Exhibit 10.19
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LOAN AGREEMENT
Dated as of March 26, 1997
between
IMGIS, INC.
as Borrower,
and
VENTURE LENDING & LEASING, INC.,
as Lender
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TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS...........................................................................................1
ARTICLE 2 - THE COMMITMENT AND LOANS..............................................................................4
2.1 THE COMMITMENT.......................................................................................4
2.2 LIMITATION ON LOANS..................................................................................5
2.3 NOTES EVIDENCING LOANS; REPAYMENT....................................................................5
2.4 PROCEDURES FOR BORROWING.............................................................................5
2.5 INTEREST.............................................................................................6
2.6 TERMINAL PAYMENT.....................................................................................6
2.7 INTEREST RATE CALCULATION............................................................................6
2.8 DEFAULT INTEREST.....................................................................................6
2.9 LENDER'S RECORDS.....................................................................................6
2.10 SECURITY............................................................................................6
2.11 ISSUANCE OF WARRANT TO LENDER.......................................................................6
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES........................................................................7
3.1 DUE ORGANIZATION.....................................................................................7
3.2 AUTHORIZATION, VALIDITY AND ENFORCEABILITY...........................................................7
3.3 COMPLIANCE WITH APPLICABLE LAWS......................................................................7
3.4 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES.........................................................7
3.5 NO CONFLICT..........................................................................................7
3.6 NO LITIGATION, CLAIMS OR PROCEEDINGS.................................................................8
3.7 CORRECTNESS OF FINANCIAL STATEMENTS..................................................................8
3.8 NO SUBSIDIARIES......................................................................................8
3.9 NO EVENT OF DEFAULT..................................................................................8
3.10 FULL DISCLOSURE.....................................................................................8
ARTICLE 4 - CONDITIONS PRECEDENT..................................................................................8
4.1 CONDITIONS TO FIRST LOAN.............................................................................8
4.2 CONDITIONS TO ALL LOANS..............................................................................9
ARTICLE 5 - AFFIRMATIVE COVENANTS.................................................................................9
5.1 NOTICE TO LENDER.....................................................................................9
5.2 FINANCIAL STATEMENTS................................................................................10
5.3 MANAGERIAL ASSISTANCE FROM LENDER...................................................................11
5.4 EXISTENCE...........................................................................................11
5.5 INSURANCE...........................................................................................11
5.6 ACCOUNTING RECORDS..................................................................................11
5.7 COMPLIANCE WITH LAWS................................................................................11
5.8 TAXES AND OTHER LIABILITIES.........................................................................12
5.9 USE OF PROCEEDS.....................................................................................12
ARTICLE 6 - NEGATIVE COVENANTS...................................................................................12
6.1 INDEBTEDNESS........................................................................................12
6.2 LIENS...............................................................................................12
6.3 DIVIDENDS...........................................................................................12
6.4 CHANGES/MERGERS.....................................................................................12
6.5 SALES OF ASSETS.....................................................................................13
6.6 LOANS/INVESTMENTS...................................................................................13
6.7 TRANSACTIONS WITH RELATED PERSONS...................................................................13
ARTICLE 7 - EVENTS OF DEFAULT....................................................................................13
7.1 EVENTS OF DEFAULT...................................................................................13
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ARTICLE 8 - GENERAL PROVISIONS...................................................................................14
8.1 NOTICES.............................................................................................14
8.2 BINDING EFFECT......................................................................................15
8.3 NO WAIVER...........................................................................................15
8.4 RIGHTS CUMULATIVE...................................................................................15
8.5 UNENFORCEABLE PROVISIONS............................................................................15
8.6 ACCOUNTING TERMS....................................................................................15
8.7 INDEMNIFICATION; EXCULPATION........................................................................15
8.8 REIMBURSEMENT.......................................................................................16
8.9 EXECUTION IN COUNTERPARTS...........................................................................16
8.10 ENTIRE AGREEMENT...................................................................................16
8.11 GOVERNING LAW AND JURISDICTION.....................................................................16
8.12 WAIVER OF JURY TRIAL...............................................................................17
LIST OF EXHIBITS
Exhibit "A" Form of Note
Exhibit "B" Form of Borrowing Request
Exhibit "C" Security Agreement
Exhibit "D" Form of Warrant
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LOAN AGREEMENT
This LOAN AGREEMENT is entered into as of March 26, 1997,
between IMGIS, INC., a California corporation ("Borrower"), and VENTURE LENDING
& LEASING, INC., a Maryland corporation ("VLLI" or "Lender").
WHEREAS, Lender has agreed to make available to Borrower a
term loan facility upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
The definitions appearing in this Agreement or any supplement
or addendum to this Agreement, shall be applicable to both the singular and
plural forms of the defined terms:
"AFFILIATE" means any Person which directly or indirectly
controls, is controlled by, or is under common control with Borrower. "Control,"
"controlled by" and "under common control with" mean direct or indirect
possession of the power to direct or cause the direction of management or
policies (whether through ownership of voting securities, by contract or
otherwise); provided, that control shall be conclusively presumed when any
Person or affiliated group directly or indirectly owns ten percent (10%) or more
of the securities having ordinary voting power for the election of directors of
a corporation.
"AGREEMENT" means this Loan Agreement as it may be amended or
supplemented from time to time.
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. ss.101, eT Seq.), as amended.
"BASIC INTEREST" means the fixed rate of interest payable on
the outstanding balance of each Loan at the applicable Designated Rate.
"BORROWING DATE" means the Business Day on which the proceeds
of a Loan are disbursed by Lender.
"BORROWING REQUEST" means a written request from Borrower in
substantially the form of EXHIBIT "B" hereto, requesting the funding of one or
more Loans on a particular Borrowing Date.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City or San Francisco are
authorized or required by law to close.
"CLOSING DATE" means the date of this Agreement.
"COLLATERAL" has the meaning ascribed thereto in the Security
Agreement.
"COMMITMENT" means the obligation of Lender to make Loans to
Borrower in an aggregate, original principal amount not exceeding Two Million
Dollars ($2,000,000). The Commitment shall be divided into two parts. The
Initial Availability (the "Initial Availability") shall be for the original
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principal amount of a loan or loans not exceeding $1,000,000. The Remaining
("Remaining Availability") amount shall be for an additional principal amount of
$1,000,000 and shall automatically become available, subject to section 4.2 of
this Agreement, upon the closing of additional venture capital equity financing
of at least $1,000,000.
"DEFAULT" means an event which with the giving of notice,
passage of time, or both would constitute an Event of Default.
"DEFAULT RATE" is defined in SECTION 2.8.
"DESIGNATED RATE" means a fixed rate of interest per annum of
nine and 75/100 percent (9.75%) applicable to a Loan.
"ENVIRONMENTAL LAWS" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any governmental
authorities, in each case relating to environmental, health, or safety matters.
"EVENT OF DEFAULT" means any event described in Article 7.
"GAAP" means generally accepted accounting principles and
practices consistent with those principles and practices promulgated or adopted
by the Financial Accounting Standards Board and the Board of the American
Institute of Certified Public Accountants, their respective predecessors and
successors. Each accounting term used but not otherwise expressly defined herein
shall have the meaning given it by GAAP.
"INDEBTEDNESS" of any Person means at any date, without
duplication and without regard to whether matured or unmatured, absolute or
contingent: (i) all obligations of such Person for borrowed money; (ii) all
obligations of such Person evidenced by bonds, debentures, notes, or other
similar instruments; (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising in
the ordinary course of business; (iv) all obligations of such Person as lessee
under capital leases; (v) all obligations of such Person to reimburse or prepay
any bank or other Person in respect of amounts paid under a letter of credit,
banker's acceptance, or similar instrument, whether drawn or undrawn; (vi) all
obligations of such Person to purchase securities which arise out of or in
connection with the sale of the same or substantially similar securities; (vii)
all obligations of such Person to purchase, redeem, exchange, convert or
otherwise acquire for value any capital stock of such Person or any warrants,
rights or options to acquire such capital stock, now or hereafter outstanding,
except to the extent that such obligations remain performable solely at the
option of such Person; (viii) all obligations to repurchase assets previously
sold (including any obligation to repurchase any accounts or chattel paper under
any factoring, receivables purchase, or similar arrangement); (ix) obligations
of such Person under interest rate swap, cap, collar or similar hedging
arrangements; and (x) all obligations of others of any type described in CLAUSE
(I) through CLAUSE (IX) above guaranteed by such Person.
"INSOLVENCY PROCEEDING" means (a) any case, action or
proceeding before any court or other governmental authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the benefit
of creditors, composition, marshalling of assets for creditors, or other,
similar
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arrangement in respect of its creditors generally or any substantial portion of
its creditors, undertaken under U.S. Federal, state or foreign law, including
the Bankruptcy Code.
"LIEN" means any voluntary or involuntary security interest,
mortgage, pledge, claim, charge, encumbrance, title retention agreement, or
third party interest, covering all or any part of the property of Borrower or
any other Person.
"LOAN" means an extension of credit by Lender under SECTION 2
of this Agreement.
"LOAN DOCUMENTS" means, individually and collectively, this
Agreement, each Note, the Security Agreement and any other security or pledge
agreement(s), and all other contracts, instruments, addenda and documents
executed in connection with this Agreement or the extensions of credit which are
the subject of this Agreement.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means
(a) a material adverse change in, or a material adverse effect upon, the
operations, business, properties, or condition (financial or otherwise) of
Borrower; (b) a material impairment of the ability of Borrower to perform under
any Loan Document; or (c) a material adverse effect upon the legality, validity,
binding effect or enforceability against Borrower of any Loan Document.
"MATURITY DATE" means, with regard to a Loan, the earlier of
(i) its maturity by reason of acceleration, or (ii) its stated maturity date,
which is the first day of the 42nd full month after the Borrowing Date of such
Loan; and is the date on which payment of all outstanding principal, accrued
interest, and the Terminal Payment with respect to such Loan is due.
"NOTE" means a promissory note substantially in the form of
EXHIBIT "A" hereto, executed by Borrower evidencing each Loan.
"OBLIGATIONS" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document, owing by
Borrower to Lender, whether direct or indirect (including those acquired by
assignment), absolute or contingent, liquidated or unliquidated, due or to
become due, now existing or hereafter arising.
"PERMITTED LIEN" means
(A) Involuntary Liens which, in the aggregate, would
not have a Material Adverse Effect and which in any event would not
exceed One-Hundred Thousand Dollars ($100,000);
(B) Liens for current taxes or other governmental or
regulatory assessments which are not delinquent, or which are contested
in good faith by the appropriate procedures and for which appropriate
reserves are maintained;
(C) Purchase money security interests on any property
held or acquired by Borrower in the ordinary course of business
securing Indebtedness incurred or assumed for the purpose of financing
all or any part of the cost of acquiring such property; PROVIDED, that
such Lien attaches solely to the property acquired with such
Indebtedness and that the principal amount of such Indebtedness does
not exceed one hundred percent (100%) of the cost of such property; and
FURTHER PROVIDED, that
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such property is not equipment with respect to which a Loan has been
made hereunder.
(D) Liens in favor of Lender;
(E) bankers' liens, rights of setoff and similar
Liens incurred on deposits made in the ordinary course of business;
(F) materialmen's, mechanics', repairmen's,
employees' or other like Liens arising in the ordinary course of
business and which are not delinquent for more than 45 days or are
being contested in good faith by appropriate proceedings;
(G) any judgment, attachment or similar Lien, unless
the judgment it secures has not been discharged or execution thereof
effectively stayed and bonded against pending appeal within 30 days of
the entry thereof;
(H) licenses or sublicenses of Patents, Patent
Licenses, Trademarks or Trademark Licenses permitted under the
Trademark Collateral Assignment or the Patent Collateral Assignment
(all as defined in the Security Agreement); and.
(I) Liens which have been approved by Lender prior to
the Closing Date and disclosed on SCHEDULE 6.2 to this Agreement.
"PERSON" means any individual or entity.
"QUALIFIED PUBLIC OFFERING" means the closing of a firmly
underwritten public offering of Borrower's common stock with aggregate proceeds
of not less than $12,500,000 (prior to underwriting expenses and commissions).
"RELATED PERSON" means any Affiliate of Borrower, or any
officer, employee, director or equity security holder of Borrower or any
Affiliate.
"SECURITY AGREEMENT" means the Security Agreement
substantially in the form of EXHIBIT "C" hereto, executed by Borrower.
"TERMINAL PAYMENT" means, with respect to each Loan, an amount
payable on the Maturity Date of such Loan in an amount equal to fifteen percent
(15%) of the original principal amount of such Loan.
"TERMINATION DATE" means the earlier of: (a) the date Lender
may terminate making loans or extending credit pursuant to the rights of Lender
under Article 7, or (b) December 31, 1997.
"UCC" means the Uniform Commercial Code as enacted in the
applicable jurisdiction, in effect on the Closing Date and as amended from time
to time.
ARTICLE 2 - THE COMMITMENT AND LOANS
2.1 THE COMMITMENT. Subject to the terms and conditions of
this Agreement, Lender agrees to make term loans to Borrower from time to time
from the Closing Date and to, but not including, the Termination Date in an
aggregate principal amount not exceeding the Commitment. The Commitment is
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not a revolving credit commitment, and Borrower shall not have the right to
repay and reborrow hereunder.
2.2 LIMITATION ON LOANS.
(A) Each Loan shall be in an amount not to exceed one
hundred percent (100%) of the amount paid or payable by Borrower to a
non-affiliated manufacturer, vendor or dealer for an item of equipment
as shown on an invoice therefor (excluding any commissions and any
portion of the payment which relates to the servicing of the equipment
and sales taxes payable by Borrower upon acquisition, and delivery
charges).
(B) Lender shall not be obligated to make any Loan
under its Commitment if at the time of or after giving effect to the
proposed Loan Lender would no longer qualify as: (A) a "venture capital
operating company" under U.S. Department of Labor Regulations Section
2510.3-101(d), Title 29 of the Code of Federal Regulations, as amended;
and (B) a "business development company" under the provisions of
federal Investment Company Act of 1940, as amended; and (C) a
"regulated investment company" under the provisions of the Internal
Revenue Code of 1986, as amended. Each Loan requested by Borrower to be
made on a single Business Day shall be for a minimum principal amount
of Fifty Thousand Dollars ($50,000), except to the extent the remaining
Commitment is a lesser amount.
2.3 NOTES EVIDENCING LOANS; REPAYMENT. Each Loan shall be
evidenced by a separate Note payable to the order of Lender substantially in the
form of EXHIBIT "A" to this Agreement, in the total principal amount of the
Loan. Each Note shall be payable as follows: Principal and Basic Interest shall
be paid in forty two (42) equal and successive monthly payments, in advance,
beginning on the Borrowing Date and continuing on the first Business Day of each
month thereafter; provided, that the first and last such amortization
installment payments shall be paid in advance on the Borrowing Date. If the
Borrowing Date is not the first day of a month, then the 42-month amortization
period shall commence on the first day of the next month following the Borrowing
Date, and interest only shall accrue and be payable for the period from the
Borrowing Date to the first day of the next month. Borrower shall pay to Lender,
in advance, on the Borrowing Date a payment of Basic Interest on the amount of
any Loan that is not made on the first day of the month for interest that will
accrue on such Loan from the Borrowing Date through the last day of the same
month. The payment of amortization installments of principal of and interest on
a Loan in advance results in a higher effective rate of interest than the stated
Designated Rate applicable to such Loan. The full amount of the Terminal Payment
with respect to each Loan shall be due and payable on the Maturity Date of such
Loan.
2.4 PROCEDURES FOR BORROWING.
(A) Borrower shall give Lender, at least five (5)
Business Days' prior to a proposed Borrowing Date, written notice of
any request for borrowing hereunder (a "Borrowing Request"). Each
Borrowing Request shall be in substantially the form of EXHIBIT "B"
hereto, shall be executed by the chief financial or accounting officer
of Borrower, and shall state how much is requested, and shall be
accompanied by such information and documentation as Lender may deem
reasonably necessary to determine whether the proposed borrowing will
comply with the limitations in SECTION 2.2.
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(B) No later than 1:00 p.m. Pacific Standard Time on
the Borrowing Date, if Borrower has satisfied the conditions precedent
in Article 4, Lender shall make the Loan available to Borrower in
immediately available funds.
2.5 INTEREST. Basic Interest on the outstanding principal
balance of the each Loan shall accrue daily at the Designated Rate from the
Borrowing Date until the Maturity Date.
2.6 TERMINAL PAYMENT. Borrower shall pay the Terminal Payment
with respect to each Loan on the Maturity Date of such Loan.
2.7 INTEREST RATE CALCULATION. Basic Interest, along with
charges and fees under this Agreement and any Loan Document, shall be calculated
for actual days elapsed on the basis of a 360-day year, which results in higher
interest, charge or fee payments than if a 365-day year were used. In no event
shall Borrower be obligated to pay Lender interest, charges or fees at a rate in
excess of the highest rate permitted by applicable law from time to time in
effect.
2.8 DEFAULT INTEREST. Any unpaid payments of principal or
interest or the Terminal Payment with respect to any Loan shall bear interest
from their respective maturities, whether scheduled or accelerated, at the
Designated Rate for such Loan PLUS five percent (5.00%) per annum, until paid in
full, whether before or after judgment (the "Default Rate"). Borrower shall pay
such interest on demand.
2.9 LENDER'S RECORDS. Principal, Basic Interest, Terminal
Payments and all other sums owed under any Loan Document shall be evidenced by
entries in records maintained by Lender for such purpose. Each payment on and
any other credits with respect to principal, Basic Interest, Terminal Payments
and all other sums outstanding under any Loan Document shall be evidenced by
entries in such records. Absent manifest error, Lender's records shall be
conclusive evidence thereof.
2.10 SECURITY. As security for all Obligations to Lender,
Borrower shall grant concurrently to Lender, or ensure that Lender is
concurrently granted, perfected security interests in all Collateral pursuant to
the Security Agreement and such other Lien documentation satisfactory in form
and substance to Lender, subject only to Permitted Liens.
2.11 ISSUANCE OF WARRANTS TO LENDER. As additional
consideration for its Commitment and obligations under this Agreement, and as a
condition to funding the initial Loan, Lender and its broker (Robert A.
Kingsbook) shall be entitled to receive one or more warrants to purchase a
number of shares of preferred stock of Borrower ("Warrant Shares") with an
aggregate value equal to seven percent (7%) of the Commitment. The Warrant
Shares shall vest in two equal parts. The first 50% shall vest upon the closing
of this commitment at $2.51 per share. The remaining 50% shall vest upon the
borrowing of any portion of the Remaining Availability at a price determined by
1) if any part of the Remaining Availability is borrowed prior to the closing of
an additional round of venture capital or corporate partner equity financing of
at least $3,000,000 ("Round C"), $2.51 per share, 2) if none of the Remaining
Availability is borrowed prior to the closing of Round C, the per share price of
preferred stock issued in Round C. The warrant issued under this Agreement shall
be in substantially the form attached hereto as EXHIBIT "D"; shall be
transferable by Lender, subject to compliance with applicable securities laws;
shall expire on December 31, 2002 or earlier as described in the warrant; and
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shall include piggy-back registration rights, "net issuance" provisions, and
anti-dilution protections reasonably satisfactory to Lender and its counsel.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that as of the Closing Date
and each Borrowing Date, except as set forth on a Schedule of Exceptions
("Schedule of Exceptions") to be amended from time to time:
3.1 DUE ORGANIZATION. Borrower is a corporation duly organized
and validly existing in good standing under the laws of California, and is duly
qualified to conduct business and is in good standing in each other jurisdiction
in which its business is conducted or its properties are located, except where
the failure to be so qualified would not reasonably be expected to have a
Material Adverse Effect.
3.2 AUTHORIZATION, VALIDITY AND ENFORCEABILITY. The execution,
delivery and performance of all Loan Documents executed by Borrower are within
Borrower's powers, have been duly authorized, and are not in conflict with
Borrower's articles of incorporation or by-laws, or the terms of any charter or
other organizational document of Borrower, as amended from time to time; and all
such Loan Documents constitute valid and binding obligations of Borrower,
enforceable in accordance with their terms (except as may be limited by
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights in general, and subject to general principles of equity).
3.3 COMPLIANCE WITH APPLICABLE LAWS. To Borrower's knowledge,
Borrower has complied with all licensing, permit and fictitious name
requirements necessary to lawfully conduct the business in which it is engaged,
and to any sales, leases or the furnishing of services by Borrower, including
without limitation those requiring consumer or other disclosures, the
noncompliance with which would have a Material Adverse Effect.
3.4 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES.
(A) To Borrower's knowledge, Borrower owns or is
licensed or otherwise has the right to use all of the patents,
trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other similar rights that are reasonably
necessary for the operation of its business, without conflict with the
rights of any other Person.
(B) To Borrower's knowledge, no slogan or other
advertising device, product, process, method, substance, part or other
material now employed, or now contemplated to be employed, by Borrower
infringes upon any rights held by any other Person.
(C) To Borrower's knowledge, no claim or litigation
regarding any of the foregoing is pending or threatened, and no patent,
invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or proposed which, in either
case, could reasonably be expected to have a Material Adverse Effect.
3.5 NO CONFLICT. The execution, delivery, and performance by
Borrower of all Loan Documents are not in conflict with any law, rule,
regulation, order or directive, or any indenture, agreement, or undertaking to
which Borrower is a party or by which Borrower may be bound or affected.
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3.6 NO LITIGATION, CLAIMS OR PROCEEDINGS. There is no
litigation, tax claim or proceeding pending, or, to the knowledge of Borrower,
threatened against Borrower or its property.
3.7 CORRECTNESS OF FINANCIAL STATEMENTS. Borrower's financial
statements which have been delivered to Lender fairly and accurately reflect
Borrower's financial condition as of December 31, 1996; and, since that date
there has been no Material Adverse Change. All indebtedness to IBL Corporation,
Aurelius Ltd., and Washington Holdings, L.P. has been canceled either by payment
or exchange of debt for equity.
3.8 NO SUBSIDIARIES. Borrower is not a majority owner of or in
a control relationship with any other business entity.
3.9 NO EVENT OF DEFAULT. No Default or Event of Default has
occurred and is continuing.
3.10 FULL DISCLOSURE. None of the representations or
warranties made by Borrower in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of Borrower in connection with the Loan Documents (including
disclosure materials delivered by or on behalf of Borrower to Lender prior to
the Closing Date), when taken together, contains any untrue statement of a
material fact or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or delivered.
ARTICLE 4 - CONDITIONS PRECEDENT
4.1 CONDITIONS TO FIRST LOAN. The obligation of Lender to make
its first Loan hereunder is, in addition to the conditions precedent specified
in SECTION 4.2, subject to the fulfillment of the following conditions and to
the receipt by Lender of the documents described below, duly executed and in
form and substance reasonably satisfactory to Lender and its counsel:
(A) RESOLUTIONS. A certified copy of the resolutions
of the Board of Directors of Borrower authorizing the execution,
delivery and performance by Borrower of the Loan Documents.
(B) INCUMBENCY AND SIGNATURES. A certificate of the
secretary of Borrower certifying the names of the officer or officers
of Borrower authorized to sign the Loan Documents, together with a
sample of the true signature of each such officer.
(C) OPINION OF COUNSEL. The opinion of Gunderson
Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel for
Borrower, together with any opinions, certificates and other matters on
which such opinion relies.
(D) ARTICLES AND BY-LAWS. Certified copies of the
Articles of Incorporation and By-Laws of Borrower, as amended through
the Closing Date.
(E) THIS AGREEMENT. A counterpart of this Agreement
with all schedules completed and attached thereto, and disclosing such
information as is acceptable to Lender.
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(F) SECURITY AGREEMENT; FINANCING STATEMENTS. A
Security Agreement executed by Borrower, substantially in the form of
EXHIBIT "C", together with filing copies (or other evidenced of filing
satisfactory to Lender and its counsel) of such Uniform Commercial Code
financing statements, collateral assignments and termination
statements, with respect to the Collateral as Lender shall request.
(G) LIEN SEARCHES. Uniform Commercial Code lien,
judgment, bankruptcy and tax lien searches of Borrower from the
California Secretary of State, and such other jurisdictions as Lender
may reasonably request, all as of a date reasonably satisfactory to
Lender and its counsel.
(H) GOOD STANDING CERTIFICATE. A Certificate of Good
Standing as of a date acceptable to Lender with respect to Borrower
from the California Secretary of State.
(I) WARRANT. A warrant issued by Borrower to Lender
exercisable for the Warrant Shares, as described in SECTION 2.11
hereof.
4.2 CONDITIONS TO ALL LOANS. The obligation of Lender to make
its initial Loan and each subsequent Loan is subject to the following further
conditions precedent that:
(A) NO DEFAULT. No Default or Event of Default has
occurred and is continuing or will result from the making of any such
Loan, and the representations and warranties of Borrower contained in
Article 3 of this Agreement are true and correct as of the Borrowing
Date of such Loan.
(B) NO MATERIAL ADVERSE CHANGE. No Material Adverse
Change shall have occurred since the date of the most recent financial
statements submitted to Lender.
(C) BORROWING REQUEST. Borrower shall have delivered
to Lender a Borrowing Request for such Loan.
(D) NOTE. Borrower shall have delivered an executed
Note evidencing such Loan, in form and substance satisfactory to
Lender.
(E) SUPPLEMENTAL LIEN FILINGS. Borrower shall have
executed and delivered such amendments or supplements to the Security
Agreement and financing statements as Lender may reasonably request in
connection with the proposed Loan, in order to create or perfect or to
maintain the perfection of Lender's Liens on the Collateral.
(F) VCOC LIMITATION. The making of the Loan will not
result in a violation of the condition applicable to Lender described
in SECTION 2.2(B).
ARTICLE 5 - AFFIRMATIVE COVENANTS
During the term of this Agreement and until its performance of
all obligations to Lender, Borrower will:
5.1 NOTICE TO LENDER. Promptly give written notice to Lender
of:
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(A) Any litigation or administrative or regulatory
proceeding affecting Borrower where the amount claimed against Borrower
is Fifty Thousand Dollars ($50,000) or more, or where the granting of
the relief requested could reasonably have a Material Adverse Effect.
(B) The occurrence of any Default or any Event of
Default where the Borrower has knowledge of such Default or Event of
Default.
(C) Any change in the location of Borrower's
principal place of business or the Collateral at least thirty (30) days
in advance of such change.
(D) Any default by Borrower under any joint venture,
partnering, distribution, cross-licensing, strategic alliance,
collaborative research or manufacturing, license or similar agreement
which could reasonably be expected to have a Material Adverse Effect.
(E) Any other matter which has resulted or might
reasonably result in a Material Adverse Change, of which the Borrower
is aware.
5.2 FINANCIAL STATEMENTS. Deliver to each Lender or cause to
be delivered to Lender, in form and detail satisfactory to Lender the following
financial information, which Borrower warrants shall be accurate and complete in
all material respects:
(A) QUARTERLY FINANCIAL STATEMENTS. As soon as
available but no later than thirty (45) days after the end of each
quarter, Borrower's balance sheet as of the end of such period, and
Borrower's income statement for such period and for that portion of
Borrower's financial reporting year ending with such period, prepared
and attested by a responsible financial officer of Borrower as being
complete and correct and fairly presenting Borrower's financial
condition and the results of Borrower's operations. After a Qualified
Public Offering, the foregoing interim financial statements shall be
delivered no later than 45 days after each fiscal quarter and for the
quarter-annual fiscal period then ended.
(B) YEAR-END FINANCIAL STATEMENTS. As soon as
available but no later than one hundred (100) days after and as of the
end of each financial reporting year, a complete copy of Borrower's
audit report, which shall include balance sheet, income statement,
statement of changes in equity and statement of cash flows for such
year, prepared and certified by an independent certified public
accountant selected by Borrower and reasonably satisfactory to Lender
(the "Accountant"). The Accountant's certification shall not be
qualified or limited due to a restricted or limited examination by the
Accountant of any material portion of Borrower's records or otherwise.
(D) GOVERNMENT REQUIRED REPORTS; PRESS RELEASES.
Within thirty (30) days after sending, issuing, making available, or
filing, copies of all statements released by Borrower to any news media
for publication, all reports, proxy statements, and financial
statements that Borrower sends or makes available to its stockholders,
and, not later than thirty (30) days after actual filing, all
registration statements and reports that Borrower files or is required
to file with the Securities and Exchange Commission, or any other
governmental or regulatory authority.
10
(E) OTHER INFORMATION. Such other statements, lists
of property and accounts, budgets, forecasts, reports, or other
information as Lender may from time to time reasonably request.
5.3 MANAGERIAL ASSISTANCE FROM LENDER. Permit Lender, as a
"venture capital operating company" to participate in, and influence the conduct
of management of Borrower through the exercise of "management rights," as such
terms are defined in 29 C.F.R. ss. 2510.3-101(d), and:
(A) Permit Lender to make available to Borrower, at
no cost to Borrower, "significant managerial assistance", as defined in
Section 2(a)(47) of the Investment Company Act of 1940, as amended,
either in the form of: (i) consulting arrangements with Lender or any
of its officers, directors, employees or affiliates, (ii) Borrower's
allowing Lender to provide recommendations of prospective candidates
for election to Borrower's Board of Directors, or (iii) Lender, at
Borrower's request, seeking the services of third-party consultants to
aid Borrower with respect to its management and operations;
(B) Permit Lender to make available consulting and
advisory services to officers of Borrower regarding Borrower's
equipment acquisition and financing plans, and such other matters
affecting the business, financial condition and prospects of Borrower
as Lender shall reasonably deem relevant; and
(C) If Lender reasonably believes that financial or
other developments affecting Borrower have impaired or are likely to
impair Borrower's ability to perform its obligations under this
Agreement, permit Lender reasonable access to Borrower's management
and/or Board of Directors and opportunity to present Lender's views
with respect to such developments.
5.4 EXISTENCE. Maintain and preserve Borrower's existence and
all rights and privileges necessary or desirable in the normal course of its
business; and keep all Borrower's property in good working order and condition,
ordinary wear and tear excepted.
5.5 INSURANCE. Obtain and keep in force insurance in such
amounts and types as is usual in the type of business conducted by Borrower,
with insurance carriers having a policyholder rating of not less than "A" and
financial category rating of Class VII in "Best's Insurance Guide," unless
otherwise approved by Lender. Such insurance policies must be in form and
substance satisfactory to Lender, and shall list Lender as an additional insured
or loss payee, as applicable, on endorsement(s) in form reasonably acceptable to
Lender. Borrower shall furnish to Lender such endorsements, and upon Lender's
request, copies of any or all such policies.
5.6 ACCOUNTING RECORDS. Maintain adequate books, accounts and
records, and prepare all financial statements in accordance with GAAP, and in
compliance with the regulations of any governmental or regulatory authority
having jurisdiction over Borrower or Borrower's business; and permit employees
or agents of Lender at such reasonable times as Lender may request, to inspect
Borrower's properties, and to examine, and make copies and memoranda of
Borrower's books, accounts and records. Such examination shall be at Lender's
expense, as long as Borrower is not in Default.
5.7 COMPLIANCE WITH LAWS. Comply with all laws (including
Environmental Laws), rules, regulations applicable to, and all orders and
directives of any governmental or regulatory authority having jurisdiction
11
over, Borrower or Borrower's business, and with all material agreements to which
Borrower is a party, except where the failure to so comply would not have a
Material Adverse Effect.
5.8 TAXES AND OTHER LIABILITIES. Pay all Borrower's
obligations when due; pay all taxes and other governmental or regulatory
assessments before delinquency or before any penalty attaches thereto, except as
may be contested in good faith by the appropriate procedures and for which
Borrower shall maintain appropriate reserves; and timely file all required tax
returns.
5.9 USE OF PROCEEDS. Use the proceeds of Loans only as set
forth in Article 2 of this Agreement; and not directly or indirectly to purchase
or carry any margin stock, as defined from time to time by the Board of
Governors of the Federal Reserve System in Federal Regulation U.
ARTICLE 6 - NEGATIVE COVENANTS
During the term of this Agreement and until the performance of
all obligations to Lender, Borrower will not (without Lender's prior written
consent):
6.1 INDEBTEDNESS. Be indebted for borrowed money or the
deferred purchase price of property, or become liable as a surety, guarantor,
accommodation party or otherwise for or upon the obligation of any other Person,
except:
(A) Indebtedness incurred for the acquisition of
supplies or inventory on normal trade credit, including a working
capital credit line with a bank; and other indebtedness incurred
pursuant to one or more transactions permitted under SECTION 6.4;
(B) Indebtedness not to exceed Seven Hundred Fifty
Thousand Dollars ($750,000) in aggregate principal amount outstanding
at any time secured by purchase money security interests covered by
clause (c) of the definition of Permitted Lien;
(C) Indebtedness of Borrower under this Agreement;
and
(D) Any Indebtedness approved by Lender prior to the
Closing Date.
6.2 LIENS. Create, incur, assume or permit to exist any Lien,
or grant any other Person a negative pledge, on any of Borrower's property,
except Permitted Liens. Borrower and Lender agree that this covenant is not
intended to constitute a lien, deed of trust, equitable mortgage, or security
interest of any kind on any of Borrower's real property, and this Agreement
shall not be recorded or recordable.
6.3 DIVIDENDS. Except after a Qualified Public Offering, pay
any dividends or purchase, redeem or otherwise acquire or make any other
distribution with respect to any of Borrower's capital stock, except dividends
or other distributions solely of capital stock of Borrower or repurchases of
unvested shares, at the original purchase price, held by employees.
6.4 CHANGES/MERGERS. Liquidate or dissolve, or enter into any
consolidation, merger, partnership, joint venture or other combination that
would constitute a Material Adverse Change.
12
6.5 SALES OF ASSETS. Sell, transfer, lease or otherwise
dispose of any of Borrower's assets except for fair consideration or where such
sale, transfer, lease or other disposition of assets would not constitute a
Material Adverse Change.
6.6 LOANS/INVESTMENTS. Make or suffer to exist any loans,
guaranties, advances, or investments, except:
(A) Accounts receivable in the ordinary course of
Borrower's business;
(B) Investments in domestic certificates of deposit
issued by, and other domestic investments with, financial institutions
organized under the laws of the United States or a state thereof,
having One Hundred Million Dollars ($100,000,000) in capital and a
rating of at least "investment grade" or "A" by Moody's or any
successor rating agency;"
(C) Investments in marketable obligations of the
United States of America and in open market commercial paper given the
highest credit rating by a national credit agency and maturing not more
than one year from the creation thereof; and
(D) Temporary advances to cover incidental expenses
to be incurred in the ordinary course of business.
6.7 TRANSACTIONS WITH RELATED PERSONS. Directly or indirectly
enter into any transaction with or for the benefit of a Related Person on terms
more favorable to the Related Person than would have been obtainable in an
"arms' length" dealing. This Section 6.7 shall not apply to any equity financing
transactions with the Company's existing venture capital investors.
ARTICLE 7 - EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT. Upon the occurrence and during the
continuation of any Default, the obligation of Lender to make any additional
Loan shall be suspended. The occurrence of any of the following shall terminate
any obligation of Lender to make any additional Loan; and shall, at the option
of Lender (1) make all sums of Basic Interest and principal, all Terminal
Payments, and any other amounts owing under any Loan Documents immediately due
and payable without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor or any other notices or demands, and
(2) give Lender the right to exercise any other right or remedy provided by
contract or applicable law:
(A) Borrower shall fail to pay any principal,
interest or Terminal Payment under this Agreement, or fail to pay any
fees or other charges when due under any Loan Document, and such
failure continues for five (5) Business Days or more after the same
first becomes due; or an Event of Default as defined in any other Loan
Document shall have occurred.
(B) Any representation or warranty made, or financial
statement, certificate or other document provided, by Borrower under
any Loan Document shall prove to have been false or misleading in any
material respect when made or deemed made herein.
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(C) Borrower shall fail to pay its debts generally as
they become due or shall commence any Insolvency Proceeding with
respect to itself; an involuntary Insolvency Proceeding shall be filed
against Borrower, or a custodian, receiver, trustee, assignee for the
benefit of creditors, or other similar official, shall be appointed to
take possession, custody or control of the properties of Borrower, and
such involuntary Insolvency Proceeding, petition or appointment is
acquiesced to by Borrower or is not dismissed within sixty (60) days;
or the dissolution or termination of the business of Borrower.
(D) Borrower shall be in default beyond any
applicable period of grace or cure under any other agreement involving
the borrowing of money, the purchase of property, the advance of credit
or any other monetary liability of any kind to Lender or to any Person
which results in the acceleration of payment of such obligation in an
amount in excess of Fifty Thousand Dollars ($50,000).
(E) Any governmental or regulatory authority shall
take any judicial or administrative action, that would have a Material
Adverse Effect, and which cannot be cured by Borrower within thirty
days of such action.
(F) Any sale, transfer or other disposition of all or
a substantial or material part of the assets of Borrower, including
without limitation to any trust or similar entity, shall occur where
such sale, transfer, lease or other disposition of assets would
constitute a Material Adverse Change.
(G) Any judgment(s) singly or in the aggregate in
excess of Fifty Thousand Dollars ($50,000) shall be entered against
Borrower which remain unsatisfied, unvacated or unstayed pending appeal
for thirty (30) or more days after entry thereof.
(H) Borrower shall fail to perform or observe any
covenant contained in this Agreement or any other Loan Document (other
than a covenant which is dealt with specifically elsewhere in this
Article 7) and the breach of such covenant is not cured within 30 days
after the sooner to occur of Borrower's receipt of notice of such
breach from Lender or the date on which such breach first becomes known
to any officer of Borrower; PROVIDED, HOWEVER that if such breach is
not capable of being cured within such 30-day period and Borrower
timely notifies Lender of such fact and Borrower diligently pursues
such cure, then the cure period shall be extended to the date requested
in Borrower's notice but in no event more than 90 days from the initial
breach; PROVIDED, FURTHER, that such additional 60-day opportunity to
cure shall not apply in the case of any failure to perform or observe
any covenant which has been the subject of a prior failure within the
preceding 180 days or which is a willful and knowing breach by
Borrower.
ARTICLE 8 - GENERAL PROVISIONS
8.1 NOTICES. Any notice given by any party under any Loan
Document shall be in writing and personally delivered, sent by overnight
courier, or United States mail, postage prepaid, or sent by facsimile, to be
promptly confirmed in writing, or other authenticated message, charges prepaid,
to the other party's or parties' addresses shown on the signature pages hereto.
Each party may change the address or facsimile number to which notices, requests
and other communications are to be sent by giving written
14
notice of such change to each other party. Notice given by hand delivery shall
be deemed received on the date delivered; if sent by overnight courier, on the
next business day after delivery to the courier service; if by first class mail,
on the third business day after deposit in the U.S. Mail; and if by telecopy, on
the date of transmission.
8.2 BINDING EFFECT. The Loan Documents shall be binding upon
and inure to the benefit of Borrower and Lender and their respective successors
and assigns; provided, however, that Borrower may not assign or transfer
Borrower's rights or obligations under any Loan Document without Lender's prior
written consent except in connection with a consolidation, merger or other
transaction in compliance with Section 6.4 of this Agreement. Lender reserves
the right to sell, assign, transfer, negotiate or grant participations in all or
any part of, or any interest in, Lender's rights and obligations under the Loan
Documents. In connection with any of the foregoing, Lender may disclose all
documents and information which Lender now or hereafter may have relating to the
Loans, Borrower, or its business; provided that any person who receives such
information shall have agreed in writing in advance to maintain the
confidentiality of such information on terms reasonably acceptable to Borrower.
8.3 NO WAIVER. Any waiver, consent or approval by Lender of
any Event of Default or breach of any provision, condition, or covenant of any
Loan Document must be in writing and shall be effective only to the extent set
forth in writing. No waiver of any breach or default shall be deemed a waiver of
any later breach or default of the same or any other provision of any Loan
Document. No failure or delay on the part of Lender in exercising any power,
right, or privilege under any Loan Document shall operate as a waiver thereof,
and no single or partial exercise of any such power, right, or privilege shall
preclude any further exercise thereof or the exercise of any other power, right
or privilege. Lender has the right at its sole option to continue to accept
interest and/or principal payments due under the Loan Documents after default,
and such acceptance shall not constitute a waiver of said default or an
extension of the Maturity Date unless Lender agrees otherwise in writing.
8.4 RIGHTS CUMULATIVE. All rights and remedies existing under
the Loan Documents are cumulative to, and not exclusive of, any other rights or
remedies available under contract or applicable law.
8.5 UNENFORCEABLE PROVISIONS. Any provision of any Loan
Document executed by Borrower which is prohibited or unenforceable in any
jurisdiction, shall be so only as to such jurisdiction and only to the extent of
such prohibition or unenforceability, but all the remaining provisions of any
such Loan Document shall remain valid and enforceable.
8.6 ACCOUNTING TERMS. Except as otherwise provided in this
Agreement, accounting terms and financial covenants and information shall be
determined and prepared in accordance with GAAP.
8.7 INDEMNIFICATION; EXCULPATION. Borrower shall pay and
protect, defend and indemnify Lender and Lender's employees, officers,
directors, shareholders, affiliates, correspondents, agents and representatives
(other than Lender, collectively "Agents") against, and hold Lender and each
such Agent harmless from, all claims, actions, proceedings, liabilities,
damages, losses, expenses (including, without limitation, attorneys' fees and
costs) and other amounts incurred by Lender and each such Agent, arising from
(i) the matters contemplated by this Agreement or any other Loan Documents, (ii)
financing statement of record outstanding at the time of this Agreement, or
(iii) any contention that Borrower has failed to
15
comply with any law, rule, regulation, order or directive applicable to
Borrower's business; PROVIDED, HOWEVER, that this indemnification shall not
apply to any of the foregoing incurred solely as the result of Lender's or any
Agent's gross negligence or willful misconduct. This indemnification shall
survive the payment and satisfaction of all of Borrower's Obligations to Lender.
8.8 REIMBURSEMENT. Borrower shall reimburse Lender for all
costs and expenses, including without limitation reasonable attorneys' fees and
disbursements expended or incurred by Lender in any arbitration, mediation,
judicial reference, legal action or otherwise in connection with (a) the
preparation and negotiation of the Loan Documents, $1,000, (b) the amendment,
interpretation and enforcement of the Loan Documents, including without
limitation during any workout, attempted workout, and/or in connection with the
rendering of legal advice as to Lender's rights, remedies and obligations under
the Loan Documents, (c) collecting any sum which becomes due Lender under any
Loan Document, (d) any proceeding for declaratory relief, any counterclaim to
any proceeding, or any appeal, or (e) the protection, preservation or
enforcement of any rights of Lender. For the purposes of this section,
attorneys' fees shall include, without limitation, fees incurred in connection
with the following: (1) contempt proceedings; (2) discovery; (3) any motion,
proceeding or other activity of any kind in connection with an Insolvency
Proceeding; (4) garnishment, levy, and debtor and third party examinations; and
(5) postjudgment motions and proceedings of any kind, including without
limitation any activity taken to collect or enforce any judgment. All of the
foregoing costs and expenses shall be payable upon demand by Lender, and if not
paid within forty-five (45) days of presentation of invoices shall bear interest
at the highest applicable Default Rate.
8.9 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts which, when taken together, shall constitute but
one agreement.
8.10 ENTIRE AGREEMENT. The Loan Documents are intended by the
parties as the final expression of their agreement and therefore contain the
entire agreement between the parties and supersede all prior understandings or
agreements concerning the subject matter hereof. This Agreement may be amended
only in a writing signed by Borrower and Lender.
8.11 GOVERNING LAW AND JURISDICTION.
(A) THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF CALIFORNIA.
(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS
OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN,
CENTRAL OR SOUTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF BORROWER AND LENDER CONSENTS, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF BORROWER AND LENDER IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED
HERETO. BORROWER AND LENDER EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY CALIFORNIA LAW.
16
8.12 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVES ITS
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. BORROWER AND LENDER EACH AGREES THAT ANY SUCH CLAIM OR
CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING
THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL
BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEMS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
IN WITNESS WHEREOF, Borrower and Lender have executed this
Agreement as of the date set forth in the preamble.
ADDRESSES FOR NOTICES: IMGIS, INC.
IMGIS, Inc.
611 Anton Boulevard, Suite 400 By: /s/ Chad Steelberg
Costa Mesa, CA 92626 -----------------------------
Attn: CFO Name: Chad Steelberg
Fax No. 714-755-3677 Its: President
Venture Lending & Leasing, Inc. VENTURE LENDING & LEASING, INC.
2010 North First Street, Suite 310
San Jose, CA 95131
Attn: Salvador O. Gutierrez By: /s/ Ronald W. Swenson
Chief Financial Officer -----------------------------
Fax No. 408-435-8625 Name: Ronald W. Swenson
Its: Chief Executive Officer
17
SCHEDULE OF EXCEPTIONS
To Loan Agreement Dated March 26, 1997, by and between
Imgis, Inc. (the "Company") and Venture Lending and Leasing, Inc.
1. Article 3, Section 3.6. The Company is currently in negotiations with Anne
Doremus dba Catalyst Communications ("Catalyst") regarding a Project
Consultancy Agreement dated June 12, 1996 (the "Consultancy Agreement");
pursuant to which Catalyst has filed a complaint in the Superior Court, State
of California, Orange County for various relief including damages for
$17,277.65 plus interest from the date of the Consultancy Agreement.
2. Article 3, Section 3.6. The Company has received correspondence from a
former employee, Jason Goldstein, requesting payment of $60,000.00 under an
agreement dated May 22, 1996 for compensation due for services performed to
the Company. Although no litigation or proceeding regarding this matter is
pending, the Company may elect to dispute such claim through settlement
negotiations, arbitration, litigation proceedings, or otherwise.
EXHIBIT "A"
[Note No. X-XXX]
FORM OF PROMISSORY NOTE
$______________________ ___________________, 199___
San Jose, California
The undersigned ("Borrower") promises to pay to the order of VENTURE
LENDING & LEASING, INC., a Maryland corporation ("Lender") at its office at
2010 North First Street, Suite 310, San Jose, California 95131, or at such
other place as Lender may designate in writing, in lawful money of the United
States of America, the principal sum of ___________________________ Dollars
($_________), with Basic Interest thereon from the date hereof until
maturity, whether scheduled or accelerated, at a fixed rate per annum of nine
and 75/100 percent (9.75%), and a Terminal Payment in the sum of _________
[15% OF FACE AMOUNT] Dollars ($ ) payable on the Maturity Date.
This Note is one of the Notes referred to in, and is entitled to all the
benefits of, a Loan Agreement dated March 26, 1997, between Borrower and
Lender. Each capitalized term not otherwise defined herein shall have the
meaning set forth in the Loan Agreement. The Loan Agreement contains
provisions for the acceleration of the maturity of this Note upon the
happening of certain stated events.
Principal of and interest on this Note shall be payable as follows:
On the Borrowing Date, Borrower shall pay (i) Basic Interest, in
advance, on the outstanding principal balance of this Note at the Designated
Rate for the period from the Borrowing Date through [THE LAST DAY OF THE SAME
MONTH]; and (ii) a first (1st) amortization installment of principal and
Basic Interest in the amount of , in advance for the month of
[FIRST FULL MONTH AFTER BORROWING DATE] [ and (iii) a 42nd [last]
amortization installment of principal and Basic Interest in the amount of $
__________________ , in advance for the month of [date of last regular
amortization payment]].
Commencing on the first day of the second full month after the Borrowing
Date, and continuing on the first day of each consecutive month thereafter,
principal and Basic Interest shall be payable, in advance, in forty (40) equal
consecutive installments of ________________________________________ Dollars
($ ) each; The Terminal Payment amount shall be payable on __[ONE MONTH
LATER] , 200___.
Any unpaid payments of principal or interest on this Note shall bear
interest from their respective maturities, whether scheduled or accelerated,
at a rate per annum equal to the Default Rate. Borrower shall pay such
interest on demand.
Interest, charges and fees shall be calculated for actual days elapsed
on the basis of a 360-day year, which results in higher interest, charge or
fee payments than if a 365-day year were used. In no event shall Borrower be
18
obligated to pay interest, charges or fees at a rate in excess of the
highest rate permitted by applicable law from time to time in effect.
This Note shall be governed by, and construed in accordance with, the
laws of the State of California.
IMGIS, INC.
By:________________________________
Name:______________________________
Its:_______________________________
EXHIBIT B
BORROWER REQUEST
____________________, 1997
Venture Lending & Leasing, Inc.
2010 North First Street, Suite 310
San Jose, CA 95131
Re: _______________________________________________
Gentlemen:
Reference is made to the Loan Agreement dated as of March 25, 1997 (as
it has been and may be amended from time to time, the "Loan Agreement", the
capitalized terms used herein as defined therein), between Venture Lending &
Leasing, Inc. and IMGIS, Inc. (the "Company").
The undersigned is the Chief Financial Officer of the Company, and
hereby requests a Loan under the Loan Agreement, and in that connection
certifies as follows:
1. The amount of the proposed Loan is $ _______________. The Business
Day of the proposed Loan is ______________________ 1997.
2. As of this date, no Default or Event of Default has occurred and is
continuing, or will result from the making of the proposed Loan, and to the
Company's knowledge, the representations and warranties of the Company
contained in Article 3 of the Loan Agreement are true and correct.
3. To the Company's knowledge no Material Adverse Change has occurred
since the date of the most recent financial statements submitted to you by
the Company.
The Company agrees to notify you promptly before the funding of the Loan
if any of the matters to which I have certified above shall not to the
Company's knowledge be true and correct on the Borrowing Date.
Very Truly Yours,
_________________________
Chief Financial Officer
EXHIBIT C
SECURITY AGREEMENT
(EQUIPMENT)
This Agreement is made as of March 26, 1997, by IMGIS, INC., a
California corporation ("Debtor") in favor of VENTURE LENDING & LEASING,
INC., a Maryland corporation ("Secured Party").
ARTICLE I - DEFINITIONS
The following definitions shall be applicable to both the singular
and plural forms of the defined terms:
"AGREEMENT" means this Security Agreement, as it may be amended
from time to time.
"COLLATERAL" means all Debtor's Equipment and Fixtures now owned or
hereafter acquired, wherever located, and whether held by Debtor or any third
party, and all proceeds and products thereof, including all insurance and
condemnation proceeds ("Proceeds"), and all monies now or at any time
hereafter in the possession or under the control of Secured Party or a bailee
or affiliate of Secured Party, including any cash collateral in any cash
collateral or other account, and all Records relating or useful to, or used
in connection with any of the foregoing.
"EQUIPMENT" means all of Debtor's specific equipment identified and
described on SCHEDULE 1 attached to this Agreement and incorporated herein by
reference (as such Schedule may be amended or supplemented from time to
time), all replacements, parts, accessions and additions thereto, and all
proceeds thereof arising from the sale, lease, rental or other use or
disposition thereof, including all rights to payment with respect to
insurance or condemnation, returned premiums, or any cause of action relating
to any of the foregoing.
"EVENT OF DEFAULT" means an event described in Article 6.
"FIXTURES" means all items of Equipment that are so related to the
real property upon which they are located that an interest in them arises
under real property law, and all proceeds thereof arising from the sale,
lease, rental or other use or disposition thereof.
"INDEBTEDNESS" means all debts, obligations and liabilities of
Debtor to Secured Party currently existing or now or hereafter made, incurred
or created, whether pursuant to the Loan Documents, whether voluntary or
involuntary and however arising or evidenced, whether direct or acquired by
Secured Party by assignment or succession, whether due or not due, absolute
or
contingent, liquidated or unliquidated, determined or undetermined, and
whether Debtor may be liable individually or jointly, or whether recovery
upon such debt may be or become barred by any statute of limitations or
otherwise unenforceable and all renewals, extensions and modifications
thereof, and all attorneys' fees and costs incurred by Secured Party in
connection with the collection and enforcement thereof.
"LIEN" means any voluntary or involuntary security interest,
mortgage, pledge, claim, charge, encumbrance, title retention agreement, or
third party interest covering all or any part of the property of Debtor or
any other Person.
"LOAN AGREEMENT" means that certain Loan Agreement between Debtor
and Secured Party of even date herewith, as amended from time to time.
"PERSON" means any individual or entity, including without
limitation Secured Party where the context so permits and in Secured Party's
sole discretion.
"PERMITTED LIEN" means
a) Involuntary Liens which, in the aggregate, would not have a
Material Adverse Effect and which in any event would not exceed One-Hundred
Thousand Dollars ($100,000);
b) Liens for current taxes or other governmental or regulatory
assessments which are not delinquent, or which are contested in good faith by
the appropriate procedures and for which appropriate reserves are maintained;
c) Purchase money security interests on any property held or
acquired by Borrower in the ordinary course of business securing Indebtedness
incurred or assumed for the purpose of financing all or any part of the cost
of acquiring such property; PROVIDED, that such Lien attaches solely to the
property acquired with such Indebtedness and that the principal amount of
such Indebtedness does not exceed one hundred percent (100%) of the cost of
such property; and FURTHER PROVIDED, that such property is not equipment with
respect to which a Loan has been made hereunder.
d) Liens in favor of Lender;
e) bankers' liens, rights of setoff and similar Liens incurred
on deposits made in the ordinary course of business;
f) materialmen's, mechanics', repairmen's, employees' or other
like Liens arising in the ordinary course of business and which are not
delinquent for more than 45 days or are being contested in good faith by
appropriate proceedings;
2
g) any judgment, attachment or similar Lien, unless the judgment
it secures has not been discharged or execution thereof effectively stayed
and bonded against pending appeal within 30 days of the entry thereof;
h) licenses or sublicenses of Patents, Patent Licenses,
Trademarks or Trademark Licenses permitted under the Trademark Collateral
Assignment or the Patent Collateral Assignment (all as defined in the
Security Agreement); and
i) Liens which have been approved by Lender prior to the Closing
Date and disclosed on SCHEDULE 6.2 to this Agreement.
"RECORDS" means all Debtor's computer programs, software, hardware,
source codes and data processing information, all written documents, books,
invoices, ledger sheets, financial information and statements, and all other
writings concerning Debtor's business.
"UNIFORM COMMERCIAL CODE" means the California Uniform Commercial
Code, as amended from time to time.
Terms not specifically defined in this Agreement have the meanings
prescribed in the Loan Agreement, and if not defined therein then the
meanings prescribed in the Uniform Commercial Code.
ARTICLE 2 - GRANT OF SECURITY INTEREST
To secure the timely payment of the Indebtedness and performance of
all obligations of Debtor to Secured Party, Debtor grants to Secured Party a
security interest in the Collateral.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants that, at all times during the term
of this Agreement:
3.1 GOVERNMENTAL ACTIONS. Debtor has obtained all consents and
actions of, and has performed all filings with, any governmental or
regulatory authority required to authorize the execution, delivery or
performance of this Agreement. Debtor has, at the time Lender makes a Loan
with respect to an item of equipment in accordance with Section 2.2 of the
Loan Agreement, and at all times thereafter while such Loan is outstanding,
obtained all consents and actions of, and has performed all filings with, any
governmental or regulatory authority required to grant and perfect Secured
Party's security interest in such item of equipment which is part of the
Collateral.
3
3.2 TITLE. Debtor is and will be the unconditional legal and
beneficial owner of the Collateral. The Collateral is subject to no Liens,
rights or defenses of others, except Permitted Liens.
3.3 CHIEF EXECUTIVE OFFICE. Debtor's chief executive office is
located at:
611 Anton Boulevard, Suite 400
Costa Mesa, CA 92626
3.4 RECORDS LOCATION. Other than as set forth in Section 3.3,
Records are maintained at:
None
3.5 EQUIPMENT OR FIXTURES LOCATION. Other than as set forth in
Section 3.3, Equipment or Fixtures are located at:
None
3.6 OTHER PLACES OF BUSINESS. In addition to the locations set
forth in Sections 3.3 through 3.5, Debtor maintains the following place(s) of
business:
None
3.7 BUSINESS NAMES. Debtor has conducted business in the following
names other than as stated in the preamble to this Agreement:
None
ARTICLE 4 - AFFIRMATIVE COVENANTS
During the term of this Agreement and until payment of all the
Indebtedness and performance of all obligations to Secured Party, Debtor
will, unless Secured Party otherwise consents in writing:
4.1 DELIVERY OF CERTAIN ITEMS. Deliver to Secured Party promptly
(a) after an Event of Default, all Proceeds; (b) such specific
acknowledgments, assignments or other agreements as Secured Party may
reasonably request relating to the Collateral; and (c) copies of such Records
and other reports in such form and detail and at such times as Secured Party
may reasonably require relating to the Collateral.
4.2 MAINTENANCE OF COLLATERAL; INSPECTION. Do all things necessary
to maintain, preserve, protect and keep all Collateral in good working order
and saleable condition, dealing with the Collateral in all ways as are
considered good practice by owners of like property, and use the Collateral
lawfully and only as
4
permitted by Debtor's insurance policies. Debtor hereby authorizes Secured
Party's officers, employees, representatives and agents, upon reasonable
notice, at reasonable times and with reasonable frequency, to inspect the
Collateral and to discuss the Collateral and the Records relating thereto
with Debtor's officers.
4.3 MAINTENANCE OF RECORDS; INSPECTION. Maintain, or cause to be
maintained, complete and accurate Records relating to the Collateral. Secured
Party, its officers, employees, agents and representatives, upon reasonable
notice, shall have the right, from time to time, to examine the Records
relating to the Collateral and to make copies or extracts therefrom. Such
examination shall be at Lender's expense, as long as Borrower is not in
Default.
4.4 DEBTOR'S DUTY TO GIVE NOTICE. Give prompt notice to Secured
Party of: (a) any decrease in the value of any Collateral and the amount of
such decrease (other than depreciation calculated in the ordinary course of
business under applicable tax laws and regulations and in accordance with
generally accepted accounting principles); (b) any threatened or asserted
dispute or claim with respect to the Collateral; (c) any litigation or
administrative or regulatory proceeding which is reasonably likely to have a
Material Adverse Effect on Debtor or its business; (d) any change in
ownership of Debtor's principal place of business; (e) the relocation of or
intent to relocate any Collateral to a location not listed in Sections 3.3
through 3.6 hereof; and (f) the occurrence of any Event of Default or of any
other development, financial or otherwise, which is reasonably likely to
materially adversely affect the Collateral or Debtor's ability to pay the
Indebtedness or perform its obligations to Secured Party.
4.5 FINANCING STATEMENTS AND OTHER ACTIONS. Execute and deliver to
Secured Party, and file or record at Debtor's expense all financing
statements, notices and other documents from time to time requested by
Secured Party to maintain a perfected security interest in the Collateral in
favor of Secured Party, all in form and substance satisfactory to Secured
Party, perform such other acts and execute and deliver to Secured Party such
additional conveyances, assignments, agreements and instruments, as Secured
Party may at any time reasonably request in connection with the
administration and enforcement of this Agreement or Secured Party's rights,
powers and remedies hereunder.
4.6 DECALS, MARKINGS. At the request of Secured Party, firmly affix
a decal, stencil or other marking to designated items of Collateral,
indicating thereon the security interest of Secured Party.
4.7 AGREEMENT WITH REAL PROPERTY OWNER/LANDLORD. At the request of
Secured Party, use Debtor's best efforts to obtain and
5
maintain such acknowledgments, consents, waivers and agreements from the
owner, lienholder, mortgagee and landlord with respect to any real property
on which Collateral is located as Secured Party may require, all in form and
substance reasonably satisfactory to Secured Party.
ARTICLE 5 - NEGATIVE COVENANTS
During the term of this Agreement and until payment of all the
Indebtedness and performance of all obligations to Secured Party, Debtor will
not, without Secured Party's prior written consent:
5.1 LIENS. Create, incur, assume or permit to exist any Lien on any
Collateral, except Permitted Liens.
5.2 DOCUMENTS OF TITLE. Sign or authorize the signing of any
financing statement or other document naming Debtor as debtor or obligor,
except those which do not relate to the Collateral or which, with respect to
the Collateral are permitted under the Loan Agreement, or acquiesce or
cooperate in the issuance of any warehouse receipt or other document of title
with respect to any Collateral, except those negotiated to Secured Party or
those naming Secured Party as secured party.
5.3 DISPOSITION OF COLLATERAL. Sell, transfer, lease or otherwise
dispose of any Collateral for less than fair value. If any collateral is
disposed of, Debtor shall grant to Secured Party a perfected security
interest in replacement collateral, acceptable to Secured Party, of equal or
greater value.
5.4 CHANGE IN LOCATION, NAME, LEGAL STRUCTURE. If and to the extent
the same would in any manner impair the creation, perfection or priority of
Secured Party's security interest in the Collateral, (a) maintain items of
Collateral, Records, its chief executive office or residence, or a place of
business at a location other than as specified in Article 3; or (b) change
its name, mailing address, or its legal structure.
ARTICLE 6 - EVENTS OF DEFAULT
6.1 EVENTS OF DEFAULT. The occurrence of any "Event of Default" as
defined in the Loan Agreement shall constitute an Event of Default hereunder.
(a) Any failure by Debtor to perform any of its duties or
obligations under this Agreement, or breach by Debtor of any of its
representations herein, where such failure or breach by debtor is not cured
within 30 days from the sooner of 1) Debtor's receipt of notice of such
breech or the date on which such breech becomes known to any officer of the
Debtor; provided, HOWEVER
6
that if such breach is not capable of being cured within such 30-day period
and Borrower timely notifies Lender of such fact and Borrower diligently
pursues such cure, then the cure period shall be extended to the date
requested in Borrower's notice but in no event more than 90 days from the
initial breach; PROVIDED, FURTHER, that such additional 60-day opportunity to
cure shall not apply in the case of any failure to perform or observe any
covenant which has been the subject of a prior failure within the preceding
180 days or which is a willful and knowing breach by Borrower.
6.2 ACCELERATION AND REMEDIES. Upon the occurrence and during the
continuance of any Event of Default, Secured Party shall be entitled to, at
Secured Party's option, (a) declare all or any part of the Indebtedness
immediately due and payable; (b) exercise any or all of the rights and
remedies available to a secured party under the Uniform Commercial Code or
any other applicable law; and (c) exercise any or all of Secured Party's
rights and remedies provided for in this Agreement and in any other Loan
Document. The obligations of Debtor under this Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any Indebtedness is rescinded or must otherwise be returned by Secured Party
upon, on account of, or in connection with, the insolvency, bankruptcy or
reorganization of Debtor, or otherwise, all as though such payment had not
been made.
6.3 SALE OF COLLATERAL. After the occurrence and during the
continuance of an Event of Default, Secured Party may sell all or any part of
the Collateral, at public or private sales, to itself, a wholesaler, retailer
or investor, for cash, upon credit or for future delivery, and at such price
or prices as Secured Party may deem commercially reasonable. To the extent
permitted by law, Debtor hereby specifically waives all rights of redemption
and any rights of stay or appraisal which it has or may have under any
applicable law in effect from time to time. Any such public or private sales
shall be held at such times and at such place(s) as Secured Party may
determine. In case of the sale of all or any part of the Collateral on credit
or for future delivery, the Collateral so sold may be retained by Secured
Party until the selling price is paid by the purchaser, but Secured Party
shall not incur any liability in case of the failure of such purchaser to pay
for the Collateral and, in case of any such failure, such Collateral may be
resold. Secured Party may, instead of exercising its power of sale, proceed
to enforce its security interest in the Collateral by seeking a judgment or
decree of a court of competent jurisdiction.
6.4 DEBTOR'S OBLIGATION UPON DEFAULT. Upon the request of Secured
Party after the occurrence of an Event of Default Debtor will:
7
(a) Assemble and make available to Secured Party the Collateral
at such place(s) as Secured Party shall designate, segregating all Collateral
so that each item is capable of identification; and
(b) Subject to rights of any previous lessor, permit Secured
Party, by Secured Party's officers, employees, agents and representatives, to
enter any premises where any Collateral is located, to take possession of the
Collateral and to remove the Collateral or to conduct any public or private
sale of the Collateral, all without any liability of Secured Party for rent
or other compensation for the use of Debtor's premises.
ARTICLE 7 - SPECIAL COLLATERAL PROVISIONS
7.1 PERFORMANCE OF DEBTOR'S OBLIGATIONS. Without having any
obligation to do so, upon reasonable prior notice to Debtor, Secured Party
may perform or pay any obligation which Debtor has agreed to perform or pay
under this Agreement, including, without limitation, the payment or discharge
of taxes or Liens levied or placed on or threatened against the Collateral.
In so performing or paying, Secured Party shall determine the action to be
taken and the amount necessary to discharge such obligations. Debtor shall
reimburse Secured Party on demand for any amounts paid by Secured Party
pursuant to this Section, which amounts shall constitute Indebtedness secured
by the Collateral and shall bear interest from the date of demand at the rate
applicable to overdue payments under the Loan Agreement.
7.2 POWER OF ATTORNEY. For the purpose of protecting, preserving
and enforcing the Collateral and Secured Party's rights under this Agreement,
Debtor hereby irrevocably appoints Secured Party, with full power of
substitution, as its attorney-in-fact with full power and authority to do any
act which Debtor is obligated to do, or Secured Party has the right to do,
hereunder; to exercise such rights with respect to the Collateral as Debtor
might exercise; to use such Equipment, Fixtures or other property as Debtor
might use; to enter Debtor's premises; to give notice of Secured Party's
security interest in and to collect the Collateral and the Proceeds; and to
execute and file in Debtor's name any financing statements, amendments and
continuation statements necessary or desirable to perfect or continue the
perfection of Secured Party's security interests in the Collateral. Debtor
hereby ratifies all that Secured Party shall lawfully do or cause to be done
by virtue of this appointment.
7.3 AUTHORIZATION FOR SECURED PARTY TO TAKE CERTAIN ACTION. The
power of attorney created in Section 7.2 is a power coupled with an interest
and shall be irrevocable. The powers conferred on Secured Party hereunder are
solely to protect its interests in the Collateral and shall not impose any
duty upon Secured Party
8
to exercise such powers. Secured Party shall be accountable only for amounts
that it actually receives as a result of the exercise of such powers and in
no event shall Secured Party or any of its directors, officers, employees,
agents or representatives be responsible to Debtor for any act or failure to
act, except for gross negligence or willful misconduct. Secured Party may
exercise this power of attorney without notice to or assent of Debtor, in the
name of Debtor, or in Secured Party's own name, from time to time in Secured
Party's sole discretion and at Debtor's expense. To further carry out the
terms of this Agreement, Secured Party may upon the occurrence and during the
continuance of an Event of Default:
(a) Execute any statements or documents to take possession of,
and endorse and collect and receive delivery or payment of, any checks,
drafts, notes, acceptances or other instruments and documents constituting
the payment of amounts due and to become due or any performance to be
rendered with respect to the Collateral.
(b) Sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts, certificates and
statements under any commercial or standby letter of credit, assignments,
leases, bills of sale, or any other documents relating to the Collateral,
including without limitation the Records.
(c) Use or operate Collateral or any other property of Debtor
for the purpose of preserving or liquidating Collateral.
(d) File any claim or take any other action or proceeding in
any court of law or equity or as otherwise deemed appropriate by Secured
Party for the purpose of collecting any and all monies due or securing any
performance to be rendered with respect to the Collateral.
(e) Commence, prosecute or defend any suits, actions or
proceedings or as otherwise deemed appropriate by Secured Party for the
purpose of protecting or collecting the Collateral. In furtherance of this
right, upon the occurrence and during the continuance of an Event of Default
Secured Party may apply for the appointment of a receiver or similar official
to operate Debtor's business.
(f) Prepare, adjust, execute, deliver and receive payment under
insurance claims, and collect and receive payment of and endorse any
instrument in payment of loss or returned premiums or any other insurance
refund or return, and apply such amounts, at Secured Party's sole discretion,
toward repayment of the Indebtedness or replacement of the Collateral.
7.4 APPLICATION OF PROCEEDS. Any Proceeds and other monies or
property received by Secured Party pursuant to the terms of
9
this Agreement or any Loan Document may be applied by Secured Party first to
the payment of expenses of collection, including without limitation to
reasonable attorneys' fees, and then to the payment of the Indebtedness in
such order of application as Secured Party may elect.
7.5 DEFICIENCY. If the proceeds of any sale of the Collateral are
insufficient to cover all costs and expenses of such sale and the payment in
full of all Indebtedness, plus all other sums required to be expended or
distributed by Secured Party, then Debtor shall be liable for any such
deficiency.
7.6 SECURED PARTY TRANSFER. Upon the transfer of all or any part of
the Indebtedness, Secured Party may transfer all or any part of its interest
in the Collateral and shall be fully discharged thereafter from all liability
and responsibility with respect to such interest in the Collateral so
transferred, and the transferee shall be vested with all the rights and
powers of Secured Party hereunder with respect to such interest in the
Collateral so transferred.
ARTICLE 8 - GENERAL PROVISIONS
8.1 NOTICES. Any notice given by any party under this Agreement
shall be given in the manner prescribed in the Loan Agreement.
8.2 BINDING EFFECT. This Agreement shall be binding upon Debtor,
its permitted successors, representatives and assigns, and shall inure to the
benefit of Secured Party and its successors, representatives and assigns.
8.3 RIGHTS CUMULATIVE. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any other rights or
remedies available under contract or applicable law.
8.4 UNENFORCEABLE PROVISIONS. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall be so only as to
such jurisdiction and only to the extent of such prohibition or
unenforceability, but all the remaining provisions of this Agreement shall
remain valid and enforceable.
8.5 GOVERNING LAW, WAIVER OF NOTICE. Except as may be otherwise
provided by the Uniform Commercial Code, this Agreement shall be governed by
and construed in accordance with the laws of the State of California.
8.6 ENTIRE AGREEMENT. This Agreement, together with the other Loan
Documents, is intended by Debtor and Secured Party as the final expression of
Debtor's obligations to Secured Party in
10
connection with the Collateral and supersedes all prior understandings or
agreements concerning the subject matter hereof. This Agreement may be
amended only by a writing signed by Debtor and accepted by Secured Party in
writing.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth in the preamble.
IMGIS, INC. VENTURE LENDING & LEASING, INC.
By:___________________________ By:____________________________
Chad Steelberg RONALD W. SWENSON
President Chief Executive Officer
11
SCHEDULE 1 TO SECURITY AGREEMENT
DESCRIPTION OF EQUIPMENT
QUANTITY ARTICLE MAKE Y. MFG. MODEL SERIAL OR MOTOR NO.
- -------- ------- ---- ------- ----- -------------------
See attached continuation to Schedule 1
together with all improvements, replacements, accessions and additions
thereto, wherever located, and all Proceeds thereof arising from the sale,
lease, rental or other use or disposition of any such property, including all
rights to payment with respect to insurance or condemnation, returned
premiums, or any cause of action relating to any of the foregoing.
IMGIS, INC.
By: _________________________________
VENTURE LENDING & LEASING, INC.
By: __________________________________
Ronald W. Swenson
CEO
EXHIBIT D
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE
SHARES OF SERIES B1 PREFERRED STOCK OF
IMGIS, INC.
(Void after December 31, 2002)
This certifies that VENTURE LENDING & LEASING, INC., a Maryland
corporation, or assigns (the "Holder"), for value received, is entitled to
purchase from IMGIS, INC., a California corporation (the "Company"), A number
of fully paid and nonassessable shares of the Company's Series B1 Preferred
Stock ("Preferred Stock") with a value equal to six and 30/100 percent (6.3%)
of the Commitment at any time or from time to time up to and including 5: 00
p.m. (Pacific time) on December, 2002 or earlier as described in section l(d)
of this Warrant, upon surrender to the Company at its principal office at 611
Anton Boulevard, Suite 400 Costa Mesa, CA 92626 (or at such other location as
the Company may advise Holder in writing) of this Warrant properly endorsed
with the Form of Subscription attached hereto duly filled in and signed and
upon payment in cash or by check of the aggregate Stock Purchase Price for
the number of shares for which this Warrant is being exercised determined in
accordance with the provisions hereof.
The Warrant Shares shall vest in two equal parts. The first 50% shall vest
upon the closing of this commitment at a price of (the "Stock Purchase
Price") $2.51 per share. The remaining 50% shall vest upon the borrowing of
any portion of the Remaining Availability at a price determined by 1) if any
part of the Remaining Availability is borrowed prior to the closing of an
additional round of venture capital or corporate partner equity financing of
at least $3,000,000 (Round C), $2.51 per share, 2) if none of the Remaining
Availability is borrowed prior to the closing of Round C, the per share price
of preferred stock issued in Round C. The Stock Purchase Price and the number
of shares purchasable hereunder are subject to adjustment as provided in
Section 4 of this Warrant.
This Warrant is subject to the
following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT
FOR SHARES.
(a) Unless an election is made pursuant to clause (b) of this
Section 1, this Warrant shall be exercisable at the option of the Holder, at
any time or from time to time, on or before the Expiration Date for all or
any portion of the shares of Preferred Stock (but not for a fraction of a
share) which may be purchased hereunder for the Stock Purchase Price
multiplied by the number of shares to be purchased. In the event, however,
that pursuant to the Company's Articles of Incorporation, as amended, an
event causing automatic conversion of the Company's Preferred Stock shall
have occurred prior to the exercise of this Warrant, in whole or in part,
then this Warrant shall be exercisable for the number of shares of Common
Stock of the Company into which the Preferred Stock not purchased upon any
prior exercise of the Warrant would have been so converted (and, where the
context requires, reference to "Preferred Stock" shall be deemed to include
such Common Stock). The Company agrees that the shares of Preferred Stock
purchased under this Warrant shall be and are deemed to be issued to the
holder hereof as the record owner of such shares as of the close of business
on the date on which this Warrant shall have been surrendered and payment
made for such shares. Subject to the provisions of Section 2, certificates
for the shares of Preferred Stock so purchased, together with any other
securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time after the rights represented by
this Warrant have been so exercised. Except as provided in clause (b) of this
Section 1, in case of a purchase of less than all the shares which may be
purchased under this Warrant, the Company shall cancel this Warrant and
execute and deliver a new Warrant or Warrants of like tenor for the balance
of the shares purchasable under the Warrant surrendered upon such purchase to
the Holder hereof within a reasonable time. Each stockcertificate so
delivered shall be in such denominations of Preferred Stock as may be
requested by the Holder hereof and shall be registered in the name of such
Holder or such other name as shall be designated by such Holder, subject to
the limitations contained in Section 2.
(b) The Holder, in lieu of exercising this Warrant by the payment
of the Stock Purchase Price pursuant to clause (a) of this Section 1, may
elect, at any time on or before the Expiration Date, to receive that number
of shares of Preferred Stock equal to the quotient of: (i) the difference
between (A) the Per Share Price (as hereinafter defined) of the Preferred
Stock, less (B) the Stock Purchase Price then in effect, multiplied by the
number of shares of Preferred Stock the Holder would otherwise have been
entitled to purchase hereunder pursuant to clause (a) of this Section 1 (or
such lesser number of shares as the Holder may designate in the case of a
partial exercise of this Warrant); over (ii) the Per Share Price.
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(c) For purposes of clause (b) of this Section 1, "Per Share Price"
means the product of: (i) the greater of (A) the average of the closing bid
and asked prices of the Company's Common Stock as quoted by NASDAQ or listed
on any exchange, whichever is applicable, as published in the Western Edition
of The Wall Street Journal for the ten (10) trading days prior to the date of
the Holder's election hereunder or, (B) if applicable at the time of or in
connection with the exercise under clause (b) of this Section 1, the gross
sales price of one share of the Company's Common Stock pursuant to a
registered public offering or that amount which shareholders of the Company
will receive for each share of Common Stock pursuant to a merger,
reorganization or sale of assets; and (ii) that number of shares of Common
Stock into which each share of Preferred Stock is convertible. If the
Company's Common Stock is not quoted by NASDAQ or listed on an exchange, the
Per Share Price of the Preferred Stock (or the equivalent number of shares of
Common Stock into which such Preferred Stock is convertible) shall be the
price per share which the Company would obtain from a willing buyer for
shares sold by the Company from authorized but unissued shares as such price
shall be agreed upon by the Holder and the Company or, if agreement cannot be
reached within ten (10) business days of the Holder's election hereunder, as
such price shall be determined by a panel of three (3) appraisers, one (1) to
be chosen by the Company, one (1) to be chosen by the Holder and the third to
be chosen by the first two (2) appraisers. If the appraisers cannot reach
agreement within 30 days of the Holder's election hereunder, then each
appraiser shall deliver its appraisal and the appraisal which is neither the
highest nor the lowest shall constitute the Per Share Price. In the event
either party fails to choose an appraiser within 30 days of the Holder's
election hereunder, then the appraisal of the sole appraiser shall constitute
the Per Share Price. Each pary shall bear the cost of the appraiser selected
by such party and the cost of the third appraiser shall be borne one-half by
each party. In the event either party fails to choose an appraiser, the cost
of the sole appraiser shall be borne one-half by each party.
2. LIMITATION ON TRANSFER.
(a) The Warrant and the Preferred Stock shall not be transferable
except upon the conditions specified in this Section 2, which conditions are
intended to insure compliance with the provisions of the Securities Act. Each
holder of this Warrant or the Preferred Stock issuable hereunder will cause
any proposed transferee of the Warrant or Preferred Stock to agree to take
and hold such securities subject to the provisions and upon the conditions
specified in this Section 2.
3
(b) Each certificate representing (i) this Warrant, (ii) the
Preferred Stock, (iii) shares of the Company's Common Stock issued upon
conversion of the Preferred Stock and (iv) any other securities issued in
respect of the Preferred Stock or Common Stock issued upon conversion of the
Preferred Stock upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall (unless otherwise permitted by
the provisions of this Section 2 or unless such securities have been
registered under the Securities Act or sold under Rule 144) be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
(c) The Holder of this Warrant and each person to whom this Warrant
is subsequently transferred represents and warrants to the Company (by
acceptance of such transfer) that it will not transfer the Warrant (or
securities issuable upon exercise hereof unless a registration statement
under the Securities Act was in effect with respect to such securities at the
time of issuance thereof) except pursuant to (i) an effective registration
statement under the Securities Act, (ii) Rule 144 under the Securities Act
(or any other rule under the Securities Act relating to the disposition of
securities), or (iii) an opinion of counsel, reasonably satisfactory to
counsel for the Company, that an exemption from such registration is
available.
(d) This Warrant will be wholly void and of no effect after the date
(the "Expiration Date") which is the earlier of (i) 5:00 p.m. (Pacific time)
December 31, 2002, or (ii) the effective time of a merger or reorganization
following which stockholders of the Company immediately prior to such
transaction own less than fifty percent (50%) of the equity securities of the
surviving corporation (or its parent, if any), so long as the surviving
entity is publicly traded and all securities in the surviving entity held by
the Company's shareholders are free of trading restrictions within 30 days of
the effective time of such transaction, and if the last day on which this
Warrant may be exercised is a Sunday or a legal holiday or a day on which
banking institutions doing business in the City of San Francisco are
authorized by law to close, this Warrant may be exercised prior to 5:00 p.m.
(Pacific time) on the next succeeding full business day with the same force
and effect as if exercised on such last day specified herein.
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3. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all shares of Preferred Stock which may be issued
upon the exercise of the rights represented by this Warrant will, upon
issuance, be duly authorized, validly issued, fully paid and nonassessable
and free from all preemptive rights of any shareholder and free of all taxes,
liens and charges with respect to the issue thereof. The Company further
covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times
have authorized and reserved, for the purpose of issue or transfer upon
exercise of the subscription rights evidenced by this Warrant, a sufficient
number of shares of authorized but unissued Preferred Stock, or other
securities and property, when and as required to provide for the exercise of
the rights represented by this Warrant. The Company will take all such action
as may be necessary to assure that such shares of Preferred Stock may be
issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any domestic securities exchange upon
which the Preferred Stock may be listed. The Company will not take any action
which would result in any adjustment of the Stock Purchase Price (as defined
in Section 4 hereof) (i) if the total number of shares of Preferred Stock
issuable after such action upon exercise of all outstanding warrants,
together with all shares of Preferred Stock then outstanding and all shares
of Preferred Stock then issuable upon exercise of all options and upon the
conversion of all convertible securities then outstanding, would exceed the
total number of shares of Preferred Stock then authorized by the Company's
Articles of Incorporation, or (ii) if the total number of shares of Common
Stock issuable after such action upon the conversion of all such shares of
Preferred Stock together with all shares of Common Stock then outstanding and
then issuable upon exercise of all options and upon the conversion of all
convertible securities hen outstanding would exceed the total number of
shares of Common Stock then authorized by the Company's Articles of
Incorporation.
4. ADJUSTMENT OF STOCK PURCHASE PRICE NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence
of certain events described in this Section 4. Upon each adjustment of the
Stock Purchase Price, the Holder of this Warrant shall thereafter be entitled
to purchase, at the Stock Purchase Price resulting from such adjustment, the
number of shares obtained by multiplying the Stock Purchase Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment, and dividing the
product thereof by the Stock Purchase Price resulting from such adjustment.
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4.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at
any time subdivide or combine its outstanding shares of Preferred Stock the
Stock Purchase Price shall be adjusted as described in Article III(B) 3(d) of
the Company's articles of Incorporation for holders of Series B1 preferred
stock.
4.2 DIVIDENDS IN PREFERRED STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. Unless provided for in the articles of incorporation, if at
any time or from time to time the holders of Preferred Stock (or any shares
of stock or other securities at the time receivable upon the exercise of this
Warrant) shall have received or become entitled to receive, without payment
therefor,
(a) Preferred Stock, or any shares of stock or other securities
whether or not such securities are at any time directly or indirectly
convertible into or exchangeable for Preferred Stock, or any rights or
options to subscribe for, purchase or otherwise acquire any of the foregoing
by way of dividend or other distribution, or
(b) any cash paid or payable otherwise than as a cash dividend, or
(c) Preferred Stock or other or additional stock or other
securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement,
(other than shares of Preferred Stock issued as a stock split, adjustments in
respect of which shall be covered by the terms of Section 4.1 above), then
and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of
Preferred Stock receivable thereupon, and without payment of any additional
consideration therefore, the amount of stock and other securities and
property (including cash in the cases referred to in clauses (b) and (c)
above) which such Holder would hold on the date of such exercise had he been
the holder of record of such Preferred Stock as of the date on which holders
of Preferred Stock received or became entitled to receive such shares and/or
all other additional stock and other securities and property.
4.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If
any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale
of all or substantially all of its assets to another corporation shall be
effected in such a way that holders of Preferred Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for
Preferred Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and
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adequate provisions shall be made whereby the holder hereof shall thereafter
have the right to purchase and receive(in lieu of the shares of the Preferred
Stock of the Company immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby) such shares of stock,
securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Preferred Stock equal to
the number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby. Except after
the effective time of a merger or reorganization following which stockholders
of the Company immediately prior to such transaction own less than fifty
percent (50%) of the equity securities of the surviving corporation (or its
parent, if any), so long as the surviving entity is publicly traded and all
securities in the surviving entity held by the Company's shareholders are
free of trading restrictions within 30 days of the effective time of such
transaction the Company will not effect any such consolidation, merger or
sale unless, prior to the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or the corporation
purchasing such assets shall assume by written instrument, executed and
mailed or delivered to the registered Holder hereof at the last address of
such Holder appearing on the books of the Company, the obligation to deliver
to such Holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such Holder may be entitled to purchase. In
any such case, appropriate provision shall be made with respect to the rights
and interests of the holder of this Warrant to the end that the provisions
hereof (including, without limitation, provisions for adjustments of the
Stock Purchase Price and of the number of shares purchasable and receivable
upon the exercise of this Warrant) shall thereafter be applicable, as nearly
as may be possble, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof.
4.4 SALE OR ISSUANCE BELOW PURCHASE PRICE. If the Company shall at any
time or from time to time issue or sell any of its Common Stock, Preferred
Stock, options to acquire (or rights to acquire such options), or any other
securities convertible into or exercisable for Common Stock, for a
consideration per share less than the Stock Purchase Price in effect
immediately prior to the time of such issue or sale, the Stock Purchase Price
then in effect and then applicable for any subsequent period or periods shall
be adjusted as described in Article III(B) 3(d) of the Company's articles of
Incorporation for holders of Series B1 preferred stock.
4.5 NOTICE OF ADJUSTMENT. Upon any adjustment of the Stock Purchase
Price, and/or any increase or decrease in the number of shares purchasable
upon the exercise of this Warrant the Company shall give written notice
thereof, by
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first class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company.
The notice shall state the Stock Purchase Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
4.6 OTHER NOTICES. If at any time:
(a) the Company shall declare any cash dividend upon its Preferred
Stock;
(b) the Company shall declare any dividend upon its Preferred
Stock payable in stock or make any special dividend or other distribution to
the holders of its Preferred Stock;
(c) the Company shall offer for subscription pro rata to the
holders of its Preferred Stock any additional shares of stock of any class or
other rights;
(d) there shall be any capital reorganization or reclassification
of the capital stock of the Company, or consolidation or merger of the
Company with, or sale of all or substantially all of its assets to, another
corporation;
(e) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(f) the Company shall take or propose to take any other action,
notice of which is actually provided to holders of the Preferred Stock;
then, in any one or more of said cases, the Company shall give, by first
class mail, postage prepaid, addressed to the holder of this Warrant at the
address of such holder as shown on the books of the Company, (i) at least 20
day's prior written notice of the date on which the books of the Company
shall close or a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, or other action and (ii) in the case of any such
reorganization, reclassification, consol-idation, merger, sale, dissolution,
liquidation or winding-up, or other action, at least 20 day's written notice
of the date when the same shall take place. Any notice given in accordance
with the foregoing clause (i) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the holders
of Preferred Stock shall be entitled thereto. Any notice given
8
in accordance with the foregoing clause (ii) shall also specify the date on
which the holders of Preferred Stock shall be entitled to exchange their
Preferred Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, or other action as the case may be.
5. ISSUE TAX. The issuance of certificates for shares of Preferred
Stock upon the exercise of the Warrant shall be made without charge to the
Holder of the Warrant for any issue tax in respect thereof; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of
any certificate in a name other than that of the then Holder of the Warrant
being exercised.
6. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any Warrant or of any shares of Preferred Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
7. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent as a shareholder in respect of
meetings of shareholders for the election of directors of the Company or any
other matters or any rights whatsoever as a shareholder of the Company. No
dividends or interest shall be payable or accrued in respect of this Warrant
or the interest represented hereby or the shares purchasable hereunder until,
and only to the extent that, this Warrant shall have been exercised. No
provisions hereof, in the absence of affirmative action by the holder to
purchase shares of Preferred Stock, and no mere enumeration herein of the
rights or privileges of the Holder hereof, shall give rise to any liability
of such Holder for the Stock Purchase Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by its
creditors.
8. REGISTRATION RIGHTS. The Holder hereof shall be entitled, with
respect to the shares of Preferred Stock issued upon exercise hereof or the
shares of Common Stock or other securities issued upon conversion of such
Preferred Stock as the case may be, to the same extent and on the same terms
and conditions as possessed by the Series B1 Investors/Purchasers. The
company shall take such action as may be reasonably necessary to assure that
the granting of such registration rights to the Holder does not violate the
provisions of such agreement or any of the. Company's charter documents or
rights of prior Grantees of registration rights.
9. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT.
9
The rights and obligations of the Company, of the Holder of this Warrant and
of the holder of shares of Preferred Stock issued upon exercise of this
Warrant, contained in Sections 6 and 8 shall survive the exercise of this
Warrant.
10. MODIFICATION AND WAIVER. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
11. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall
be deemed to have been given (i) upon receipt if delivered personally or by
courier (ii) upon confirmation of receipt if by telecopy or (iii) three
business days after deposit in the US mail, with postage prepaid and
certified or registered, to each such holder at its address as shown on the
books of the Company or to the Company at the address indicated therefor in
the first paragraph of this Warrant.
12. BINDING EFFECT ON SUCCESSORS. All of the obligations of the Company
relating to the Preferred Stock issuable upon the exercise of this Warrant
shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assign of the holder hereof. The Company will, at the time of
the exercise of this Warrant, in whole or in part, upon request of the Holder
hereof but at the Company's expense, acknowledge in writing its continuing
obligation to the Holder hereof in respect of any rights (including, without
limitation, any right to registration of the shares of Common Stock) to which
the holder hereof shall continue to be entitled after such exercise in
accordance with this Warrant; provided, that the failure of the holder hereof
to make any such request shall not affect the continuing obligation of the
Company to the Holder hereof in respect of such rights.
13. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The descriptive headings of
the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of California.
14. LOST WARRANTS OR STOCK CERTIFICATES. The Company represents and
warrants to the Holder hereof that upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
any Warrant or stock certificate and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably
10
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant or stock certificate, the Company
at its expense will make and deliver a new Warrant or stock certificate, of
like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or
stock certificate.
15. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any
fractional share, pay the holder entitled to such fraction a sum in cash
equal to such fraction multiplied by the then effective Stock Purchase Price.
16. REPRESENTATIONS OF HOLDER. With respect to this Warrant, Holder
represents and warrants to the Company as follows:
16.1 EXPERIENCE. It is experienced in evaluating and investing in
companies engaged in businesses similar to that of the Company; it
understands that investment in the Warrant involves substantial risks; it has
made detailed inquiries concerning the Company, its business and services,
its officers and its personnel; the officers of the Company have made
available to Holder any and all written information it has requested; the
officers of the Company have answered to Holder's satisfaction all inquiries
made by it; in making this investment it has relied upon information made
available to it by the Company; and it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and risks of investment in the Company and it is able to bear the economic
risk of that investment.
16.2 INVESTMENT. It is acquiring the Warrant for investment for
its own account and not with a view to, or for resale in connection with, any
distribution thereof. It understands that the Warrant, the shares of
Preferred Stock issuable upon exercise thereof and the shares of Common Stock
issuable upon conversion of the Preferred Stock, have not been registered
under the Securities Act of 1933, as amended, nor qualified under applicable
state securities laws.
16.3 RULE 144. It acknowledges that the Warrant, the Preferred
Stock and the Common Stock must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. It has been advised or is aware of the provisions
of Rule 144 promulgated under the Securities Act.
16.4 ACCESS TO DATA. It has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management and has had the opportunity to inspect the Company's facilities.
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17. ADDITIONAL REPRESENTATIONS AND COVENANTS OF THE COMPANY. The
Company hereby represents, warrants and agrees as follows:
17.1 CORPORATE POWER. The Company has all requisite corporate
power and corporate authority to issue this Warrant and to carry out and
perform its obligations hereunder.
17.2 AUTHORIZATION. All corporate action on the part of the
Company, its directors and shareholders necessary for the authorization,
execution, delivery and performance by the Company of this has been taken.
This Warrant is a valid and binding obligation of the Company, enforceable in
accordance with its terms.
17.3 OFFERING. Subject in part to the truth and accuracy of
Holder's representations set forth in Section 17 hereof, the offer, issuance
and sale of the Warrant is, and the issuance of Preferred Stock upon exercise
of the Warrant and the issuance of Common Stock upon conversion of the
Preferred Stock will be exempt from the registration requirements of the
Securities Act, and are exempt from the qualification requirements of any
applicable state securities laws; and neither the Company nor anyone acting
on its behalf will take any action hereafter that would cause the loss of
such exemptions.
17.4 STOCK ISSUANCE. Upon exercise of the Warrant, the Company
will use its best efforts to cause stock certificates representing the shares
of Preferred Stock purchased pursuant to the exercise to be issued in the
individual names of Holder, its nominees or assignees, as appropriate at the
time of such exercise. Upon conversion of the shares of Preferred Stock to
shares of Common Stock, the Company will issue the Common Stock in the
individual names of Holder, its nominees or assignees, as appropriate.
17.5 ARTICLES AND BY-LAWS. The Company has provided Holder with
true and complete copies of the Company's Articles or Certificate of
Incorporation, By-Laws, and each Certificate of Determination or other
charter document setting, forth any rights, preferences and privileges of
Company's capital stock, each as amended and in effect on the date of
issuance of this Warrant.
17.6 CONVERSION OF PREFERRED STOCK. As of the date hereof, each
share of the Preferred Stock is convertible into one share of the Common
Stock.
17.7 FINANCIAL AND OTHER REPORTS. From time to time up to the
earlier of the Expiration Date or the complete exercise of this Warrant, the
Company shall furnish to Holder (i) within 100 days after the close of each
fiscal year of
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the Company an audited balance sheet and statement of changes in financial
position at and as of the end of such fiscal year, together with an audited
statement of income for such fiscal year; (ii) within 45 days after the close
of each fiscal quarter of the Company, an unaudited balance sheet and
statement of cash flows at and as of the end of such quarter, together with
an unaudited statement of income for such quarter; and (iii) promptly after
sending, making available, or filing, copies of all reports, proxy
statements, and financial statements that the Company sends or makes
available to its shareholders and all registration statements and reports
that the Company files with the SEC or any other governmental or regulatory
authority.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 26th day of March,
1997.
IMGIS, INC.
By:____________________________________
Title: ________________________________
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FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To:_______________________________________
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder,__________________________ (_______) (1)
shares of Preferred Stock of ____________________________________________
and herewith makes payment of _____________________________________
Dollars ($____________________) therefor, and requests that the certificates
for such shares be issued in the name of, and delivered to,
_____________________________________________, whose address is
_________________________________________________.
The undersigned represents that it is acquiring such Preferred
Stock for its own account for investment and not with a view to or for sale
in connection with any distribution thereof (subject, however, to any
requirement of law that the disposition
thereof shall at all times be within its control.
DATED:____________________________________________
__________________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
(Address)
__________________________________________________
__________________________________________________
(1) Insert here the number of shares called for on the face of the
Warrant (or, in the case of a partial exercise, the portion thereof
as to which the Warrant is being exercised), in either case without
making any adjustment for additional Preferred Stock or any other
stock or other securities or property or cash which, pursuant to
the adjustment provisions of the Warrant, may be deliverable upon
exercise.
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned, the holder of the within
Warrant, hereby sells, assigns and transfers all of the rights of the
undersigned under the within Warrant, with respect to the number of shares of
Preferred Stock covered thereby set forth hereinbelow, unto:
Name of Assignee Address No. of Shares
- -----------------------------------------------------------------------------------
Dated:_____________________________________
___________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
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