company.
(n) INSURANCE. The properties of the Company and its Subsidiaries are
insured, with financially sound and reputable insurance companies, in such
amounts, with such deductibles and covering such risks as is customarily carried
by companies engaged in similar businesses and owning similar properties in the
localities where the Company or such Subsidiary operates.
15.
(o) TITLE TO PROPERTIES; LIENS. The Company and its Subsidiaries have good
and marketable title to, or valid and subsisting leasehold interests in, their
properties and assets, including all property forming a part of the Collateral,
and there is no Lien upon or with respect to any of such properties or assets,
including any of the Collateral, except for Permitted Liens.
(p) ENVIRONMENTAL LAWS. Each of the Company and its Subsidiaries is in
material compliance with all Environmental Laws, and there are no actions,
suits, claims, notices of violation, hearings, investigations or proceedings
pending or, to the best of the Company's knowledge, threatened against or
affecting the Company or any of its Subsidiaries or with respect to the
ownership, use, maintenance and operation of the Company's and its Subsidiaries'
properties, relating to any Environmental Laws or Hazardous Substances.
(q) EMPLOYMENT MATTERS. The Company and its Subsidiaries (i) has withheld
all amounts required by law or agreement to be withheld from wages, salaries and
other payments to its employees and former employees or has remedied any failure
to do so, (ii) is not liable for any arrearages of wages and (iii) is not liable
for taxes or penalties for failure to withhold or pay wages when due. There are
no complaints pending or, to the Company's knowledge, threatened before any
governmental authority alleging unfair labor practices or unlawful
discrimination nor, to the Company's and its Subsidiaries knowledge, is there
any basis for any such claim. There are no existing or, to the Company's
knowledge, threatened labor troubles affecting the Company which would
individually or in the aggregate, have a Material Adverse Effect. The Company is
not a party to any collective bargaining agreement with any labor union. The
Disclosure Letter sets forth a list of the Company's employees and their
positions.
(r) ERISA. Each of the Company and its Subsidiaries is in compliance with
ERISA in all material respects, and there is no condition or event under which
the Company or any of its Subsidiaries or any Plan maintained by the Company,
its Subsidiaries or, to the best of the Company's knowledge, any ERISA
Affiliate, could be subject to any risk of material liability under or in
connection with ERISA.
(s) SUBSIDIARIES. The name, capital structure and ownership of each
Subsidiary of the Company on the date of this Agreement is as set forth in
SCHEDULE 2. All of the outstanding capital stock of, or other interest in, each
such Subsidiary has been validly issued, and is fully paid and nonassessable.
Except as set forth in such Schedule, on the date of this Agreement the Company
has no material equity interest in any Person.
(t) NOTICE(S) OF BORROWING. The Notice of Borrowing submitted by the
Company, and all previous Notices of Borrowing, shall be and at the time of
submission were true, accurate, and complete.
(u) DISCLOSURE. None of the representations or warranties made by the
Company in the Loan Documents (including the Disclosure Letter) as of the date
of such representations and warranties, and none of the statements contained in
any other information with respect to the Company and its Subsidiaries,
including each exhibit or report, furnished by or on behalf of the Company to
the Lender in connection with the Loan Documents, contains any untrue statement
of a material fact or omits any material fact required to be stated therein or
necessary to make the
16.
statements made therein, in the light of the circumstances under which they are
made, not misleading.
SECTION 4.02 REPRESENTATIONS AND WARRANTIES OF LENDER. The Lender
represents and warrants to the company that:
(a) SUITABILITY. The Lender (including any assignee Lender at the time of
such assignment) represents that it (i) is entering into this Agreement solely
for investment purposes and not with a view toward, or for sale in connection
with, any distribution thereof, (ii) has received and reviewed such information
as it deems necessary to evaluate the merits and risks of its entering into this
Agreement, (iii) is an "accredited investor" within the meaning on Rule 501(a)
under the Securities Act, and (iv) has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of entering into this Agreement, including a complete loss of its
investment.
(b) RESTRICTIONS ON RESALE. The Lender understands that this Agreement is
being offered only in a transaction not involving any public offering within the
meaning of the Securities Act, and that, if in the future such Lender decides to
resell, pledge or otherwise transfer this Agreement, this Agreement may be
resold, pledged or transferred only (i) to the company, (ii) to a person who
such Lender reasonably believes is a qualified institutional buyer that
purchases for its own account or for the account of a qualified institutional
buyer to whom notice is given that such resale, pledge or transfer is being made
in reliance on Rule 144A under the Securities Act, or (iii) pursuant to an
exemption form registration under the Securities Act.
ARTICLE V
COVENANTS
SECTION 5.01 REPORTING COVENANTS. So long as any of the Obligations shall
remain unpaid or the Lender shall have any Commitment, the Company agrees that:
(a) FINANCIAL STATEMENTS AND OTHER REPORTS. The Company will furnish to the
Lender: (i) as soon as available and in any event within 45 days after the end
of the first three fiscal quarters of each fiscal year of the Company or 90 days
(in the case of the fourth fiscal quarter), its quarterly consolidated and, if
requested by the Lender, consolidating financial statements, prepared in
accordance with GAAP, together with a certificate of a Responsible Officer of
the Company stating that such financial statements fairly present the financial
condition of the Company and its Subsidiaries as at such date and the results of
operations of the Company and its Subsidiaries for the period ended on such date
and have been prepared in accordance with GAAP, subject to changes resulting
from normal, yearend audit adjustments and except for the absence of notes; (ii)
as soon as available and in any event within 90 days after the end of each
fiscal year of the Company, its consolidated and, if requested by the Lender,
consolidating annual financial statements, prepared in accordance with GAAP, all
in reasonable detail and (A) in the case of consolidated financial statements,
accompanied by an unqualified (other than reservations for whether the Company
is a going concern) report thereon of independent certified public accountants
of recognized standing, and (B) in the case of any such consolidating financial
statements requested by the Lender, certified by a Responsible Officer of
17.
the Company; and (iii) together with the financial statements required pursuant
to clauses (i) and (ii).
(b) ADDITIONAL INFORMATION. The Company will furnish to the Lender: (i)
promptly after the Company has knowledge or becomes aware thereof, notice of the
occurrence of any Default; (ii) prompt written notice of all actions, suits and
proceedings before any governmental agency or authority or arbitrator pending,
or to the best of the Company's knowledge, threatened against or affecting the
Company or any of its Subsidiaries, including any actions, suits, claims,
notices of violation, hearings, investigations or proceedings pending, or to the
best of the Company's knowledge, threatened against or affecting the Company or
any of its Subsidiaries, or with respect to the ownership, use, maintenance and
operation of their respective properties, relating to Environmental Laws or
Hazardous Substances, which (A) involve an aggregate liability of $10,000 or
more, or (B) otherwise may have a Material Adverse Effect; (iii) prompt written
notice of any other condition or event which has resulted, or that could
reasonably be expected to result, in a Material Adverse Effect; (iv) promptly
after the same are released, copies of all press releases; (v) promptly after
the giving, sending or filing thereof, copies of all reports and financial
information, if any, which the Company or any of its Subsidiaries sends to the
holders of its respective capital stock or other securities, and the holders, if
any, of any other Indebtedness, and of all reports or filings, if any, by the
Company or any of its Subsidiaries with the Securities and Exchange Commission
or any national securities exchange; and (vi) such other information respecting
the operations, properties, business or condition (financial or otherwise) of
the Company or its Subsidiaries (including with respect to the Collateral) as
the Lender may from time to time reasonably request. Each notice pursuant to
claims (i) through (iii) of this subsection (b) shall be accompanied by a
written statement by a Responsible Officer of the Company setting forth details
of the occurrence referred to therein.
SECTION 5.02 AFFIRMATIVE COVENANTS. So long as any of the Obligations shall
remain unpaid or the Lender shall have any Commitment, the Company agrees that:
(a) PRESERVATION OF EXISTENCE, ETC. The Company will, and will cause each
of its Subsidiaries to, maintain and preserve its corporate existence, its
rights to transact business and all other rights, franchises and privileges
necessary or desirable in the normal course of its business and operations and
the ownership of its properties, except in connection with any transactions
expressly permitted by Section 5.03.
(b) PAYMENT OF TAXES, ETC. The Company will, and will cause each of its
Subsidiaries to, pay and discharge all taxes, fees, assessments and governmental
charges or levies imposed upon it or upon its properties or assets prior to the
date on which penalties attach thereto, and all lawful claims for labor,
materials and supplies which, if unpaid, might become a Lien upon any properties
or assets of the Company or any Subsidiary, except to the extent such taxes,
fees, assessments or governmental charges or levies, or such claims, are being
contested in good faith by appropriate proceedings and are adequately reserved
against in accordance with GAAP.
(c) MAINTENANCE OF INSURANCE. The Company will, and will cause each of its
Subsidiaries to, carry and maintain in full force and effect, at its own expense
and with financially sound and reputable insurance companies, insurance in such
amounts, with such
18.
deductibles and covering such risks as is customarily carried by companies
engaged in the same or similar businesses and owning similar properties in the
localities where the Company or such Subsidiary operates.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company will, and will
cause each of its Subsidiaries to, keep adequate records and books of account,
in which complete entries will be made in accordance with GAAP.
(e) INSPECTION RIGHTS. The Company will at any reasonable time and from
time to time permit the Lender or any of its agents or representatives to visit
and inspect any of the properties of the Company and its Subsidiaries and to
examine the records and books of account of the Company and its Subsidiaries,
and to discuss the business affairs, finances and accounts of the Company and
any such Subsidiary with any of the officers, employees or accountants of the
Company or such Subsidiary.
(f) COMPLIANCE WITH LAWS, ETC. The Company will, and will cause each of its
Subsidiaries to, comply in all material respects with the requirements of all
applicable laws, rules, regulations and orders of any governmental agency or
authority, including all Environmental Laws and ERISA, and the terms of any
indenture, contract or other instrument to which it may be a party or under
which it or its properties may be bound. The Company will, for so long as it has
securities registered under the Exchange Act or has an effective registration
statement under the Securities Act, make timely filing of such reports as are
required to be filed by it with the SEC.
(g) MAINTENANCE OF PROPERTIES, ETC. The Company will, and will cause each
of its Subsidiaries to, maintain and preserve all of its properties necessary or
useful in the proper conduct of its business in good working order and condition
in accordance with the general practice of other corporations of similar
character and size, ordinary wear and tear excepted. The Company will, and will
cause each of its Subsidiaries to, maintain all Proprietary Information owned or
held by it or hereafter owned or held by it in full force and effect in the
United States of America and in such other countries in which the Company or its
Subsidiaries shall engage in business, including but not limited to: (i) the
execution by future employees, officers and independent contractors of the
Company or its Subsidiaries of confidentiality and nondisclosure agreements,
Proprietary Rights assignment agreements; (ii) the prosecution of applications
to register or perfect rights or claims in and to any such Proprietary Rights;
(iii) the registration of license agreements; (iv) the timely filing of
affidavits of use, renewals or other maintenance filings; and (v) the timely
payment of filing and maintenance fees.
(h) LICENSES. The Company will, and will cause each of its Subsidiaries to,
obtain and maintain all licenses, authorizations, consents, filings, exemptions,
registrations and other governmental approvals of any governmental agency or
authority necessary in connection with the execution, delivery and performance
of the Loan Documents, the consummation of the transactions therein contemplated
or the operation and conduct of its business and ownership of its properties.
(i) USE OF PROCEEDS. The Company will use the proceeds of each Loan solely
in the amounts and for purposes expressly authorized by ANNEX A hereto; and,
such proceeds shall
19.
not be used to reduce any outstanding Indebtedness or to make any payments to
Stockholders or Affiliates of the Company or pay any obligation of the Company
existing on the date hereof other than (a) payments to employees and directors
as compensation for their employment or service on the Board of Directors in
accordance with arrangements which the Lender has deemed satisfactory pursuant
to Section 3.01(f), and (b)certain obligations to trade creditors set forth on
ANNEX A and, with the Lender's prior written consent, related penalties and
interest for late payments to such trade creditors.
(j) APPOINTMENT AND REMOVAL OF CORPORATE OFFICERS. At any time and from
time to time, the Lender shall have the right to cause the Company to effect the
appointment or election of individuals designated by the Lender to hold any
corporate office. The Lender shall also have the right to cause the Company to
effect the removal or resignation of any individuals holding any corporate
office.
(k) SAFEGUARD DESIGNEE. At any time and from time to time, the Lender shall
have the right to appoint an individual to observe the operations of the Company
(the "Safeguard Designee"). The Safeguard Designee shall: (i) have access to all
the facilities of the Company; (ii) have access to the Company's books and
records; (iii) be given an opportunity to observe and participate in all Company
meetings, whether such meetings are among directors or officers or other
employees; and (iv) otherwise be given an opportunity to observe all aspects of
the day-to-day operations of the Company. The initial Safeguard Designee shall
be ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
(l) FURTHER ASSURANCES AND ADDITIONAL ACTS. The Company will execute,
acknowledge, deliver, file, notarize and register at its own expense all such
further agreements, instruments, certificates, documents and assurances and
perform such acts as the Lender shall deem necessary or appropriate to
effectuate the purposes of the Loan Documents, and promptly provide the Lender
with evidence of the foregoing satisfactory in form and substance to the Lender.
Without limiting the generality of the preceding sentence, the Company shall
cooperate with the Lender in determining the scope of the Proprietary Rights
that the Company claims to own or have the right to use and shall assist the
Lender in perfecting the security interest in such Proprietary Rights granted
pursuant to the Security Agreement as the Lender deems necessary or appropriate.
SECTION 5.03 NEGATIVE COVENANTS. So long as any of the Obligations shall
remain unpaid or the Lender shall have any Commitment, the Company agrees that,
without the prior written approval of the Lender:
(a) INDEBTEDNESS. The Company will not, and will not permit any of its
Subsidiaries to, create, incur, assume or otherwise become liable for or suffer
to exist any Indebtedness, other than: (i) Indebtedness of the Company to the
Lender hereunder; (ii) Indebtedness of the Company and its Subsidiaries existing
on the Closing Date and disclosed to the Lender or extensions, renewals and
refinancings of such Indebtedness, PROVIDED that the principal amount of such
Indebtedness being extended, renewed or refinanced does not increase; (iii)
accounts payable to trade creditors for goods and services and current operating
liabilities (not the result of the borrowing of money) incurred in the ordinary
course of the Company's or such Subsidiary's business in accordance with
customary terms and paid within the specified time, unless contested in good
faith by appropriate proceedings and reserved for in accordance
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with GAAP; (iv) Indebtedness consisting of guarantees resulting from endorsement
of negotiable instruments for collection by the Company or any such Subsidiary
in the ordinary course of business; (v) interest rate swaps, currency swaps and
similar financial products entered into or obtained in the ordinary course of
busines; (vi) unsecured Indebtedness of the Company and its Subsidiaries in an
aggregate principal amount not to exceed $10,000 at any time outstanding; (viii)
Indebtedness of the Company and its Subsidiaries under capital leases or
otherwise incurred under or in connection with any Liens of the type referred to
in clause (vii) of the definition of Permitted Liens in Section 1.01 in an
aggregate principal amount not to exceed $10,000 (or its equivalent in another
currency or other currencies) at any time outstanding; (ix) Indebtedness of the
Company or any of its Subsidiaries secured by Permitted Liens of the type
referred to in clause (vi) of the definition thereof set forth in Section 1.01,
or extensions, renewals and refinancings of such Indebtedness, PROVIDED that the
principal amount of such Indebtedness being extended, renewed or refinanced does
not increase, and PROVIDED FURTHER that the aggregate principal amount of all
such Indebtedness does not exceed $10,000 at any time outstanding; (x)
Indebtedness subordinated on terms satisfactory to the Lender to the Obligations
in an aggregate principal amount not to exceed $10,000 (or its equivalent in
another currency or currencies) at any time outstanding; and (xi) Indebtedness
of the Company to any of its wholly owned Subsidiaries or of any of its wholly
owned Subsidiaries to another of its wholly owned Subsidiaries.
(b) LIENS; NEGATIVE PLEDGES. (i) The Company will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon or with respect to any of its properties, revenues or assets, whether now
owned or hereafter acquired, other than Permitted Liens. (ii) The Company will
not, and will not permit any of its Subsidiaries to, enter into any agreement
(other than this Agreement and any other Loan Document) prohibiting the creation
or assumption of any Lien upon, or the assignment of, any of its properties,
revenues or assets, whether now owned or hereafter acquired.
(c) CHANGE IN NATURE OF BUSINESS. The Company will not, and will not permit
any of its Subsidiaries to, engage in any material line of business
substantially different from those lines of business carried on by it at the
date hereof.
(d) RESTRICTIONS ON FUNDAMENTAL CHANGES. The Company will not, and will not
permit any of its Subsidiaries to, merge with or consolidate into, or acquire
all or substantially all of the assets of, any Person, or sell, transfer, lease
or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets, except that: (i) any of
the Company's wholly owned Subsidiaries may merge with, consolidate into or
transfer all or substantially all of its assets to another of the Company's
wholly owned Subsidiaries or to the Company and in connection therewith such
Subsidiary may be liquidated or dissolved; and (ii) the Company or any of its
Subsidiaries may sell or dispose of assets in accordance with the provisions of
subsection (e).
(e) SALES OF ASSETS; PROPRIETARY RIGHTS. The Company will not, and will not
permit any of its Subsidiaries to, sell, lease, transfer, or otherwise dispose
of, or part with control of (whether in one transaction or a series of
transactions) any assets (including any shares of stock in any Subsidiary or
other Person and any Proprietary Rights), except: (i) sales or other
dispositions of inventory, and the non-exclusive license, sublicense and grant
of distribution and
21.
similar rights, in the ordinary course of business; (ii) sales or other
dispositions of assets in the ordinary course of business which have become worn
out or obsolete or which are promptly being replaced; (iii) sales or other
dispositions of assets by any of its wholly owned Subsidiaries to another of its
wholly owned Subsidiaries or to the Company. The Company will not, and will not
permit any of its Subsidiaries to, (i) abandon or let lapse or pass to the
public domain any of the Proprietary Rights owned or held by the Company or any
of its Subsidiaries; or (ii) fail to maintain the confidentiality and trade
secret status of all Proprietary Rights except to the extent that such
disclosure is necessary to obtain copyrights, trademarks or patents.
(f) DISTRIBUTIONS. (i) The Company will not declare or pay any dividends in
respect of the Company's capital stock, or purchase, redeem, retire or otherwise
acquire for value any of its capital stock now or hereafter outstanding, return
any capital to its shareholders as such, or make any distribution of assets to
its shareholders as such, or permit any of its Subsidiaries to purchase, redeem,
retire, or otherwise acquire for value any stock of the Company, except that the
Company may: (A) declare and deliver dividends and distributions payable only in
common stock of the Company; and (B) purchase, redeem, retire, or otherwise
acquire shares of its capital stock with the proceeds received from a
substantially concurrent issue of new shares of its capital stock. (ii) The
Company will not permit any Subsidiary of the Company to grant or otherwise
agree to or suffer to exist any consensual restrictions on the ability of such
Subsidiary to pay dividends and make other distributions to the Company, or to
pay any Indebtedness owed to the Company or transfer properties and assets to
the Company.
(g) LOANS AND INVESTMENTS. The Company will not, and will not permit any of
its Subsidiaries to, purchase or otherwise acquire the capital stock, assets
(constituting a business unit), obligations or other securities of or any
interest in any Person, or otherwise extend any credit to or make any additional
investments in any Person, other than in connection with: (i) extensions of
credit in the nature of accounts receivable or notes receivable arising from the
sales of goods or services in the ordinary course of business; (ii) extensions
of credit by the Company to any of its wholly owned Subsidiaries or by any of
its wholly owned Subsidiaries to another of its wholly owned Subsidiaries or the
Company; (iii) short term, investment grade money market instruments, in
accordance with the Company's usual and customary treasury management policies.
(h) TRANSACTIONS WITH RELATED PARTIES. The Company will not, and will not
permit any of its Subsidiaries to, enter into any transaction, including the
purchase, sale or exchange of property or the rendering of any services, with
any Affiliate, any officer or director thereof or any Person which beneficially
owns or holds 5% or more of the equity securities, or 5% or more of the equity
interest, thereof (a "Related Party"), or enter into, assume or suffer to exist,
or permit any Subsidiary to enter into, assume or suffer to exist, any
employment or consulting contract with any Related Party, except a transaction
or contract which is in the ordinary course of the Company's or such
Subsidiary's business and which is upon fair and reasonable terms not less
favorable to the Company or such Subsidiary than it would obtain in a comparable
arm's length transaction with a Person not a Related Party; PROVIDED, HOWEVER,
that nothing in this subsection shall prohibit any transactions between the
Company and its wholly owned Subsidiaries or between the Company's wholly owned
Subsidiaries.
22.
(i) AMENDMENTS OF CERTAIN DOCUMENTS. The Company will not, and will not
permit any of its Subsidiaries to, agree to or permit any amendment,
modification or waiver of any provision of any agreement related to any
Subordinated Debt (including any amendment, modification or waiver pursuant to
an exchange of other securities or instruments for outstanding Subordinated
Debt).
(j) REDEMPTION OF SUBORDINATED DEBT. The Company will not, and will not
permit any of its Subsidiaries to, make any voluntary or optional payment or
repayment on, redemption, exchange or acquisition for value of, or any sinking
fund or similar payment with respect to, any Subordinated Debt.
(k) BUSINESS PLANS, STRATEGIES AND BUDGETS. The Company will not, and will
not permit any of its Subsidiaries, to adopt or modify any business or financial
plan, business or financial strategy, or operating or capital budget.
(l) COMPENSATION ARRANGEMENTS. The Company will not, and will not permit
any of its Subsidiaries, to enter into any new, or modify any existing,
compensation arrangements (including without limitation, salary, bonus, stock
option plans or individual stock option grants, benefits, perquisites, etc.)
with any officer or employee of the Company.
(m) EMPLOYEES; INDEPENDENT CONTRACTORS. The Company will not, and will not
permit any of its Subsidiaries, to hire additional employees or enter into any
new, or modify any existing, arrangement with any independent contractor
(n) SIGNIFICANT CASH EXPENDITURES. The Company will not, and will not
permit any of its Subsidiaries, to make any single cash expenditure, or series
of related cash expenditures, in excess of five thousand dollars ($5,000);
provided, however, that in the event an expenditure or series of related
expenditures is to be used from the proceeds of a Loan for the purpose
specifically set forth in the Notice of Borrowing delivered to the Lender
pursuant to Section 2.02 relating to such Loan, the Lender's prior written
approval shall not be required.
(o) ADDITIONAL EQUITY INCENTIVES. The Company will not, and will not permit
any of its Subsidiaries, to grant any equity-based security under its equity
incentive plans or otherwise, including without limitation stock options, stock
appreciation rights and phantom stock.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01 EVENTS OF DEFAULT. Any of the following events which shall
occur shall constitute an "Event of Default":
(a) PAYMENTS. The Company shall fail to pay when due or in the appropriate
currency any amount of principal of, or interest on, any Loan, or any fee or
other amount payable under any of the Loan Documents.
23.
(b) REPRESENTATIONS AND WARRANTIES. Any representation or warranty by the
Company under or in connection with the Loan Documents shall prove to have been
incorrect in any respect when made or deemed made.
(c) FAILURE BY COMPANY TO PERFORM CERTAIN COVENANTS. The Company shall fail
to perform or observe any term, covenant or agreement contained in Section 5.02
or Section 5.03.
(d) FAILURE BY COMPANY TO PERFORM OTHER COVENANTS. The Company shall fail
to perform or observe any other term, covenant or agreement contained in any
Loan Document on its part to be performed or observed.
(e) INSOLVENCY. (i) The Company or any of its Subsidiaries shall (A) admit
in writing its inability to, or shall fail generally or be generally unable to,
pay its debts (including its payrolls) as such debts become due, (B) make a
general assignment for the benefit of creditors, (C) be dissolved, liquidated,
wound up or cease its corporate existence; or (ii) the Company or any such
Subsidiary (A) shall file a voluntary petition in bankruptcy or a petition or
answer seeking reorganization, to effect a plan or other arrangement with
creditors or any other relief under the Bankruptcy Reform Act of 1978 (the
"Bankruptcy Code") or under any other state or federal law relating to
bankruptcy or reorganization granting relief to debtors, whether now or
hereafter in effect, or (B) shall file an answer admitting the jurisdiction of
the court and the material allegations of any involuntary petition filed against
the Company or any such Subsidiary pursuant to the Bankruptcy Code or any such
other state or federal law; or (iii) the Company or any such Subsidiary shall be
adjudicated a bankrupt, or shall make an assignment for the benefit of
creditors, or shall apply for or consent to the appointment of any custodian,
receiver or trustee for all or any substantial part of the Company's or any such
Subsidiary's property, or shall take any action to authorize any of the actions
or events set forth above in this subsection; or (iv) an involuntary petition
seeking any of the relief specified in this subsection shall be filed against
the Company or any such Subsidiary; or (v) any order for relief shall be entered
against the Company or any such Subsidiary in any involuntary proceeding under
the Bankruptcy Code or any such other state or federal law referred to in this
subsection (e).
(f) DISSOLUTION, ETC. The Company or any of its Subsidiaries shall (i)
liquidate, wind up or dissolve (or suffer any liquidation, windup or
dissolution), except to the extent expressly permitted by Section 5.03, (ii)
suspend its operations other than in the ordinary course of business, or (iii)
take any corporate action to authorize any of the actions or events set forth
above in this subsection (f).
(g) DEFAULT OR ACCELERATION UNDER OTHER INDEBTEDNESS. The Company or any of
its Subsidiaries shall (i) fail to make any payment of any principal of, or
interest or premium on, any Indebtedness (other than in respect of the Loans)
when due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), or (ii) to perform or observe any term, covenant or
condition on its part to be performed or observed under any agreement or
instrument relating to any such Indebtedness, when required to be performed or
observed; or any such Indebtedness shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof.
24.
(h) DEFAULT UNDER UNISERVICES OR KODAK AGREEMENTS. There shall have been a
termination of, or an event which, after the giving of notice and without regard
to any right to cure or similar right, would result in a termination of, any of
the Uniservices Agreements or the Kodak Agreement.
(i) JUDGMENTS. (i) A final judgment or order for the payment of money in
excess of $10,000 (or its equivalent in another currency) which is not fully
covered by third-party insurance shall be rendered against the Company or any of
its Subsidiaries (or its equivalent in another currency); or (ii) any
non-monetary judgment or order shall be rendered against the Company or any such
Subsidiary which has or would reasonably be expected to have a Material Adverse
Effect.
(j) MATERIAL ADVERSE CHANGE. A Material Adverse Effect shall have occurred.
(k) COLLATERAL DOCUMENTS. The Company or any other Person shall fail to
perform or observe any term, covenant or agreement contained in the Collateral
Documents on its part to be performed or observed, or any "Event of Default" as
defined in any Collateral Document shall have occurred; or any of the Collateral
Documents after delivery thereof shall for any reason be revoked or invalidated,
or otherwise cease to be in full force and effect, or the Company or any other
Person shall contest in any manner the validity or enforceability thereof, or
the Company or any other Person shall deny that it has any further liability or
obligation thereunder; or any of the Collateral Documents for any reason, except
to the extent permitted by the terms thereof, shall cease to create a valid and
perfected first priority Lien subject only to Permitted Liens in any of the
Collateral purported to be covered thereby.
(l) CONSENTS, ETC. Any law, decree, license, consent, authorization,
registration or approval now or hereafter necessary to enable the Company to
comply with its obligations incurred in the Loan Documents shall be modified,
revoked, withdrawn or withheld or shall cease to remain in full force and
effect.
(m) ERISA. The Company or any Subsidiary shall incur or become subject to
any material liability or Lien under or with respect to any Plan.
SECTION 6.02 EFFECT OF EVENT OF DEFAULT. If any Event of Default shall
occur, the Lender may (i) by notice to the Company, (A) declare its Commitment
to be terminated, whereupon the same shall immediately terminate, and (B)
declare the entire unpaid principal amount of each Loan (and of the Loans), all
interest accrued and unpaid thereon and all other Obligations to be immediately
due and payable, whereupon with respect to each Loan, all such accrued interest
and all such other Obligations shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Company, PROVIDED that if an event described
in Section 6.01(e) shall occur, the result which would otherwise occur only upon
giving of notice by the Lender to the Company as specified in this clause (i)
shall occur automatically, without the giving of any such notice; (ii) whether
or not the actions referred to in clause (i) have been taken, (A) exercise any
or all of the Lender's rights and remedies under the Collateral Documents, and
(B) proceed to enforce all other rights and remedies available to the Lender
under the Loan Documents and applicable law; and (iii) cause the Company to
increase the numbers of directors constituting the
25.
entire Board of Directors by two times the then current number of directors plus
one, and appoint designees of the Lender to fill such vacancies on the Board of
Directors to serve until such time as the Obligations have been satisfied in
full. In addition, in the event of a Willful Default, the Warrant shall be
deemed amended to provide that the exercise price per share at which the Warrant
may be exercised shall be reduced to equal 85% of the price in effect prior to
such Event of Default.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01 AMENDMENTS AND WAIVERS. No amendment to any provision of the
Loan Documents shall be effective unless it is in writing and has been signed by
the Lender and the Company, and no waiver of any provision of any Loan Document,
or consent to any departure by the Company therefrom, shall be effective unless
it is in writing and has been signed by the Lender. Any such amendment, waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 7.02 NOTICES. All notices and other communications provided for
hereunder and under the other Loan Documents shall, unless otherwise stated
herein, be in writing (including by facsimile transmission) and mailed, sent or
delivered to the respective parties hereto at or to their respective addresses
or facsimile numbers set forth below their names on the signature pages hereof,
or at or to such other address or facsimile number as shall be designated by any
party in a written notice to the other party hereto. All such notices and
communications shall be effective (i) if delivered by hand, when delivered; (ii)
if sent by mail, upon the earlier of the date of receipt or five Business Days
after deposit in the mail, first class, postage prepaid; and (iii) if sent by
facsimile transmission, when sent; PROVIDED, HOWEVER, that notices and
communications to the Lender pursuant to Article II shall not be effective until
received.
SECTION 7.03 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of the
Lender to exercise, and no delay in exercising, any right, remedy, power or
privilege under any Loan Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, remedy, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights and remedies under the Loan
Documents are cumulative and not exclusive of any rights, remedies, powers and
privileges that may otherwise be available to the Lender.
SECTION 7.04 COSTS AND EXPENSES; INDEMNITY.
(a) COSTS AND EXPENSES. The Company agrees to pay on demand: (i) the
reasonable out-of-pocket costs and expenses of the Lender and any of its
Affiliates, and the reasonable fees and disbursements of counsel to the Lender,
in connection with the negotiation, preparation, execution, delivery and
administration of the Loan Documents, and any amendments, modifications or
waivers of the terms thereof; (ii) all audit, consulting, appraisal, search,
recording, filing and similar costs, fees and expenses incurred or sustained by
the Lender or any of its Affiliates in connection with the Loan Documents or the
Collateral; and (iii) all costs and expenses of the Lender and its Affiliates,
and fees and disbursements of counsel, in
26.
connection with (A) any Default, (B) the enforcement or attempted enforcement
of, and preservation of any rights or interests under, the Loan Documents, (C)
any out-of-court workout or other refinancing or restructuring or any bankruptcy
or insolvency case or proceeding, and (D) the preservation of and realization
upon any of the Collateral.
(b) OTHER CHARGES. The Company also agrees to indemnify the Lender against
and hold it harmless from any and all present and future stamp, transfer,
documentary and other such taxes, levies, fees, assessments and other charges
made by any jurisdiction by reason of the execution, delivery, performance and
enforcement of the Loan Documents.
(c) INDEMNIFICATION. Whether or not the transactions contemplated hereby
shall be consummated, the Company hereby agrees to indemnify the Lender, any
Affiliate thereof and their respective directors, officers, employees, agents,
counsel and other advisors (each an "Indemnified Person") against, and hold each
of them harmless from, any and all liabilities, obligations, losses, claims,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever, including the reasonable fees and
disbursements of counsel to an Indemnified Person (including allocated costs of
internal counsel), which may be imposed on, incurred by, or asserted against any
Indemnified Person, (i) in any way relating to or arising out of any of the Loan
Documents, the use or intended use of the proceeds of the Loans or the
transactions contemplated hereby or thereby, (ii) with respect to any
investigation, litigation or other proceeding relating to any of the foregoing,
irrespective of whether the Indemnified Person shall be designated a party
thereto, or (iii) in any way relating to or arising out of the use, generation,
manufacture, installation, treatment, storage or presence, or the spillage,
leakage, leaching, migration, dumping, deposit, discharge, disposal or release,
at any time, of any Hazardous Substances on, under, at or from any properties of
the Company or any of its Subsidiaries, including any personal injury or
property damage suffered by any Person, and any investigation, site assessment,
environmental audit, feasibility study, monitoring, cleanup, removal,
containment, restoration, remedial response or remedial work undertaken by or on
behalf of the any Indemnified Person at any time, voluntarily or involuntarily,
with respect to the Premises (the "Indemnified Liabilities"); PROVIDED that the
Company shall not be liable to any Indemnified Person for any portion of such
Indemnified Liabilities to the extent they are found by a final decision of a
court of competent jurisdiction to have resulted from such Indemnified Person's
gross negligence or willful misconduct. If and to the extent that the foregoing
indemnification is for any reason held unenforceable, the Company agrees to make
the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
SECTION 7.05 SURVIVAL. All covenants, agreements, representations and
warranties made in any Loan Documents shall, except to the extent otherwise
provided therein, survive the execution and delivery of this Agreement and the
making of the Loans, and shall continue in full force and effect so long as the
Lender has any Commitment, any Loan shall remain outstanding or any other
Obligations remain unpaid or any obligation to perform any other act hereunder
or under any other Loan Document remains unsatisfied. Without limiting the
generality of the foregoing, the obligations of the Company under Section 7.04,
and all similar obligations under the other Loan Documents (including all
obligations to pay costs and expenses and all indemnity obligations), shall
survive the repayment of the Loans and the termination of the Commitment.
27.
SECTION 7.06 BENEFITS OF AGREEMENT. The Loan Documents are entered into for
the sole protection and benefit of the parties hereto and their successors and
assigns, and no other Person shall be a direct or indirect beneficiary of, or
shall have any direct or indirect cause of action or claim in connection with,
any Loan Document.
SECTION 7.07 BINDING EFFECT; ASSIGNMENT. This Agreement shall become
effective when it shall have been executed by the Company and the Lender and
thereafter shall be binding upon, inure to the benefit of and be enforceable by
the Company, the Lender and their respective successors and assigns. The Company
shall not have the right to assign its rights and obligations hereunder or under
the other Loan Documents or any interest herein or therein without the prior
written consent of the Lender. The Lender reserves the right to sell, assign,
transfer or grant participations in all or any portion of the Lender's rights
and obligations hereunder and under the other Loan Documents to any other
Person. In the event of any such assignment, the assignee shall be deemed the
"Lender" for all purposes of the Loan Documents with respect to the rights and
obligations assigned to it, and the obligations of the Lender so assigned shall
thereupon terminate. The Company shall, from time to time upon request of the
Lender, enter into such amendments to the Loan Documents and execute and deliver
such other documents as shall be necessary to effect any such grant or
assignment. The Company agrees that in connection with any such grant or
assignment, the Lender may deliver to the prospective participant or assignee
financial statements and other relevant information relating to the Company and
its Subsidiaries.
SECTION 7.08 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE COMMONWEALTH OF
PENNSYLVANIA.
SECTION 7.09 WAIVER OF JURY TRIAL. THE COMPANY AND THE LENDER EACH WAIVE
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS,
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. THE COMPANY AND THE LENDER EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
SECTION 7.10 SUBMISSION TO JURISDICTION. The Company hereby (i) submits to
the nonexclusive jurisdiction of the courts of the Commonwealth of
Pennsylvania
and the Federal courts of the United States sitting in the Eastern District of
Pennsylvania for the
28.
purpose of any action or proceeding arising out of or relating to the Loan
Documents, (ii) agrees that all claims in respect of any such action or
proceeding may be heard and determined in such courts, (iii) irrevocably waives
(to the extent permitted by applicable law) any objection which it now or
hereafter may have to the laying of venue of any such action or proceeding
brought in any of the foregoing courts in and of the Commonwealth of
Pennsylvania, and any objection on the ground that any such action or proceeding
in any such court has been brought in an inconvenient forum, and (iv) agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner permitted by law.
SECTION 7.11 ENTIRE AGREEMENT. The Loan Documents reflect the entire
agreement between the Company and the Lender with respect to the matters set
forth herein and therein and supersede any prior agreements, commitments,
drafts, communication, discussions and understandings, oral or written, with
respect thereto.
SECTION 7.12 SEVERABILITY. Whenever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be effective and valid under
all applicable laws and regulations. If, however, any provision of any of the
Loan Documents shall be prohibited by or invalid under any such law or
regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed
modified to conform to the minimum requirements of such law or regulation, or,
if for any reason it is not deemed so modified, it shall be ineffective and
invalid only to the extent of such prohibition or invalidity without affecting
the remaining provisions of such Loan Document, or the validity or effectiveness
of such provision in any other jurisdiction.
SECTION 7.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same agreement.
SECTION 7.14 EXCHANGE OF WARRANTS. In exchange for the Warrant, the Lender
agrees deliver to the Company for cancellation the outstanding warrants to
purchase an aggregate of 15,628,295 shares of the Common Stock of the Company
held by the Lender (or an Affiliate thereof) as of the date hereof within a
reasonable time after the date hereof; provided, however, that in the event any
of such warrants have been lost, stolen or destroyed, the Lender shall deliver
to the Company an affidavit of that fact.
29.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
as of the date first above written.
THE COMPANY
LIFEF/X, INC.
By /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Title: Chief Executive Officer
Address:
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: Chief Executive Officer
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
LIFEF/X NETWORKS, INC.
By /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Title: Chief Executive Officer
Address:
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: Chief Executive Officer
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
THE LENDER
SAFEGUARD 2001 CAPITAL, L.P.
By: Safeguard Delaware, Inc.
Title: General Partner
By /s/ N. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Title: Executive Vice President
and General Counsel
Address:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ______________________________
Fax No.______________________________
30.
OMITTED SCHEDULES AND EXHIBITS
1. Schedule 1 - Existing Liens
2. Schedule 2 - Subsidiaries
3. Exhibit A - Notice of Borrowing
4. Exhibit B - Opinion of Counsel to the Company
5. Annex A - Additional Terms and Conditions of Funding
The Registrant undertakes to supply copies of the omitted schedules and exhibits
to the Commission upon request.
1.
