EXHIBIT 10.7
SUBORDINATED LOAN AND SECURITY AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of July 30, 1999, is entered
into by and between Battery Express, a California corporation, with its chief
executive office and principal place of business located at 0000 Xxxx Xxxxx,
Xxxx, XX 00000 (the "Borrower") and Comdisco, Inc., a Delaware corporation,
with its principal place of business located at 0000 Xxxxx Xxxxx Xxxx, Xxxxxxxx,
Xxxxxxxx 00000 (the "Lender" or sometimes, "Comdisco"). In consideration of the
mutual agreements contained herein, the parties hereto agree as follows:
RECITALS
WHEREAS, Borrower has requested Lender to make available to Borrower a loan
or loans up to an aggregate principal amount equal to the lesser of one hundred
twenty five percent (125%) of the total dollars invested by individuals and
entities affiliated with Institutional Venture Partners (collectively, "IVP") in
the Borrower's Next Round, up to a maximum of THREE MILLION FIVE HUNDRED
THOUSAND DOLLARS ($3,500,000) (as the same may from time to time be amended,
modified, supplemented or revised, individually or collectively referred to as
the "Loan(s)"), which would be evidenced by Subordinated Promissory Note(s)
executed by Borrower substantially in the form of Exhibit A hereto (as the same
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may from time to time be amended, modified, supplemented or restated the
"Note(s)") as set forth in Section 2 herein;
WHEREAS, Lender is willing to make the Loan(s) on the terms and conditions
set forth in this Agreement;
WHEREAS, Lender and Borrower agree any Loan(s) hereunder shall be
subordinate to Senior Debt (as defined herein) to the extent set forth in the
Subordination Agreement (as defined herein); and
WHEREAS, Borrower has also given Lender certain rights to purchase the
Borrower's Preferred Stock under terms and conditions set forth in this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the promises and the mutual agreements
contained herein, Borrower and Lender hereby agree as follows:
SECTION 1. DEFINITIONS
Unless otherwise defined herein, the following capitalized terms shall have
the following meanings (such meanings being equally applicable to both the
singular and plural form of the terms defined);
1.1 "Account" means any "account" as such term is defined in Section 9-106
of the UCC, now owned or hereafter acquired by Borrower or in which Borrower now
holds or hereafter acquires any interest and, in any event, shall include,
without limitation, all accounts receivable, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments) now owned or hereafter received or acquired by or
belonging or owing to Borrower (including, without limitation, under any trade
name, style or division
thereof) whether arising out of goods sold or services rendered by Borrower or
from any other transaction, whether or not the same involves the sale of goods
or services by Borrower (including, without limitation, any such obligation
which may be characterized as an account or contract right under the UCC) and
all of Borrower's rights in, to and under all purchase orders or receipts now
owned or hereafter acquired by it for goods or services, and all of Borrower's
rights to any goods represented by any of the foregoing (including, without
limitation, unpaid seller's rights of rescission, replevin, reclamation and
stoppage in transit and rights to returned, reclaimed or repossessed goods), and
all monies due or to become due to Borrower under all purchase orders and
contracts for the sale of goods or the performance of services or both by
Borrower (whether or not yet earned by performance on the part of Borrower or in
connection with any other transaction), now in existence or hereafter occurring,
including, without limitation, the right to receive the proceeds of said
purchase orders and contracts, and all collateral security and guarantees of any
kind given by any Person with respect to any of the foregoing.
1.2 "Account Debtor" means any "account debtor," as such term is defined
in Section 9-105(1)(a) of the UCC.
1.3 "Advance" means each installment made by the Lender to Borrower
pursuant to the Loan to be evidenced by the Note(s) secured by the Collateral.
1.4 "Advance Date" means the funding date of any Advance of the Loan.
1.5. "Advance Request" means the request by Borrower for an Advance under
the Loan, each to be substantially in the form of Exhibit C attached hereto, as
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submitted by Borrower to Lender from time to time.
1.6 "Chattel Paper" means any "chattel paper," as such term is defined in
Section 9-105(1)(b) of the UCC, now owned or hereafter acquired by Borrower or
in which Borrower now holds or hereafter acquires any interest.
1.7 "Closing Date" means the date hereof.
1.8 "Collateral" shall have the meaning assigned to such term in Section 3
of this Agreement.
1.9 "Contracts" means all contracts, undertakings, franchise agreements or
other agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Borrower may now or hereafter have any right,
title or interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.
1.10 "Conversion/Purchase Option" shall have the meaning assigned to such
term in Section 8 of this Agreement.
1.11 "Copyrights" means all of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (i) all copyrights, whether registered or unregistered, held pursuant
to the laws of the United States, any State thereof or of any other country;
(ii) registrations, applications and recordings in the United States Copyright
Office or in any similar office or agency of the United States, any state
thereof or any
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other country; (iii) any continuations, renewals or extensions thereof; and (iv)
any registrations to be issued in any pending applications.
1.12 "Copyright License" means any written agreement granting any right to
use any Copyright or Copyright registration now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
1.13 "Documents" means any "documents," as such term is defined in Section
9-105(1)(f) of the UCC, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest.
1.14 "Equipment" means any "equipment," as such term is defined in Section
9-109(2) of the UCC, now or hereafter owned or acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest and any and all additions,
substitutions and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
1.15 "Excluded Agreements" means (i) the Master Lease Agreement dated as
of June 23, 1999 between Borrower, as lessee, and Lender, as lessor, including,
without limitation, any Equipment Schedules and Summary Equipment Schedules to
the Master Lease Agreement executed or delivered by Borrower pursuant thereto
and any other modifications or amendments thereof, whereby Borrower (as lessee)
leases equipment, software, or goods from Lender (as lessor) to Borrower (as
lessee) and (ii) any warrant agreements between Borrower (as lessee) and Lender
(as lessor).
1.16 "Facility Fee" means one percent (1.0%) of the Maximum Available Loan
and due to Lender at the Closing Date, plus a transaction and due diligence fee
of $5,000.00.
1.17 "Fixtures" means any "fixtures," as such term is defined in Section
9-313(1)(a) of the UCC, now or hereafter owned or acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest and, now or
hereafter attached or affixed to or constituting a part of, or located in or
upon, real property wherever located, together with all right, title and
interest of Borrower in and to all extensions, improvements, betterments,
renewals, substitutes, and replacements of, and all additions and appurtenances
to any of the foregoing property, and all purchases of the security constituted
thereby, immediately upon any acquisition or release thereof or any such
purchase, as the case may be.
1.18 "General Intangibles" means any "general intangibles," as such term
is defined in Section 9-106 of the UCC, now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest and,
in any event, shall include, without limitation and unless otherwise limited by
Section 3(h) below, all right, title and interest which Borrower may now or
hereafter have in or under any contract, all customer lists, Copyrights,
Trademarks, Patents, rights to Intellectual Property, interests in partnerships,
joint ventures and other business associations, Licenses, permits, trade
secrets, proprietary or confidential information, inventions (whether or not
patented or patentable), technical information, procedures, designs, knowledge,
know-how, software, data bases, data, skill, expertise, recipes, experience,
processes, models, drawings, materials and records, goodwill (including, without
limitation, the goodwill associated with any Trademark, Trademark registration
or Trademark licensed under any Trademark License), claims in or under insurance
policies, including unearned premiums, uncertificated securities, cash
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and other forms of money or currency, deposit accounts (including as defined in
Section 9-105(e) of the UCC), rights to xxx for past, present and future
infringement of Copyrights, Trademarks and Patents, rights to receive tax
refunds and other payments and rights of indemnification.
1.19 "Initial Public Offering" means an initial public offering of
Borrower's securities.
1.20 "Instruments" means any "instrument," as such term is defined in
Section 9-105(1)(i) of the UCC, now owned or hereafter acquired by Borrower or
in which Borrower now holds or hereafter acquires any interest.
1.21 "Intellectual Property" means all Copyrights, Trademarks, Patents,
Licenses, trade secrets, source codes, customer lists, proprietary or
confidential information, inventions (whether or not patented or patentable),
technical information, procedures, designs, knowledge, know-how, software, data
bases, skill, expertise, experience, processes, models, drawings, materials and
records and goodwill and any rights to enforce or enjoy the benefits thereof.
1.22 "Inventory " means any "inventory," as such term is defined in
Section 9-109(4) of the UCC, wherever located, now or hereafter owned or
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest, and, in any event, shall include, without limitation, all inventory,
goods and other personal property which are held by or on behalf of Borrower for
sale or lease or are furnished or are to be furnished under a contract of
service or which constitute raw materials, work in process or materials used or
consumed or to be used or consumed in Borrower's business, or the processing,
packaging, promotion, delivery or shipping of the same, and all furnished goods
whether or not such inventory is listed on any schedules, assignments or reports
furnished to Lender from time to time and whether or not the same is in transit
or in the constructive, actual or exclusive occupancy or possession of Borrower
or is held by Borrower or by others for Borrower's account, including, without
limitation, all goods covered by purchase orders and contracts with suppliers
and all goods billed and held by suppliers and all inventory which may be
located on premises of Borrower or of any carriers, forwarding agents, truckers,
warehousemen, vendors, selling agents or other persons.
1.23 "License" means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest
and any renewals or extensions thereof.
1.24 "Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, xxxx, xxxx or charge of
any kind, whether voluntarily incurred or arising by operation of law or
otherwise, against any property, any conditional sale or other title retention
agreement, any lease in the nature of a security interest, and the filing of any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.
1.25 "Loan Documents" shall mean and include this Agreement, the Note(s),
and any other documents executed in connection with the Secured Obligations or
the transactions contemplated hereby, as the same may from time to time be
amended, modified, supplemented or restated, provided, that the Loan Documents
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shall not include any of the Excluded Agreements.
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1.26 "Material Adverse Effect" means a material adverse effect upon: (i)
the business, operations, properties, prospects, assets or conditions (financial
or otherwise) of
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Borrower; or (ii) the ability of Borrower to perform, or of Lender to enforce,
the Secured Obligations (other than limitations on Lender's ability to enforce
the Secured Obligations under the Subordination Agreement or any limitations
arising from conditions applicable to Lender but unrelated to Borrower's
performance hereunder).
1.27 "Maturity Date" means the date thirty-six (36) months from the
Advance Date of each installment of the Loan.
1.28 "Maximum Loan Amount" means one hundred twenty five percent (125%) of
the dollars invested by IVP in Borrower's Next Round not to exceed Three Million
Five Hundred Thousand and No/100 Dollars ($3,500,000.00).
1.29 "Merger Event" means a capital reorganization of the shares of the
Borrower's stock (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), or a merger or
consolidation of the Borrower with or into another corporation whether or not
the Borrower is the surviving corporation, or the sale of all or substantially
all of the Borrower's properties and assets to any other person.
1.30 "Next Round" means the Borrower's first private round of equity
financing in consummated on or after the date hereof which IVP shall have
invested a minimum of Two Million Dollars ($2,000,000.00).
1.31 "Patent License" means any written agreement granting any right with
respect to any invention on which a Patent is in existence now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter
acquires any interest.
1.32 "Patents" means all of the following now owned or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest:
(a) letters patent of, or rights corresponding thereto in, the United States or
any other county, all registrations and recordings thereof, and all applications
for letters patent of, or rights corresponding thereto in the United States or
any other country, including, without limitation, registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country;
(b) all reissues, continuations, continuations-in-part or extensions thereof;
(c) all xxxxx patents, divisionals, and patents of addition; and (d) all patents
to issue in any such applications.
1.33 "Permitted Liens" means any and all of the following: (i) liens in
favor of Lender, (ii) liens related to, or arising in connection with, Senior
Debt.
1.34 "Preferred Stock" means the Borrower's Series C Preferred Stock.
1.35 "Proceeds" means "proceeds," as such term is defined in Section 9-
306(1) of the UCC and, in any event, shall include, without limitation, (a) any
and all Accounts, Chattel Paper, Instruments, cash or other forms of money or
currency or other proceeds payable to Borrower from time to time in respect of
the Collateral, (b) any and all proceeds of any insurance, indemnity, warranty
or guaranty payable to Borrower from time to time with respect to any of the
Collateral, (c) any and all payments (in any form whatsoever) made or due and
payable to Borrower from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any
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Person acting under color of governmental authority), (d) any claim of Borrower
against third parties (i) for past, present or future infringement of any
Copyright, Patent or Patent License or (ii) for past, present or future
infringement or dilution of any Trademark or Trademark License or for injury to
the goodwill associated with any Trademark, Trademark registration or Trademark
licensed under any Trademark License and (e) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.
1.36 "Receivables" shall mean and include all of the Borrower's accounts,
instruments, documents, chattel paper and general intangibles whether secured or
unsecured, whether now existing or hereafter created or arising, and whether or
not specifically sold or assigned to Lender hereunder.
1.37 "Secured Obligations" shall mean and include all principal, interest,
fees, costs, or other liabilities or obligations for monetary amounts owed by
Borrower to Lender, whether due or to become due, matured or unmatured,
liquidated or unliquidated, contingent or non-contingent, and all covenants and
duties regarding such amounts, of any kind of nature, present or future, arising
under this Agreement, the Note(s), or any of the other Loan Documents, whether
or not evidenced by any Note(s), Agreement or other instrument, as the same may
from time to time be amended, modified, supplemented or restated, provided, that
the Secured Obligations shall not include any indebtedness or obligations of
Borrower arising under or in connection with the Excluded Agreements.
1.38 "Senior Creditor" means a bank, insurance company, pension fund, or
other institutional lender to be determined and identified to Lender in
accordance with the Subordination Agreement, or a syndication of such
institutional lenders that currently or in the future provides Senior Debt
financing to Borrower; provided, that Senior Creditor shall not include any
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officer, director, shareholder, venture capital investor, or insider of
Borrower, or any affiliate of the foregoing persons, except upon the express
written consent of Lender.
1.39 "Senior Debt" means any and all indebtedness and obligations for
borrowed money (including, without limitation, principal, premium (if any),
interest, fees charges, expenses, costs, professional fees and expenses, and
reimbursement obligations) at any time owing by Borrower to Senior Creditor
under the Senior Loan Documents, including, but not limited to such amounts as
may accrue or be incurred before or after default or workout or the commencement
of any liquidation, dissolution, bankruptcy, receivership or reorganization by
or against Borrower provided, that Senior Debt shall not include debt exceeding
One Million Five Hundred Thousand Dollars ($1,500,000.00) outstanding at any one
time without Lender's prior approval.
1.40 "Senior Loan Documents" means the loan agreement between Borrower and
Senior Creditor and any other agreement, security agreement, document,
promissory note, UCC financing statement, or instrument executed by Borrower in
favor of Senior Creditor pursuant to or in connection with the Senior Debt or
the loan agreement, as the same may from time to time be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.41 "Subordination Agreement" means the Subordination Agreement of even
date herewith, entered into between Borrower and Lender for the benefit of
Senior.
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1.42 "Trademark License" means any written agreement granting any right to
use any Trademark or Trademark registration now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
1.43 "Trademarks" means any of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (a) any and all trademarks, tradenames, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, designs
and general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and any applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof and (b) any reissues, extensions or
renewals thereof.
1.44 "UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Illinois. Unless otherwise defined
herein, terms that are defined in the UCC and used herein shall have the
meanings given to them in the UCC.
SECTION 2. THE LOANS
2.1 Subject to the closing of the Next Round, Lender agrees to lend to
Borrower an amount equal to one hundred twenty five percent (125%) of the
dollars invested by IVP in the Borrower's Next Round not to exceed Three Million
Five Hundred Thousand and No/100 Dollars ($3,500,000.00) in the aggregate at any
one time outstanding for the purposes and upon the terms and subject to the
conditions contained in this Agreement.
2.2 The Loan(s) shall be available in three (3) equal installments. Each
Advance made by Lender to Borrower shall be evidenced by a Note in the original
principal amount of such Advance. The principal balance of each Note shall bear
interest thereon precomputed at the rate of eleven percent (11%) per annum, and
each such Note shall be due and payable in twelve (12) equal monthly
installments of interest only, payable on the first day of each month, followed
by twenty four (24) equal monthly installments of principal and interest,
payable on the first day of each month, to and including the Maturity Date
(each, a "Payment Date"). If any payment under a Note shall be payable on a day
other than a business day, then such payment shall be due and payable on the
next succeeding business day.
2.3 In order to obtain an Advance under the Loans, Borrower shall
complete, sign and deliver an Advance Request to Lender. Each Advance Request
shall identify an Advance Date which is no less than five (5) business days from
the date of such notice. Upon receipt of an Advance Request, Lender shall
verify the information contained in the Advance Request and so long as the
criteria set forth in Section 4 are met Lender shall deliver a Note dated the
Advance Date evidencing such Advance to Borrower for signature. Upon receipt of
the signed Note, Lender will fund the Advance in the manner requested by the
Advance Request. Borrower agrees that Lender may rely on any notice given by
any Person it reasonably believes to be an authorized officer of Borrower
without the necessity of independent investigation.
2.4 Borrower shall have the option to prepay any Note, in whole or in
part, without premium after twelve (12) months from the Closing Date by paying
the principal amount thereon
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together with all accrued and unpaid interest with respect to such principal
amount, as of the date of such prepayment. If Borrower prepays a Note within
twelve (12) months from the Closing Date, Borrower shall pay the principal
amount together with all accrued and unpaid interest and a prepayment premium
equal to one percent (1%) of the then outstanding principal amount.
Notwithstanding the foregoing, (a) any such prepayment by the Borrower shall not
affect Lender's right to purchase as described in Section 8 herein and (b) in
the event of a prepayment in conjunction with or subsequent to an Initial Public
Offering, no premium or penalty shall apply.
2.5 (a) Notwithstanding any provision in this Agreement, the Note(s), or
any other Loan Document, it is not the parties' intent to contract for, charge
or receive interest at a rate that is greater than the maximum rate permissible
by law which a court of competent jurisdiction shall deem applicable hereto
(which under the laws of the State of Illinois shall be deemed to be the laws
relating to permissible rates of interest on commercial loans) (the "Maximum
Rate"). If the Borrower actually pays Lender an amount of interest, chargeable
on the total aggregate principal Secured Obligations of Borrower under this
Agreement and the Note(s) (as said rate is calculated over a period of time from
the date of this Agreement through the end of time that any principal is
outstanding on the Note(s)), which amount of interest exceeds interest
calculated at the Maximum Rate on said principal chargeable over said period of
time, then such excess interest actually paid by Borrower shall be applied
first, to the payment of principal outstanding on the Note(s); second, after all
principal is repaid, to the payment of Lender's out of pocket costs, expenses,
and professional fees which are owed by Borrower to Lender under this Agreement
or the Loan Documents; and third, after all principal, costs, expenses, and
professional fees owed by Borrower to Lender are repaid, the excess (if any)
shall be refunded to Borrower, and the effective rate of interest will be
automatically reduced to the Maximum Rate.
(b) In the event any interest is not paid when due hereunder,
delinquent interest shall be added to principal and shall bear interest on
interest, compounded at the rate set forth in Section 2.2.
(c) Upon and during the continuation of an Event of Default hereunder,
all Secured Obligations, including principal, interest, compounded interest, and
professional fees, shall bear interest at a rate per annum equal to the rate set
forth in Section 2.2 plus five percent (5%) per annum ("Default Rate").
SECTION 3. SECURITY INTEREST
As security for the prompt, complete and indefeasible payment when due
(whether at stated payment dates or otherwise) of all the Secured Obligations
and in order to induce Lender to make the Loan(s) upon the terms and subject to
the conditions of the Note(s), Borrower hereby assigns, conveys, mortgages,
pledges, hypothecates and transfers to Lender for security purposes only, and
hereby grants to Lender a security interest in, all of Borrower's right, title
and interest in, to and under each of the following (all of which being
hereinafter collectively called the "Collateral"):
(a) All Receivables;
(b) All Equipment;
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(c) All Fixtures;
(d) All General Intangibles;
(e) All Inventory;
(f) All other goods and personal property of Borrower whether tangible
or intangible and whether now or hereafter owned or existing, leased,
consigned by or to, or acquired by, Borrower and wherever located; and
(g) To the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for, and
rents, profits and products of each of the foregoing.
(h) The foregoing Collateral excludes Intellectual Property currently
held or hereafter obtained, including without limitation, the Borrower's
right, title and interest in or licenses to all patents, trademarks,
service marks, tradenames, copyrights, trade secrets, database or other
information, and any other proprietary rights or processes and any rights
to enforce or enjoy the benefits thereof, provided, however, in the event
Borrower grants to any other party a security interest in its Intellectual
Property, without Lender's prior written consent, Lender's security
interest shall be deemed to include Intellectual Property without any
further action on the part of the parties.
SECTION 4. CONDITIONS PRECEDENT TO LOAN
The obligations of the Lender to make Loans hereunder are subject to the
satisfaction by Borrower, or waiver by Lender, of the following conditions:
4.1 (a) The Advance Date for any installment shall occur on or before
January 30, 2000.
(b) Borrower shall have closed the Next Round to occur no later than
October 31, 1999.
4.2 Borrower, on or prior to the Closing Date, shall have delivered to
Lender the following:
(a) executed originals of the Agreement, the Subordination Agreement,
and any other documents reasonably required by Lender to effectuate the
liens of Lender with respect to all Collateral;
(b) certified copy of resolutions of Borrower's board of directors
evidencing approval of the borrowing and other transactions evidenced by
the Loan Documents;
(c) certified copies of the Articles of Incorporation and the Bylaws,
as amended through the Closing Date, of Borrower;
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(d) certificate of good standing for Borrower from its state of
incorporation and similar certificates from all other jurisdictions in
which it does business and where the failure to be qualified would have a
Material Adverse Effect;
(e) payment of the Facility Fee;
(f) such other documents as Lender may reasonably request.
4.2 On each Advance Date:
(a) The Lender shall have received (i) an Advance Request for such
Advance as required by Section 2.3, (ii) an executed Note evidencing such
Advance and (iii) any other documents Lender may reasonably request.
(b) The representations and warranties set forth in Section 5 hereof
shall be true and correct in all material respects on and as of the Advance Date
with the same effect as though made on and as of such date, except to the extent
such representations and warranties expressly relate to an earlier date.
(c) The Borrower shall be in compliance with all the terms and
provisions set forth herein and in each other Loan Document on its part to be
observed or performed, and at the time of and immediately after such Advance no
Event of Default shall have occurred and be continuing.
Each Advance Request shall be deemed to constitute a representation and warranty
by the Borrower on the Advance Date as to the matters specified in paragraphs
(b) and (c) of this Section 4.2.
4.3 Borrower shall deliver a certificate signed by its Chief Executive
Officer and Chief Financial Officer certifying that Borrower has achieved at
least seventy-five percent (75%) or more of its cumulative revenue and 125% or
less of its cumulative net loss projections as set forth in its Business Plan in
the six (6) month period prior to the Advance Date, attached hereto as Exhibit
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D.
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4.4 Perfection of Security Interests. Borrower shall have taken or caused
to be taken such actions requested by Lender to grant Lender a first priority
perfected security interest in the Collateral, subject only to Permitted Liens
(as to which Lender's interest will be secondary). Such actions shall include,
without limitation, the delivery to Lender of all appropriate financing
statements, executed by Borrower, as to the Collateral granted by Borrower for
all jurisdictions as may be necessary or desirable to perfect the security
interest of Lender in such Collateral.
4.5 Absence of Events of Defaults. As of the Closing Date or the Advance
Date, no fact or condition exists that would (or would, with the passage of
time, the giving of notice, or both) constitute an Event of Default under this
Agreement or any of the Loan Documents and no fact or condition exists that
would (or would, with the passage of time, the giving of notice, or both)
constitute a material default under the Senior Loan Documents between Borrower
and Senior Creditor.
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4.6 Material Adverse Effect. As of the Closing Date or the Advance Date,
no event which has had or could reasonably be expected to have a Material
Adverse Effect has occurred and is continuing.
4.7 Termination Date. Notwithstanding anything in this Agreement to the
contrary, Lender's obligations to provide the Loan(s) shall terminate on the
earlier of (i) January 30, 2000 or (ii) the occurrence of an Event of Default
pursuant to Section 9, and no Advance Requests shall be accepted after such
date.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents, warrants and agrees that:
5.1 Borrower owns all right title and interest in and to the Collateral,
free of all liens, security interests, encumbrances and claims whatsoever,
except for Permitted Liens.
5.2 Borrower has the full power and authority to, and does hereby grant
and convey to the Lender, a perfected security interest (when the requisite
financing statements are properly filed) in the Collateral as security for the
Secured Obligations, free of all liens, security interests, encumbrances and
claims, other than Permitted Liens and shall execute such Uniform Commercial
Code financing statements in connection herewith as the Lender may reasonably
request. Except for Permitted Liens, no other lien, security interest, adverse
claim or encumbrance has been created by Borrower or is known by Borrower to
exist with respect to any Collateral.
5.3 Borrower is a corporation duly organized, legally existing and in good
standing under the laws of the State of California, and is duly qualified as a
foreign corporation in all jurisdictions in which the nature of its business or
location of its properties require such qualifications and where the failure to
be qualified would have a Material Adverse Effect.
5.4 Borrower's execution, delivery and performance of the Note(s), this
Agreement, all financing statements, all other Loan Documents, required to be
delivered or executed in connection herewith, have been duly authorized by all
necessary corporate action of Borrower, the individual or individuals executing
the Loan Documents were duly authorized to do so; and the Loan Documents
constitute legal, valid and binding obligations of the Borrower, enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization or other similar laws generally affecting the
enforcement of the rights of creditors.
5.5 This Agreement and the other Loan Documents do not and will not
violate any provisions of Borrower's Articles of Incorporation, bylaws or any
contract, agreement, law, regulation, order, injunction, judgment, decree or
writ to which the Borrower is subject, or result in the creation or imposition
of any lien, security interest or other encumbrance upon the Collateral, other
than those created by this Agreement.
5.6 The execution, delivery and performance of this Agreement and the
other Loan Documents do not require the consent or approval of any other person
or entity including, without limitation, any regulatory authority or
governmental body of the United States or any state thereof or any political
subdivision of the United States or any state thereof.
11
5.7 No event which has had or could reasonably be expected to have a
Material Adverse Effect has occurred and is continuing.
5.8 No fact or condition exists that would (or would, with the passage of
time, the giving of notice, or both) constitute a material default under the
Senior Loan Documents.
5.9 (a) There are no actions, suits or proceedings at law or in equity or
by or before any governmental authority now pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any business, property
or rights of the Borrower (i) which involve any Loan Document or (ii) as to
which there is a reasonable possibility of an adverse determination and which,
if adversely determined, could, individually or in the aggregate, result in a
Material Adverse Effect.
(b) The Borrower is not in violation of any law, rule or regulation,
or in default with respect to any judgment, writ, injunction or decree of any
governmental authority, where such violation or default could result in a
Material Adverse Effect.
5.10 (a) The Borrower is not a party to any agreement or instrument or
subject to any corporate restriction that has resulted or could result in a
Material Adverse Effect.
(b) The Borrower is not in default in any manner under any provision
of any indenture or other agreement or instrument evidencing indebtedness, or
any other material agreement or instrument to which it is a party or by which it
or any of its properties or assets are or may be bound, where such default could
result in a Material Adverse Effect.
5.11 No information, report, financial statement, exhibit or schedule
furnished by or on behalf of the Borrower to the Lender in connection with the
negotiation of any Loan Document or included therein or delivered pursuant
thereto contained, contains or will contain any material misstatement of fact or
omitted, omits or will omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were, are
or will be made, not misleading.
5.12. All issued and outstanding shares of Common Stock, Preferred Stock
or any other securities of the Borrower have been duly authorized and validly
issued and are fully paid and nonassessable. All outstanding shares of Common
Stock, Preferred Stock and any other securities were issued in full compliance
with all Federal and state securities laws. In addition as of the Closing Date:
(i) The authorized capital stock of the Borrower consists of 8,706,250
shares of Common Stock, no par value (the "Common Stock"), of which
1,106,941 shares shall be issued and outstanding, and 1,293,750 shares of
Preferred Stock, of which 611,250 shares shall have been designated as
Series A Preferred Stock, 500,000 shares shall have been designated as
Series B Preferred Stock and 182,500 shares shall have been designated as
Series C Preferred Stock. 611,250 shares of Series A Preferred Stock and
500,000 shares of Series B Preferred Stock are issued and outstanding. No
shares of Series C Preferred Stock are outstanding prior to the closing of
the Next Round. All of the issued and outstanding
12
shares of Preferred Stock have been duly authorized and validly issued and
are fully paid and nonassessable. All of the issued and outstanding shares
of Preferred Stock have been duly authorized and validly issued and are
fully paid and nonassessable. All of the issued and outstanding shares of
Common Stock have been duly authorized and validly issued and are fully
paid and nonassessable. There have been from time to time an aggregate of
542,800 shares of Common Stock reserved for issuance under the Borrower's
1996 Stock Option Plan, of which 59,341 shares have been issued upon the
exercise of options, 212,590 shares are subject to outstanding options and
270,869 shares remain available for issuance. The Company has reserved
1,111,250 shares of Common Stock for issuance upon conversion of the
outstanding Preferred Stock. Except as set forth in this Agreement or
Borrower's Articles of Incorporation, and (i) outstanding options issued
pursuant to the Stock Plan, (ii) warrants to purchase up to an aggregate of
13,500 shares of Common Stock issued to Xxxxxxx X. Xxxxxxxxx and
Vrolyk/Power Express L.P on June 14, 1996, (iii) a warrant to purchase
preferred stock held by Lender , (iv)conversion rights of the outstanding
Series A and Series B Preferred Stock and (v) preemptive rights held by
certain shareholders pursuant to the Amended and Restated Shareholders
Agreement dated October 22, 1998 (the "Shareholders Agreement") (i) no
subscription, warrant, option, convertible security or other right
(contingent or otherwise) to purchase or acquire any shares of capital
stock of the Borrower is authorized or outstanding, (ii) the Borrower has
no obligation (contingent or otherwise) to issue any subscription, warrant,
option, convertible security or other such right or to issue or distribute
to holders of a share of its capital stock any evidences of indebtedness or
assets of the Borrower, and (iii) the Borrower has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any
shares of its capital stock or any interest therein or to pay any dividend
to make any other distribution in respect thereof. All of the issued and
outstanding securities or the Borrower have been offered, issued and sold
by the Borrower is compliance with applicable federal and state securities
laws.
(ii) In accordance with the Borrower's Articles of Incorporation,
other than as set forth in the Shareholders Agreement, no shareholder of
the Borrower has preemptive rights to purchase new issuances of the
Borrower's capital stock.
5.13 Borrower has filed and will file all tax returns, federal, state and
local, which it is required to file and has duly paid or fully reserved for all
taxes or installments thereof (including any interest or penalties) as and when
due, which have or may become due pursuant to such returns or pursuant to any
assessment received by Borrower for the three (3) years preceding the Closing
Date, if any (including any taxes being contested in good faith and by
appropriate proceedings).
SECTION 6. INSURANCE
6.1 So long as there are any Secured Obligations outstanding, Borrower
shall cause to be carried and maintained commercial general liability insurance
against risks customarily insured against in Borrower's line of business. Such
risks shall include, without limitation, the risks of death, bodily injury and
property damage. So long as there are any Secured Obligations outstanding,
Borrower shall also cause to be carried and maintained insurance upon the
Collateral and Borrower's business, covering casualty, hazard and such other
property risks in amounts equal to the full replacement cost of the Collateral.
Borrower shall deliver to Lender lender's loss payable endorsements (Form BFU
438 or equivalent) naming Lender as loss payee and additional insured. Borrower
shall use commercially reasonable efforts to cause all policies
13
evidencing such insurance to provide for at least thirty (30) days prior written
notice by the underwriter or insurance company to Lender in the event of
cancellation or expiration. Such policies shall be issued by such insurers and
in such amounts as is customary in Borrower's industry.
6.2 Borrower shall and does hereby indemnify and hold Lender, its agents
and shareholders harmless from and against any and all claims, costs, expenses,
damages and liabilities (including, without limitation, such claims, costs,
expenses, damages and liabilities based on liability in tort, including without
limitation, strict liability in tort), including reasonable attorneys' fees,
arising out of the disposition or utilization of the Collateral, other than
claims arising at or caused by Lender's negligence or willful misconduct.
SECTION 7. COVENANTS OF BORROWER
Borrower covenants and agrees as follows at all times while any of the
Secured Obligations remain outstanding:
7.1 Borrower shall furnish to Lender the financial statements listed
hereinafter, each prepared in accordance with generally accepted accounting
principles consistently applied (the "Financial Statements"):
(a) as soon as practicable (and in any event within forty-five (45)
days) after the end of each quarter, unaudited interim financial
statements as of the end of such quarter (prepared on a consolidated and
consolidating basis, if applicable), including balance sheet and related
statements of income and cash flows accompanied by a report detailing any
material contingencies (including the commencement of any material
litigation by or against Borrower) or any other occurrence that could
reasonably be expected to have a Material Adverse Effect, all certified by
Borrower's Chief Executive Officer or Chief Financial Officer to be true
and correct;
(b) as soon as practicable (and in any event within ninety (90) days)
after the end of each fiscal year, unqualified audited financial statements
as of the end of such year (prepared on a consolidated and consolidating
basis, if applicable), including balance sheet and related statements of
income and cash flows, and setting forth in comparative form the
corresponding figures for the preceding fiscal year, certified by a firm of
independent certified public accountants selected by Borrower and
reasonably acceptable to Lender, accompanied by any management report from
such accountants;
(c) promptly after the sending or filing thereof, as the case may be,
copies of any proxy statements, financial statements or reports which
Borrower has made available to its shareholders and copies of any regular,
periodic and special reports or registration statements which Borrower
files with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor, or any national securities
exchange which reports, to the extent setting forth quarterly or annual
financials results, may be furnished to Lender in lieu of the items
required under paragraph (a) and (b) above; and
(d) promptly, any additional information, financial or otherwise
(including, but not limited, to tax returns and names of principal
creditors) as Lender reasonably
14
believes necessary to evaluate Borrower's continuing ability to meet its
financial obligations.
7.2 Borrower shall permit any authorized representative of Lender and its
attorneys and accountants on reasonable prior written notice to inspect, examine
and make copies and abstracts of the books of account and records of Borrower at
reasonable times during normal business hours. In addition, such representative
of Lender and its attorneys and accountants shall have the right to meet with
management and officers of the Borrower to discuss such books of account and
records.
7.3 Borrower will from time to time execute, deliver and file, alone or
with Lender, any financing statements, security agreements or other documents;
procure any instruments or documents as may be reasonably requested by Lender;
and take all further action that may be necessary, or that Lender may reasonably
request, to confirm, perfect, preserve and protect the security interests
intended to be granted hereby, and in addition, and for such purposes only,
Borrower hereby authorizes Lender to execute and deliver on behalf of Borrower
and to file such financing statements, security agreement and other documents
without the signature of Borrower either in Lender's name or in the name of
Borrower as agent and attorney-in-fact for Borrower. The parties agree that a
carbon, photographic or other reproduction of this Agreement shall be sufficient
as a financing statement and may be filed in any appropriate office in lieu
thereof.
7.4 Borrower shall protect and defend Borrower's title as well as the
interest of the Lender against all persons claiming any interest adverse to
Borrower or Lender and shall at all times keep the Collateral free and clear
from any legal process, liens or encumbrances whatsoever (except any placed
thereon by Lender or Permitted Liens) and shall give Lender immediate written
notice thereof.
7.5 Without Lender's prior written consent, Borrower shall not, except in
the ordinary course of business consistent with past practices, (a) grant any
material extension of the time of payment of any of the Receivables, (b) to any
material extent, compromise, compound or settle the same for less than the full
amount thereof, (c) release, wholly or partly, any Person liable for the
payment thereof, or allow any credit or discount whatsoever thereon other than
trade discounts granted in the ordinary course of business of Borrower.
7.6 Borrower shall maintain and protect its properties, assets and
facilities, including without limitation, its Equipment and Fixtures, in good
order and working repair and condition (taking into consideration ordinary wear
and tear) and from time to time make or cause to be made all necessary and
proper repairs, renewals and replacements thereto and shall competently manage
and care for its property in accordance with prudent industry practices.
7.7 Borrower shall not merge with and into any other entity; or sell or
convey all or substantially all of its assets or stock to any other person or
entity without notifying Lender a minimum of thirty (30) days prior to the
closing date and requesting Lender's consent to the assignment of all of
Borrower's Secured Obligations hereunder to the successor entity in form and
substance satisfactory to Lender. In the event Lender does not consent to such
assignment the parties agree Borrower shall prepay the Loan in accordance with
Section 2.2 hereof provided that such consent by the Lender shall not be
required in any transaction in which the surviving entity has a Xxxxx'x Bond
rating of BA3 or better or a commercially acceptable equivalent
15
measure of creditworthiness as reasonably determined by Lender. Notwithstanding
the foregoing, this paragraph shall not apply to any merger effected for
purposes of changing Borrower's domicile.
7.8 Borrower shall not, without the prior written consent of Lender, such
consent not to be unreasonably withheld, declare or pay any cash dividend or
make a distribution, other than in Borrower's capital stock, on any class of
stock, other than pursuant to employee repurchase plans upon an employee's death
or termination of employment or transfer, sell, lease, lend or in any other
manner convey any equitable, beneficial or legal interest in any material
portion of the assets of Borrower (except inventory sold in the normal course of
business).
7.9 Upon the written request of Lender delivered reasonably in advance,
Borrower shall, during business hours, make the Inventory and Equipment
available to Lender for inspection at the place where it is normally located and
shall make Borrower's log and maintenance records pertaining to the Inventory
and Equipment available to Lender for inspection. Borrower shall take all
action necessary to maintain such logs and maintenance records in a correct and
complete fashion.
7.10 Borrower covenants and agrees to pay when due, all taxes, fees or
other charges of any nature whatsoever (together with any related interest or
penalties) now or hereafter imposed or assessed against Borrower, Lender or the
Collateral or upon Borrower's ownership, possession, use, operation or
disposition thereof or upon Borrower's rents, receipts or earnings arising
therefrom, except to the extent that such non-payment could not be reasonably
expected to have a Material Adverse Effect provided Borrower maintains adequate
reserves in accordance with GAAP therefor and provided further that Borrower
shall not be responsible for any taxes, fees or other charges arising from the
income of Lender. Borrower shall file on or before the due date therefor all
personal property tax returns in respect of the Collateral. Notwithstanding the
foregoing, Borrower may contest, in good faith and by appropriate proceedings,
taxes for which Borrower maintains adequate reserves therefor.
7.11 Borrower shall not relocate any item of the Collateral (other than
sale of inventory in the ordinary course of business) except: (i) with the prior
written consent of the Lender not to be unreasonably withheld; and (ii) if such
relocation shall be within the continental United States. If permitted to
relocate Collateral pursuant to the foregoing sentence, unless otherwise agreed
in writing by Lender, Borrower shall first (a) cause to be filed and/or
delivered to the Lender all Uniform Commercial Code financing statements,
certificates or other documents or instruments necessary to continue in effect
the perfected security interest of the Lender in the Collateral, and (b) have
given the Lender no less than thirty (30) days prior written notice of such
relocation.
7.12 In addition to any other rights granted pursuant to Section 8 of this
Agreement, Lender shall have the right to purchase shares of Borrower securities
of up to ten percent of the Maximum Loan Amount upon the occurrence of the Next
Round. Such right shall be upon the same terms and conditions as the other
investors in the Next Round.
7.13 Borrower shall not sell, transfer, assign, hypothecate or otherwise
encumber its Intellectual Property without Lender's prior written consent. In
the event Borrower grants a first security interest in its intellectual property
to another party, Borrower shall grant Lender a
16
secondary security interest in such intellectual property and shall execute the
necessary documents for Lender to perfect in such intellectual property.
SECTION 8. CONVERSION/PURCHASE OPTION
8.1 In addition to the right granted pursuant to Section 7.12 hereof,
Lender shall have the right to purchase shares of Borrower's Preferred Stock
with an aggregate value of up to twenty eight percent (28%) of the Maximum Loan
Amount (subject to increase as provided in Section 8.2) at any time subject to
the limits expressed herein, at Lender's sole and absolute discretion (the
"Conversion/Purchase Option"). The Conversion/Purchase Option shall be
exercisable by Lender at a purchase price as set forth below:
The Conversion/Purchase Option shall be exercisable by Lender at a
purchase price equal to one hundred fifteen (115%) of the price per
share of the Next Round, provided, however, IVP has invested a minimum
of Two Million Eight Hundred Thousand ($2,800,000) in the Next Round.
In the event that IVP invests less than Two Million Eight Hundred
Thousand ($2,800,000) in the Next Round, the price per share shall be
equal to the price per share paid by IVP in the Next Round.
Notwithstanding the foregoing, in the event that a corporate investor
invests at a lower price per share in the Next Round, the purchase
price will be equal to the per share paid by that corporate investor.
("Purchase Price ").
The number and purchase price of such shares are subject to adjustment as
provided in this Section 8.
The Conversion/Purchase Option will terminate upon the date thirty (30)
days from receipt by Lender of notice from Borrower of a Board of Directors'
approved Initial Public Offering or Merger Event, subject to the terms set
forth in Section 8.9 hereof.
8.2 If the Borrower has not repaid the outstanding principal amount under
a Note in its entirety by the Maturity Date (as defined in the applicable
Note(s)), then for each additional month, or portion thereof, thereafter that
the outstanding principal is not paid and during which time the Lender's
Conversion/Purchase Option is still outstanding, Lender shall have the right to
purchase from the Borrower, at the Purchase Price (adjusted, as set forth and
defined in Section 8.3 herein), an additional amount of Preferred Stock with a
value equal to the product of (x) the outstanding principal amount which is due
but unpaid and (y) one percent (1%).
8.3 The Purchase Price per share and the number of shares of Preferred
Stock purchasable hereunder are subject to adjustment, as follows:
(a) If the Borrower at any time shall, by combination,
reclassification, exchange or subdivision of the securities as to which purchase
rights under this Conversion/Purchase Option exist into the same or a different
number of securities of any other class or classes (including, without
limitation, the automatic conversion of the Borrower's outstanding Preferred
Stock pursuant to the Articles of Incorporation as then in effect), this
Conversion/Purchase Option shall thereafter represent the right to acquire such
number and kind of securities as would have been issuable as the result of such
change with respect to the
17
securities which were subject to the purchase rights under this
Conversion/Purchase Option immediately prior to such classification, exchange,
subdivision or other change.
(b) If the Borrower at any time shall combine or subdivide its
Preferred Stock, the Purchase Price shall be proportionately decreased in the
case of a subdivision, or proportionately increased in the case of a
combination.
(c) If the Borrower at any time shall pay a dividend payable in, or
make any other distribution (except any distribution specifically provided for
in the foregoing subsections (a) or (b)) of the Borrower's stock to the holders
of Preferred Stock, then the Purchase Price shall be adjusted, from and after
the record date of such dividend or distribution, to that price determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction (i) the numerator of which shall be the total number of all shares
of the Borrower's stock outstanding immediately prior to such dividend or
distribution, and (ii) the denominator of which shall be the total number of all
shares of the Borrower's stock outstanding immediately after such dividend or
distribution. The Lender shall thereafter be entitled to purchase, at the
Purchase Price resulting from such adjustment, the number of shares of Preferred
Stock (calculated to the nearest whole share) obtained by multiplying the
Purchase Price in effect immediately prior to such adjustment by the number of
shares of Preferred Stock issuable upon the exercise hereof immediately prior to
such adjustment and dividing the product thereof by the Purchase Price resulting
from such adjustment.
(d) Additional antidilution rights applicable to the Preferred Stock
purchasable hereunder are as set forth in the Borrower's Articles of
Incorporation, as amended through the date of this Agreement, a true and
complete copy of which is attached hereto as Exhibit E (the "Charter"). The
---------
Borrower shall promptly provide the Lender with any restatement, amendment,
modification or waiver of the Charter. The Borrower shall provide Lender with
prior written notice of any issuance of its stock or other equity security to
occur after the Effective Date of this Conversion/Purchase Option which is a
dilutive event (excluding shares issued or issuable under the Borrower's equity
benefit plan from time to time in effect or pursuant to warrants outstanding as
of the Closing Date), which notice shall include (i) the price at which such
stock or security is to be sold, (ii) the number of shares to be issued, and
(iii) such other information as necessary for Lender to calculate the dilutive
effect.
(e) If prior to the termination of exercise of the Conversion/Purchase
Option: (i) the Borrower shall declare any dividend or distribution upon its
stock, whether in cash, property, stock or other securities; (ii) there shall be
any Merger Event; (iii) there shall be an Initial Public Offering; or (iv) there
shall be any voluntary dissolution, liquidation or winding up of the Borrower;
then, in connection with each such event, the Borrower shall send to the Lender:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Borrower shall close or a record shall be taken for such dividend,
distribution, (specifying the date on which the holders of Preferred Stock shall
be entitled thereto) or for determining rights to vote in respect of such
dissolution, liquidation or winding up; (B) in the case of any such dissolution,
liquidation or winding up, at least twenty (20) days' prior written notice of
the date when the same shall take place (and specifying the date on which the
holders of Preferred Stock shall be entitled to exchange their Preferred Stock
for securities or other property deliverable upon dissolution, liquidation or
winding up); and (C) in the case of a Initial Public Offering or Merger Event,
the Borrower shall give the Lender at least twenty (20) days written notice
prior to the effective date thereof.
18
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Purchase Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Lender, at the address as shown on the books of the Lender.
(f) Failure to timely provide such notice required by subsection (e)
above shall entitle Lender to retain the benefit of the applicable notice period
notwithstanding anything to the contrary contained in any insufficient notice
received by Lender. The notice period shall begin on the date Lender actually
receives a written notice containing all the information specified above.
8.5 The Conversion/Purchase Option is exercisable by the Lender, in whole
or in part, at any time, or from time to time, prior to the earlier of thirty
(30) days after receipt of notice from Borrower of a Board of Directors'
approved (i) Initial Public Offering, or (ii) Merger Event. Lender may exercise
its Conversion/Purchase Option by tendering to the Borrower at its principal
office a notice of exercise in the form attached hereto as Exhibit F (the
---------
"Notice of Purchase"), duly completed and executed together with payment of the
Purchase Price by tender of one or more Note(s), the outstanding principal and
interest of which shall be credited against the Purchase Price, with the
balance, of the Purchase Price after conversion of all outstanding Notes payable
in cash or by check as provided above. In such event, the Note(s) so tendered
will be deemed satisfied in full and will be cancelled by the Borrower and the
Borrower will have no further obligation to the Lender under such Note(s). It
is understood and agreed that in connection with any exercise of Lender's
Conversion/Purchase Option, Lender shall first be required to surrender and
convert the balance of any outstanding Notes in payment thereof before Lender
will be permitted to purchase shares through Lender's payment of additional
funds. To the extent that the Purchase Price is less than the balance of the
surrendered Notes(s), in connection with Lender's exercise of the
Conversion/Purchase Option, Borrower shall execute and deliver a replacement
Note reflecting the amount by which the outstanding balances on the converted
Note(s) exceeded the applicable Purchase Price.
Promptly upon receipt of the Notice of Purchase and the payment of the
Purchase Price in accordance with the terms set forth below, Borrower shall
execute the acknowledgment of exercise in the form attached hereto as Exhibit G
---------
(the "Acknowledgment of Purchase") indicating the number of shares which remain
subject to future purchases, if any. Subject to Lender's right of recission of
its election pursuant to Section 8.9, no later than twenty-one (21) days
thereafter, the Borrower shall issue to the Lender a certificate for the number
of shares of Preferred Stock purchased.
8.6 (a) During the term of this Conversion/Purchase Option, the Borrower
will at all times have authorized and reserved a sufficient number of shares of
its Preferred Stock (or other security for which the Purchase Option may then be
exercised)to provide for the exercise of the rights to purchase Preferred Stock
(or other security for which the Purchase Option may then be exercised) as
provided for herein.
(b) If any shares of Preferred Stock required to be reserved hereunder
require registration with or approval of any governmental authority under any
Federal or State law (other than any registration under the Securities Act of
1933, as amended ("1933 Act"), as then in
19
effect, or any similar Federal statute then enforced, or any state securities
law, required by reason of any transfer involved in such purchase), or listing
on any domestic securities exchange, before such shares may be issued upon
purchase, the Borrower will, at its expense and as expeditiously as possible,
use its best efforts to cause such shares to be duly registered, listed or
approved for listing on such domestic securities exchange, as the case may be.
8.7 No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Conversion/Purchase Option, but in lieu of such
fractional shares the Borrower shall make a cash payment therefor upon the basis
of the Purchase Price then in effect.
8.8 This Conversion/Purchase Option does not entitle the Lender to any
voting rights or other rights as a shareholder of the Borrower prior to the
exercise of the Conversion/Purchase Option.
8.9 In the event Lender has exercised the Conversion/Purchase Option based
upon receipt of notice from Borrower of a Board of Directors' approved Initial
Public Offering or Merger Event and if such transaction is not consummated, the
Borrower shall promptly notify the Lender that such proposed transaction has
been terminated, and the Lender may rescind any exercise of its
Conversion/Purchase Option promptly after such notice of termination of the
proposed transaction.
SECTION 9. DEFAULT
The occurrence of any one or more of the following events (herein called
"Events of Default") shall constitute a default hereunder and under the Note(s)
and other Loan Documents:
9.1 Borrower defaults in the payment of any principal, interest or other
Secured Obligation involving the payment of money under this Agreement, the
Note(s) or any of the other Loan Documents, and such default continues for more
than five (5) days after the due date thereof; or
9.2 Borrower defaults in the performance of any other covenant or Secured
Obligation of Borrower hereunder or under the Note(s) or any of the other Loan
Documents, and such default continues for more than twenty (20) days after
Lender has given notice of such default to Borrower.
9.3 Any representation or warranty made herein by Borrower shall prove to
have been false or misleading in any material respect; or
9.4 Borrower shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
shall file a voluntary petition in bankruptcy, or shall file any petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation pertinent to such circumstances, or shall seek
or consent to or acquiesce in the appointment of any trustee, receiver, or
liquidator of Borrower or of all or any substantial part (33-1/3% or more) of
the properties of Borrower; or Borrower or its directors or majority
shareholders shall take any action initiating the dissolution or liquidation of
Borrower; or
20
9.5 Sixty (60) days shall have expired after the commencement of an action
by or against Borrower seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, without such action being dismissed or all
orders or proceedings thereunder affecting the operations or the business of
Borrower being stayed; or a stay of any such order or proceedings shall
thereafter be set aside and the action setting it aside shall not be timely
appealed; or Borrower shall file any answer admitting or not contesting the
material allegations of a petition filed against Borrower in any such
proceedings; or the court in which such proceedings are pending shall enter a
decree or order granting the relief sought in any such proceedings; or
9.6 Sixty (60) days shall have expired after the appointment, without the
consent or acquiescence of Borrower, of any trustee, receiver or liquidator of
Borrower or of all or any substantial part of the properties of Borrower without
such appointment being vacated; or
9.7 The material default by Borrower under any Excluded Agreement(s), any
other promissory note or agreement for borrowed money, or any other agreement
between Borrower and Lender if such material default is not cured within the
applicable cure period or waived; or
9.8 The occurrence of any material default under any lease or other
agreement or obligation of Borrower involving an amount in excess of $100,000.00
or having a Material Adverse Effect if such material default is not cured within
the applicable cure period or waived; or the entry of any judgment against
Borrower involving an award in excess of $100,000.00 that would have a Material
Adverse Effect, that has not been bonded or stayed on appeal within thirty (30)
days; or
9.9 The occurrence of any material default under the Senior Loan
Documents if such material default is not cured within the applicable cure
period or waived.
SECTION 10. REMEDIES
Upon the occurrence of any one or more Events of Default, Lender, at its
option, may declare the Note and all of the other Secured Obligations to be
accelerated and immediately due and payable (provided, that upon the occurrence
--------
of an Event of Default of the type described in Sections 9.4 or 9.5, the Note(s)
and all of the other Secured Obligations shall automatically be accelerated and
made due and payable without any further act), whereupon the unpaid principal of
and accrued interest on such Note(s) and all other outstanding Secured
Obligations shall become immediately due and payable, and shall thereafter bear
interest at the Default Rate set forth in, and calculated according to, Section
2.5 (c) of this Agreement. Subject to the rights of any Senior Creditor, Lender
may exercise all rights and remedies with respect to the Collateral under the
Loan Documents or otherwise available to it under applicable law, including the
right to release, hold or otherwise dispose of all or any part of the Collateral
and the right to occupy, utilize, process and commingle the Collateral.
Upon the happening and during the continuance of any Event of Default,
Lender may then, or at any time thereafter and from time to time, apply,
collect, sell in one or more sales, lease or otherwise dispose of, any or all of
the Collateral, in its then condition or following any commercially reasonable
preparation or processing, in such order as Lender may elect, and any such sale
may be made either at public or private sale at its place of business or
elsewhere.
21
Borrower agrees that any such public or private sale may occur upon ten (10)
calendar days' prior written notice to Borrower. Lender may require Borrower to
assemble the Collateral and make it available to Lender at a place designated by
Lender which is reasonably convenient to Lender and Borrower. The proceeds of
any sale, disposition or other realization upon all or any part of the
Collateral shall be distributed by Lender in the following order of priorities:
First, to Lender in an amount sufficient to pay in full Lender's costs and
professionals' and advisors' fees and expenses;
Second, to Lender in an amount equal to the then unpaid amount of the
Secured Obligations in such order and priority as Lender may choose in its
sole discretion; and
Finally, upon payment in full of all of the Secured Obligations, to
Borrower or its representatives or as a court of competent jurisdiction may
direct.
Lender shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it complies with the
obligations of a secured party under Section 9-207 of the UCC.
Lender's rights and remedies hereunder are subject to the terms of the
Subordination Agreement.
SECTION 11. MISCELLANEOUS
11.1 Continuation of Security Interest. This is a continuing Agreement
and the grant of a security interest hereunder shall remain in full force and
effect and all the rights, powers and remedies of Lender hereunder shall
continue to exist until the Secured Obligations are paid in full as the same
become due and payable and until Lender has executed a written termination
statement (which Lender shall execute within a reasonable time after full
payment of the Secured Obligations hereunder), reassigning to Borrower, without
recourse, the Collateral and all rights conveyed hereby and returning possession
of the Collateral to Borrower. The rights, powers and remedies of Lender
hereunder shall be in addition to all rights, powers and remedies given by
statute or rule of law and are cumulative. The Purchase of any one or more of
the rights, powers and remedies provided herein shall not be construed as a
waiver of or election of remedies with respect to any other rights, powers and
remedies of Lender.
11.2 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective only to the extent
and duration of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
11.3 Notice. Except as otherwise provided herein, all notices and service
of process required, contemplated, or permitted hereunder or with respect to the
subject matter hereof shall be in writing, and shall be deemed to have been
validly served, given or delivered upon the earlier of: (i) the first business
day after transmission by facsimile or hand delivery or deposit with an
overnight express service or overnight mail delivery service; or (ii) the fifth
calendar day after deposit in the United States mails, with proper first class
postage prepaid, and shall be addressed to the party to be notified as follows:
22
(a) If to Lender:
------------
COMDISCO VENTURES
Attention: Xxxxx X. Xxxx
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
With a copy to:
--------------
COMDISCO, INC.
Legal Department
Attention: General Counsel
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
COMDISCO, INC./COMDISCO VENTURES
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
(b) If to Borrower:
--------------
BATTERY EXPRESS, INC.
Attention: Chief Financial Officer
0000 Xxxx Xxxxx
Xxxx, XX 00000
Facsimile: (000) 000-0000
Phone: (000) 000-0000
or to such other address as each party may designate for itself by like notice.
11.4 Entire Agreement; Amendments. This Agreement, the Note(s), and the
other Loan Documents constitute the entire agreement and understanding of the
parties hereto in respect of the subject matter hereof and thereof, and
supersede and replace in their entirety any prior proposals, term sheets,
letters, negotiations or other documents or agreements, whether written or oral,
with respect to the subject matter hereof or thereof (including, without
limitation, Lender's proposal letter dated July 16, 1999, all of which are
merged herein and therein. None of the terms of this Agreement, the Note(s) or
any of the other Loan Documents may be amended except by an instrument executed
by each of the parties hereto.
11.5 Headings. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
23
11.6 No Waiver. The powers conferred upon Lender by this Agreement are
solely to protect its interest in the Collateral and shall not impose any duty
upon Lender to exercise any such powers. No omission, or delay, by Lender at
any time to enforce any right or remedy reserved to it, or to require
performance of any of the terms, covenants or provisions hereof by Borrower at
any time designated, shall be a waiver of any such right or remedy to which
Lender is entitled, nor shall it in any way affect the right of Lender to
enforce such provisions thereafter.
11.7 Survival. All agreements, representations and warranties contained
in this Agreement, the Note(s) and the other Loan Documents or in any document
delivered pursuant hereto or thereto shall be for the benefit of Lender and
shall survive the execution and delivery of this Agreement and the expiration or
other termination of this Agreement.
11.8 Successor and Assigns. The provisions of this Agreement and the
other Loan Documents shall inure to the benefit of and be binding on Borrower
and its permitted assigns (if any). Borrower shall not assign its obligations
under this Agreement, the Note(s) or any of the other Loan Documents without
Lender's express written consent, and any such attempted assignment shall be
void and of no effect; provided that no consent shall be necessary with respect
to the assignment hereof in connection with Borrower's contemplated re-
incorporation into the State of Delaware. Lender may assign, transfer, or
endorse its rights hereunder and under the other Loan Documents without prior
notice to Borrower, and all of such rights shall inure to the benefit of
Lender's successors and assigns.
11.9 Further Indemnification. Borrower agrees to pay, and to save Lender
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all excise, sales or other similar taxes which may be
payable or determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Agreement.
11.10 Governing Law. This Agreement, the Note(s) and the other Loan
Documents have been negotiated and delivered to Lender in the State of Illinois,
and shall not become effective until accepted by Lender in the State of
Illinois. Payment to Lender by Borrower of the Secured Obligations is due in
the State of Illinois. This Agreement, the Note(s) and the other Loan Documents
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Illinois, excluding conflict of laws principles that would cause
the application of laws of any other jurisdiction.
11.11 Consent To Jurisdiction And Venue. All judicial proceedings arising
in or under or related to this Agreement, the Note(s) or any of the other Loan
Documents may be brought in any state or federal court of competent jurisdiction
located in the State of Illinois. By execution and delivery of this Agreement,
each party hereto generally and unconditionally: (a) consents to personal
jurisdiction in Xxxx County, State of Illinois; (b) waives any objection as to
jurisdiction or venue in Xxxx County, State of Illinois; (c) agrees not to
assert any defense based on lack of jurisdiction or venue in the aforesaid
courts; and (d) irrevocably agrees to be bound by any judgment rendered thereby
in connection with this Agreement, the Note(s) or the other Loan Documents.
Service of process on any party hereto in any action arising out of or relating
to this agreement shall be effective if given in accordance with the
requirements for notice set forth in Section 11.3, above and shall be deemed
effective and received as set forth in Section 11.3, above. Nothing herein
shall affect the right to serve process in any other manner permitted by
24
law or shall limit the right of either party to bring proceedings in the courts
of any other jurisdiction.
11.12 Mutual Waiver Of Jury Trial. Because disputes arising in connection
with complex financial transactions are most quickly and economically resolved
by an experienced and expert person and the parties wish applicable state and
federal laws to apply (rather than arbitration rules), the parties desire that
their disputes be resolved by a judge applying such applicable laws. EACH OF
BORROWER AND LENDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY
OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR
ANY OTHER CLAIM (COLLECTIVELY, "CLAIMS") ASSERTED BY BORROWER AGAINST LENDER OR
ITS ASSIGNEE AND/OR BY LENDER OR ITS ASSIGNEE AGAINST BORROWER. This waiver
extends to all such Claims, including, without limitation, Claims which involve
persons or entities other than Borrower and Lender; Claims which arise out of or
are in any way connected to the relationship between Borrower and Lender; and
any Claims for damages, breach of contract arising out of this Agreement, any
other Loan Document or any of the Excluded Agreements, specific performance, or
any equitable or legal relief of any kind.
11.13 Confidentiality. Lender acknowledges that certain items of
Collateral, including, but not limited to trade secrets, source codes, customer
lists and certain other items of Intellectual Property, and any Financial
Statements provided pursuant to Section 7 hereof, constitute proprietary and
confidential information of the Borrower (the "Confidential Information").
Accordingly, Lender agrees that any Confidential Information it may obtain in
the course of acquiring, perfecting or foreclosing on the Collateral or
otherwise provided under this Agreement, provided such Confidential Information
is marked as confidential by Borrower at the time of disclosure, shall be
received in the strictest confidence and will not be disclosed to any other
person or entity in any manner whatsoever, in whole or in part, without the
prior written consent of the Borrower, unless and until Lender has acquired
indefeasible title thereto.
11.14 Counterparts. This Agreement and any amendments, waivers, consents
or supplements hereto may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
25
IN WITNESS WHEREOF, the Borrower and the Lender have duly executed and delivered
this Agreement as of the day and year first above written.
BORROWER: BATTERY EXPRESS, INC.
Signature: /s/ Xxxx Xxxxxxx
------------------------------
Print Name: Xxxx Xxxxxxx
------------------------------
Title: CFO
------------------------------
Accepted in Rosemont, Illinois:
------------------------------
LENDER: COMDISCO, INC.
Signature: /s/ Xxxx X. Xxxxxx
------------------------------
Print Name: Xxxx X. Xxxxxx
------------------------------
Title: Senior Vice President
------------------------------
26
Exhibit C
Advance Request
Date: ___________, 1999
To: Lender:
Comdisco, Inc.
% Comdisco Ventures
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Vika Tonga
Facsimile (000) 000-0000
Borrower hereby requests from Comdisco, Inc. ("Lender") an Advance in the
amount of $__________________ on ______________, 1999 (the "Advance Date") under
that Subordinated Loan and Security Agreement between Borrower and Lender dated
July 30, 1999 (the "Agreement").
Please:
(a) Issue a check payable to Borrower ________
or
(b) Wire Funds to Borrower's account ________
Bank:_________________________________
Address:______________________________
______________________________
ABA Number:___________________________
Account Number:_______________________
Account Name:_________________________
Borrower hereby represents that the Conditions Precedent to Loan set forth
in Section 4 of the Agreement are satisfied and will be satisfied upon the
making of such Loans, except and to the extent described on Schedule 1 to this
Advance Request. Borrower understands and acknowledges that Lender has the
right to review such Schedule and based upon such review in its sole discretion
Lender may decline to fund the requested Advance.
Executed this ___ day of __________, 199__ by:
BORROWER: BATTERY EXPRESS, INC.
BY: ______________________________
TITLE:______________________________
PRINT:______________________________
27
EXHIBIT F
NOTICE OF EXERCISE OF PURCHASE OPTION
TO: ________ ("Borrower")
(1) The undersigned Lender hereby elects to exercise its Purchase Option with
respect to _______ shares of the Series C Preferred Stock of Borrower,
pursuant to the terms of the Subordinated Loan and Security Agreement dated
the 30th day of July, 1999 (the "Loan Agreement") between Borrower and the
Lender, and tenders herewith payment of the purchase price for such shares
in full, together with all applicable transfer taxes, if any.
(2) In exercising its rights with respect to the Purchase Option, the
undersigned hereby represents and warrants to Borrower as follows:
(a) The right to acquire Preferred Stock or the Preferred Stock issuable
upon exercise of the Lender's rights contained herein will be acquired for
investment and not with a view to the sale or distribution of any part thereof,
and the Lender has no present intention of selling or engaging in any public
distribution of the same except pursuant to a registration or exemption.
(b) The Lender understands (i) that the Preferred Stock issuable upon
exercise of its Purchase Option is not registered under the 1933 Act nor
qualified under applicable state securities laws on the ground that the issuance
contemplated by its Purchase Option will be exempt from the registration and
qualifications requirements thereof, and (ii) that the Borrower's reliance on
such exemption is predicated on the representations set forth in this notice.
(c) The Lender has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its investment,
and has the ability to bear the economic risks of its investment.
(d) The Lender understands that if the Borrower does not register with the
Securities and Exchange Commission pursuant to Section 12 of the 1934 Act (the
"1934 Act"), or file reports pursuant to Section 15(d), of the 1934 Act, or if a
registration statement covering the securities under the 1933 Act is not in
effect when it desires to sell (i) the rights to purchase Preferred Stock
pursuant to this its Purchase Option, or (ii) the Preferred Stock issuable upon
exercise of the right to purchase, if may be required to hold such securities
for an indefinite period. The Lender also understands that any sale of its
rights of the Lender to purchase Preferred Stock or Preferred Stock which might
be made by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
(e) Lender is an "accredited investor" within the meaning of the Securities
and Exchange Rule 501 of Regulation D, as presently in effect.
(3) Subject to our review and acceptance of your Acknowledgement Certificate
with respect to this Notice, please issue a certificate or certificates
representing said shares of Series C Preferred Stock (or other security for
which our Purchase Option is currently exercisable
28
under the terms of the Loan Agreement) in the name of the undersigned or in
such other name as is specified below.
_________________________________
(Name)
_________________________________
(Address)
Lender: COMDISCO, INC.
By: _________________________
Title: _________________________
Date: _________________________
29
EXHIBIT G
ACKNOWLEDGMENT OF RECEIPT OF NOTICE
OF EXERCISE OF PURCHASE OPTION
The undersigned ________ ("Borrower") hereby acknowledges receipt of the
"Notice of Purchase" from Comdisco, Inc. ("Lender") to exercise its Purchase
Option with respect to ____ shares of the Series C Preferred Stock of
_________________, pursuant to the terms of the Subordinated Loan and Security
Agreement dated July 30, 1999 (the "Agreement"). Borrower further acknowledges
that ______ shares remain subject to purchase under the terms of the Agreement.
In connection with such Purchase Option the undersigned hereby represents,
warrants and agrees as follows:
(a) All representations and warranties of the Borrower made pursuant to the
Agreement are true and correct in all material respects on and as of the date of
this Acknowledgment with the same effect as though made on and as of this date
(except as set forth in Schedule 1 to this Acknowledgment or with respect to
representations made as to a particular date).
(b) The Preferred Stock issuable upon exercise of the Lender's rights has
been duly and validly reserved and, when issued in accordance with the
provisions of the Purchase Option, will be validly issued, fully paid and non-
assessable, and will be free of any taxes, liens, charges or encumbrances of any
nature whatsoever; provided, however, that the Preferred Stock issuable pursuant
to the Purchase Option may be subject to restrictions on transfer under state
and/or Federal securities laws. The Borrower has made available to the Lender
true, correct and complete copies of its Charter and Bylaws, as amended. The
issuance of certificates for shares of Preferred Stock upon Purchase of the
Purchase Option shall be made without charge to the Lender for any issuance tax
in respect thereof, or other cost incurred by the Borrower in connection with
such Purchase and the related issuance of shares of Preferred Stock. The
Borrower shall not be required to pay any tax which may be payable in respect of
any transfer involved and the issuance and delivery of any certificate in a name
other than that of the Lender.
(c) The issuance to Lender of the right to acquire the shares of Preferred
Stock, has been duly authorized by all necessary corporate action on the part of
the Borrower, and the Purchase Option is not inconsistent with the Borrower's
Charter or Bylaws, does not contravene any law or governmental rule, regulation
or order applicable to it, does not and will not contravene any provision of, or
constitute a default under, any indenture, mortgage, contract or other
instrument to which it is a party or by which it is bound, and the Purchase
Option constitutes a legal, valid and binding agreement of the Borrower,
enforceable in accordance with its terms.
(d) No consent or approval of, giving of notice to, registration with, or
taking of any other action in respect of any state, Federal or other
governmental authority or agency is required with respect to the execution,
delivery and performance by the Borrower of its obligations under the Purchase
Option, except for the filing of notices pursuant to Regulation D
30
under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(e) Except as set forth in Borrower's Amended and Restated Registration
Rights Agreement, the Borrower is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
1933 Act any of its presently outstanding securities or any of its securities
which may hereafter be issued.
(f) Subject to the accuracy of the Lender's representations in its Notice,
the issuance of the Preferred Stock upon exercise of the Purchase Option will
constitute a transaction exempt from (i) the registration requirements of
Section 5 of the 1933 Act, in reliance upon Section 4(2) thereof, and (ii) the
qualification requirements of the applicable state securities laws.
(g) If Lender proposes to sell Preferred Stock issuable upon the exercise
of the Purchase Option in compliance with Rule 144 promulgated by the Securities
and Exchange Commission, the Borrower shall furnish to the Lender, within ten
days after receipt of a written request, a written statement confirming the
Borrower's compliance with the filing requirements of the Securities and
Exchange Commission as set forth in such Rule, as such Rule may be amended from
time to time.
Borrower acknowledges that Lender has the right to review Schedule 1 to
this Certificate and that Lender may in its sole discretion withdraw its notice
of exercise of Purchase Option within the ten business days after Lender's
receipt of this Acknowledgment.
Borrower: BATTERY EXPRESS, INC.
By: _________________________
Title: _________________________
Date: _________________________
31
