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EXHIBIT 10.12
LOAN AND SECURITY AGREEMENT
Agreement No. ________ Dated as of May 20, 1999
between
MMC/GATX PARTNERSHIP NO. I
Four ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
as Lender
and
PACKETEER INC.
a Delaware corporation
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
as Borrower
CREDIT AMOUNT: $2,500,000
Treasury Note Maturity: 12 months
Loan Margin: 766 basis points
Commitment Termination Date: May 28, 1999
The defined terms and information set forth on this cover page are a
part of the LOAN AND SECURITY AGREEMENT, dated as of the date first written
above (this "Agreement"), entered into by and between MMC/GATX PARTNERSHIP NO. I
("Lender") and the borrower ("Borrower") set forth above. The terms and
conditions of this Agreement agreed to between Lender and Borrower are as
follows:
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INTERPRETATION
1.01. Certain Definitions. Unless otherwise indicated in this Agreement
or any other Operative Document, the following terms, when used in this
Agreement or any other Operative Document, shall have the following respective
meanings:
"Applicable Premium" shall mean an amount equal to the greater of (i)
zero and (ii) the excess of (x) the sum of the present values, at the date of
prepayment of the amount of each remaining scheduled payment of interest on and
principal on the Loan, or portion of such payment, which will not be required to
be made as a result of such prepayment (each such payment an "Amount Payable")
(each such Amount Payable discounted separately at the Treasury Rate, determined
on the date three (3) Business Days before the date of prepayment, compounded
monthly, from the date such Amount Payable would be due), over (y) the principal
amount of such Note to be prepaid. The "Treasury Rate" shall be the yield (as
quoted in The Wall Street Journal on the date which is three (3) Business Days
prior to the date of prepayment) on U.S. Treasury securities adjusted to a
constant maturity equal to the then remaining number of full months to maturity
of the Note.
"Borrower's Home State" shall mean the state in which Borrower's
principal place of business is located.
"Business Day" shall mean any day other than a Saturday, Sunday or
public holiday under the laws of California, Illinois or Borrower's Home State
or other day on which banking institutions are authorized or obligated to close
in California, Illinois or Borrower's Home State.
"Claim" has the meaning given to that term in Section 10.03.
"Collateral" has the meaning given to that term in Section 5.01(a).
"Commitment Fee" has the meaning given to that term in Section 2.04.
"Commitment Termination Date" shall mean the date specified on the cover
page of this Agreement.
"Credit Amount" shall mean the maximum amount that Lender is committed
to lend (if the conditions specified in Schedule 3 are satisfied), which amount
is set forth following such term on the cover page of this Agreement.
"Current Assets" shall mean the aggregate amount of all of the
consolidated assets of Borrower and its Subsidiaries that would, in accordance
with GAAP, be classified on a balance sheet as current assets.
"Current Liabilities" shall mean the aggregate amount of all of the
consolidated liabilities of Borrower and its Subsidiaries that would, in
accordance with GAAP, be classified on a balance sheet as current liabilities.
"Default" shall mean any event which with the passing of time or the
giving of notice or both would become an Event of Default hereunder.
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"Default Rate" shall mean the per annum rate of interest equal to the
higher of (i) 18% or (ii) the Prime Rate plus 6%, but such rate shall in no
event be more than the highest rate permitted by applicable law.
"Disclosure Schedule" has the meaning set forth in the definition of the
term "Permitted Liens."
"Environmental Law" shall mean the Resource Conservation and Recovery
Act of 1987, the Comprehensive Environmental Response, Compensation and
Liability Act, and any other federal, state or local statute, law, ordinance,
code, rule, regulation, order or decree (in each case having the force of law)
regulating or imposing liability or standards of conduct concerning any
Hazardous Material, as now or at any time hereafter in effect.
"Equity Securities" of any Person shall mean (a) all common stock,
preferred stock, participations, shares, partnership interests or other equity
interests in and of such Person (regardless of how designated and whether or not
voting or non-voting) and (b) all warrants, options and other rights to acquire
any of the foregoing.
"Event of Default" has the meaning given to that term in Section 9.01.
"Funding Date" shall mean the date on which the Loan is made to or on
account of Borrower under this Agreement.
"GAAP" shall mean generally accepted accounting principles and practices
as in effect in the United States of America from time to time, consistently
applied.
"Hazardous Material" means any hazardous, dangerous or toxic constituent
material, pollutant, waste or other substance, whether solid, liquid or gaseous,
which is regulated by any federal, state or local governmental authority.
"Indebtedness" shall mean, with respect to Borrower or any Subsidiary,
the aggregate amount of, without duplication, (a) all obligations of such Person
for borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person to pay the deferred purchase price of property or services (excluding
trade payables aged less than 180 days), (d) all capital lease obligations of
such Person, (e) all obligations or liabilities of others secured by a lien on
any asset of such Person, whether or not such obligation or liability is
assumed, (f) all obligations or liabilities of others guaranteed by such Person;
and (g) any other obligations or liabilities which are required by GAAP to be
shown as debt on the balance sheet of such Person. Unless otherwise indicated,
the term "Indebtedness" shall include all Indebtedness of Borrower and the
Subsidiaries.
"Intellectual Property" shall mean all of Borrower's right, title and
interest in and to patents, patent rights (and applications therefor),
trademarks and service marks (and applications and registrations therefor),
inventions, copyrights, mask works (and applications and registrations
therefor), trade names, trade styles, software and computer programs, trade
secrets, methods, processes, know how, drawings, specifications, descriptions,
and all memoranda, notes, and records with respect to any research and
development, all whether now owned or subsequently acquired or developed by
Borrower and whether in tangible or intangible form or contained on magnetic
media readable by machine together with all such magnetic media.
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"Lien" shall mean any pledge, bailment, lease, mortgage, hypothecation,
conditional sales and title retention agreements, charge, claim, encumbrance or
other lien in favor of any Person.
"Loan" shall mean the loan advanced by Lender to Borrower under this
Agreement.
"Loan Margin" shall mean the number of basis points set forth following
such term on the cover page of this Agreement.
"Loan Rate" shall mean, with respect to the Loan, the per annum rate of
interest (based on a year of twelve 30 day months) equal to the sum of (a) the
U.S. Treasury note rate of a term equal to the Treasury Note Maturity as quoted
in The Wall Street Journal on the date the applicable Note is prepared, plus (b)
the Loan Margin.
"Note" shall mean the secured promissory note of Borrower substantially
in the form of Exhibit A.
"Obligations" has the meaning given to that term in Section 5.01.
"Operative Documents" shall mean this Agreement, the Note, the Warrant
and Consent(s) and all other documents, instruments and agreements executed and
delivered in connection herewith or therewith or in respect of the closing of
the transactions contemplated hereby or thereby.
"Payment Date" means the last Business Day of each calendar month.
"Permitted Indebtedness" shall mean and include:
(a) Indebtedness of Borrower to Lender;
(b) Indebtedness of Borrower secured by Liens permitted under
clause (e) of the definition of Permitted Liens;
(c) Indebtedness arising from the endorsement of instruments in
the ordinary course of business;
(d) Indebtedness existing on the date hereof and set forth on the
Disclosure Schedule;
(e) Subordinated Indebtedness; and
(f) Other Indebtedness of Borrower not exceeding One Hundred
Thousand Dollars ($100,000) at any time.
"Permitted Investments" shall mean and include:
(a) Deposits with commercial banks organized under the laws of
the United States or a state thereof to the extent such deposits are fully
insured by the Federal Deposit Insurance Corporation;
(b) Investments in marketable obligations issued or fully
guaranteed by the United States and maturing not more than one (1) year from the
date of issuance; and
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(c) Investments in open market commercial paper rated at least
"A1" or "P1" or higher by a national credit rating agency and maturing not more
than one (1) year from the creation thereof.
(d) Investments pursuant to or arising under currency agreements
or interest rate agreements entered into in the ordinary course of business;
(e) Investments consisting of deposit accounts of Borrower in
which Lender has a perfected security interest; and
(f) Other Investments aggregating not in excess of Two Hundred
Fifty Thousand Dollars ($250,000) at any time.
"Permitted Liens" shall mean (a) the Lien created by this Agreement, (b)
Liens for fees, taxes, levies, imposts, duties or other governmental charges of
any kind which are not yet delinquent or which are being contested in good faith
by appropriate proceedings which suspend the collection thereof (provided,
however, that such proceedings do not involve any substantial danger of the
sale, forfeiture or loss of any item of equipment and that Borrower has
adequately bonded such Lien or reserves sufficient to discharge such Lien have
been provided on the books of Borrower), (c) Liens identified on the disclosure
schedule attached hereto as Schedule 2 ("Disclosure Schedule"), (d) Liens to
secure payment of worker's compensation, employment insurance, old age pensions
or other social security obligations of Borrower in the ordinary course of
business of Borrower, (e) Liens upon any equipment or other personal property
acquired by Borrower after the date hereof to secure (i) the purchase price of
such equipment or other personal property or (ii) lease obligations or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment or other personal property; provided that (A) such Liens are
confined solely to the equipment or other personal property so acquired and the
amount secured does not exceed the acquisition price thereof, and (B) no such
Lien shall be created, incurred, assumed or suffered to exist in favor of
Borrower's officers, directors or shareholders holding five percent (5%) or more
of Borrower's Equity Securities, (f) carriers', warehousemen's, mechanics',
landlords', materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business which are not delinquent or remain payable without
penalty or which are being contested in good faith and by appropriate
proceedings, and (g) non-exclusive licenses of Intellectual Property entered
into in the ordinary course of business and licenses, Liens or similar
arrangements entered into in connection with joint ventures and corporate
collaborations.
"Person" shall mean and include an individual, a partnership, a
corporation, a business trust, a joint stock company, a limited liability
company, an unincorporated association or other entity and any domestic or
foreign national, state or local government, any political subdivision thereof,
and any department, agency, authority or bureau of any of the foregoing.
"Prime Rate" shall mean the interest rate per annum publicly announced
from time to time by Bank of America NT & SA (or its successor) as its reference
rate, but such rate shall in no event be more than the highest interest rate
permitted by applicable law.
"Subordinated Indebtedness" shall mean Indebtedness subordinated to the
Obligations on terms and conditions acceptable to Lender in its sole discretion.
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"Subsidiary" shall mean any corporation of which a majority of the
outstanding capital stock entitled to vote for the election of directors
(otherwise than as the result of a default) is owned by Borrower directly or
indirectly through Subsidiaries.
"Term" shall mean the period from and after the date hereof until the
payment or satisfaction in full of all Obligations under this Agreement and the
other Operative Documents.
"Treasury Note Maturity" shall mean the period of months set forth
following such term on the cover page of this Agreement.
"Warrant" shall mean a warrant to purchase securities of Borrower
substantially in the form of Exhibit B.
1.02. Headings. Headings in this Agreement and each of the other
Operative Documents are for convenience of reference only and are not part of
the substance hereof or thereof.
1.03. Plural Terms. All terms defined in this Agreement or any other
Operative Document in the singular form shall have comparable meanings when used
in the plural form and vice versa.
1.04. Construction. This Agreement is the result of negotiations among,
and has been reviewed by, Borrower and Lender and their respective counsel.
Accordingly, this Agreement shall be deemed to be the product of all parties
hereto, and no ambiguity shall be construed in favor of or against Borrower or
Lender.
1.05. Entire Agreement. This Agreement, together with the terms set
forth in each of the other Operative Documents, taken together, constitute and,
contain the entire agreement of Borrower and Lender and, with regard to their
respective subject matters, supersede any and all prior agreements, term sheets,
negotiations, correspondence, understandings and communications among the
parties, whether written or oral, with respect to their respective subject
matters.
1.06. Other Interpretive Provisions. References in this Agreement to
"Articles," "Sections," "Exhibits," "Schedules" and "Annexes" are to recitals,
articles, sections, exhibits, schedules and annexes herein and hereto unless
otherwise indicated. References in this Agreement and each of the other
Operative Documents to any document, instrument or agreement shall include (a)
all exhibits, schedules, annexes and other attachments thereto, (b) all
documents, instruments or agreements issued or executed in replacement thereof,
and (c) such document, instrument or agreement, or replacement or predecessor
thereto, as amended, modified and supplemented from time to time and in effect
at any given time. The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement or any other Operative Document shall
refer to this Agreement or such other Operative Document, as the case may be, as
a whole and not to any particular provision of this Agreement or such other
Operative Document, as the case may be. The words "include" and "including" and
words of similar import when used in this Agreement or any other Operative
Document shall not be construed to be limiting or exclusive. Unless otherwise
indicated in this Agreement or any other Operative Document, all accounting
terms used in this Agreement or any other Operative Document shall be construed,
and all accounting and financial computations hereunder or thereunder shall be
computed, in accordance with generally accepted accounting principles as in
effect in the United States of America from time to time.
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II
THE CREDIT
2.01. Credit Facility.
(a) Commitment. On the terms and subject to the conditions hereof
and relying upon the representations and warranties herein set forth as and when
made or deemed to be made, Lender agrees to make a Loan in the principal amount
of Two Million Five Hundred Thousand Dollars ($2,500,000).
(b) Loan Interest Rate. Borrower shall pay interest on the unpaid
principal amount of the Loan from the date of the Loan until the Loan is paid in
full, at a per annum rate of interest equal to the Loan Rate determined in
accordance with the definition of Loan Rate. The Loan Rate applicable to the
Loan shall not be subject to change in the absence of manifest error. All
computations of interest on the Loan shall be based on a year of twelve 30 day
months. If Borrower pays interest on any Loan which is determined to be in
excess of the then legal maximum rate, then that portion of each interest
payment representing an amount in excess of the then legal maximum rate shall be
deemed a payment of principal and applied against the principal of the Loan.
(c) Payments of Principal and Interest. Borrower shall make
payments of accrued interest only on the outstanding principal amount of the
Loan on each Payment Date, commencing June 30, 1999 through and including April
30, 2000. On May 31, 2000, Borrower shall make a final payment equal to the
entire outstanding principal amount of the Loan, plus accrued and unpaid
interest.
2.02. Use of Proceeds; the Loan and the Note; Disbursement.
(a) Use of Proceeds. The proceeds of the Loan shall be used
solely for working capital or general corporate purposes of Borrower.
(b) The Loan and the Note. The obligation of Borrower to repay
the unpaid principal amount of and interest on the Loan shall be evidenced by
the Note. Lender may, and is hereby authorized by Borrower to, endorse on a grid
annexed to the Note appropriate notations regarding the Loan; provided, however,
that the failure to make, or an error in making, any such notation shall not
limit or otherwise affect the obligations of Borrower hereunder or under the
Note.
(c) Disbursement. Subject to the satisfaction of the conditions
set forth in this Agreement, Lender shall disburse such Loan by wire transfer to
Borrower unless otherwise directed in writing by Borrower.
(d) Termination of Commitment to Lend. Notwithstanding anything
to the contrary in the Operative Documents, Lender's obligation to lend the
undisbursed portion of the Credit Amount to Borrower hereunder shall terminate
on the earlier of (i) the occurrence of any Event of Default hereunder, and (ii)
the Commitment Termination Date.
(e) Optional Prepayment with Premium. Upon three (3) Business
Days' prior written notice to Lender, Borrower may, at its option, at any time,
prepay the Loan in its entirety, at a prepayment price equal to the principal
amount of the Loan so to be prepaid, plus interest accrued thereon through and
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including the date of such prepayment, plus a premium equal to the Applicable
Premium. If an Event of Default occurs and is continuing, and Lender exercises
its right under Section 9.02 to accelerate the Loan, Borrower expressly agrees
that the amount then due and payable shall include the Applicable Premium as of
the date of such acceleration.
2.03. Other Payment Terms.
(a) Place and Manner. Borrower shall make all payments due to
Lender in lawful money of the United States, in immediately available funds, at
the address for payments and in the manner specified in Section 10.05(b).
(b) Date. Whenever any payment due hereunder shall fall due on a
day other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall be included in the computation of
interest or fees, as the case may be.
(c) Default Rate. If either (i) any amounts required to be paid
by Borrower under this Agreement or the other Operative Documents (including
principal or interest payable on the Loan, any fees or other amounts) remain
unpaid after such amounts are due, or (ii) an Event of Default has occurred and
is continuing, Borrower shall pay interest on the outstanding principal balance
hereunder from the date due or from the date of the Event of Default, as
applicable, until such past due amounts are paid in full or until all Events of
Defaults are cured, as applicable, at a per annum rate equal to the Default
Rate, such rate to change from time to time as the Prime Rate shall change. All
computations of such interest at the Default Rate shall be based on a year of
twelve 30 day months.
2.04. Commitment Fee. Lender has received a commitment fee from Borrower
in the amount of $25,000 (the "Commitment Fee"). Any portion of the Commitment
Fee not utilized to pay Lender's expenses in connection with the negotiation,
documentation and funding of the Loan will be applied by Lender to amounts due
under the Note in the order in which such amounts are due. If the Loan is not
made, any remaining balance of the Commitment Fee shall be retained by Lender.
III
REPRESENTATIONS AND WARRANTIES
3.01. Representations and Warranties. Except as set forth in the
Disclosure Schedule, Borrower makes the following representations and warranties
to Lender as of the date hereof and again on the Funding Date:
(a) Organization and Qualification. Borrower is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and is duly qualified to do business in Borrower's Home
State.
(b) Authority. Borrower has all necessary corporate power,
authority and legal right and has obtained all approvals and consents and has
given all notices necessary to execute and deliver this Agreement and the other
Operative Documents and to perform the terms hereof and thereof. Borrower has
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all requisite corporate power and authority to own and operate its properties
and to carry on its businesses as now conducted.
(c) Conflict with Other Instruments, etc. Neither the execution
and delivery of any Operative Document to which Borrower is a party nor the
consummation of the transactions therein contemplated nor compliance with the
terms, conditions and provisions thereof will conflict with or result in a
breach of any of the terms, conditions or provisions of the charter or the
bylaws of Borrower or, to its knowledge, any law or any regulation, order, writ,
injunction or decree of any court or governmental instrumentality or any
material agreement or instrument to which Borrower is a party or by which it or
any of its properties is bound or to which it or any of its properties is
subject, or constitute a default thereunder or result in the creation or
imposition of any Lien, other than Permitted Liens.
(d) Title to Properties. Borrower has good and marketable title
to the Collateral, free and clear of all Liens, other than Permitted Liens.
Borrower has title and ownership of, or is licensed under, all Intellectual
Property, with no known infringement of the rights of others. Borrower has not
received any communications alleging that Borrower has violated, or by
conducting its business as proposed, would violate any proprietary rights of any
other Person. Borrower has no knowledge of any infringement or violation by it
of the intellectual property rights of any third party and has no knowledge of
any violation or infringement by a third party of any of its Intellectual
Property. The Collateral and the Intellectual Property constitute substantially
all of the assets and property of Borrower. Borrower does not own any right,
title or interest in or to any real property or motor vehicles.
(e) Authorization, Governmental Approvals, etc. The execution and
delivery by Borrower of each Operative Document, the granting of the security
interest in the Collateral, the issuance of the Warrant, the issuance of the
securities into which the Warrant is exercisable, the issuance of any securities
into which the securities issuable upon exercise of the Warrant are convertible,
and the performance of the obligations herein and therein contemplated have each
been duly authorized by all necessary action on the part of Borrower. No
authorization, consent, approval, license or exemption of, and no registration,
qualification, designation, declaration or filing with, or notice to, any Person
is, was or will be necessary to (i) the valid execution and delivery of any
Operative Document to which Borrower is a party, (ii) the performance of
Borrower's obligations under any Operative Document, or (iii) the granting of
the security interest in the Collateral, except for filings in connection with
the perfection of the security interest in any of the Collateral or the issuance
of the Warrant. The Operative Documents have been or will be duly executed and
delivered and constitute or will constitute legal, valid and binding obligations
of Borrower, enforceable in accordance with their respective terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency or other
similar laws of general application relating to or affecting the enforcement of
creditors' rights or by general principles of equity.
(f) Litigation. There are no actions, suits, proceedings or
investigations pending or, to the knowledge of Borrower, threatened against or
affecting Borrower, or the business or any property or asset owned by it, before
any court or governmental department, agency or instrumentality which, if
adversely determined, could reasonably be expected to have a material adverse
effect on the financial condition, business or operations of Borrower.
(g) Security Interest. Assuming the proper filing of one or more
financing statement(s) identifying the Collateral with the proper state and/or
local authorities, the security interests in the Collateral
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granted to Lender pursuant to this Agreement (i) constitute and will continue to
constitute first priority security interests (except to the extent any other
Permitted Lien existing on the date of this Agreement may create any priority to
Lender's Lien under this Agreement) and (ii) are and will continue to be
superior and prior to the rights in the Collateral of all other creditors of
Borrower (except to the extent of such Permitted Liens).
(h) Executive Offices. The principal place of business and chief
executive office of Borrower, and the office where Borrower will keep all
records and files regarding the Collateral, is set forth on the cover page of
this Agreement.
(i) Solvency, Etc. Borrower is Solvent (as defined below) and,
after the execution and delivery of the Operative Documents and the consummation
of the transactions contemplated thereby, Borrower will be Solvent. "Solvent"
shall mean, with respect to any Person on any date, that on such date (a) the
fair value of the property of such Person is greater than the fair value of the
liabilities (including, without limitation, contingent liabilities) of such
Person, (b) the present fair saleable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature and (d)
such Person is not engaged in business or a transaction, and is not about in
business or a transaction, for which such Person's property would constitute an
unreasonably small capital.
(j) Catastrophic Events; Labor Disputes. None of Borrower or its
properties is or has been affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or other casualty that could reasonably be expected to have a material
adverse effect on the financial condition, business or operations of Borrower.
There are no disputes presently subject to grievance procedure, arbitration or
litigation under any of the collective bargaining agreements, employment
contracts or employee welfare or incentive plans to which Borrower is a party,
and there are no strikes, lockouts, work stoppages or slowdowns, or, to the best
knowledge of Borrower, jurisdictional disputes or organizing activity occurring
or threatened which could reasonably be expected to have a material adverse
effect on the financial condition, business or operations of Borrower.
(k) No Material Adverse Effect. No event has occurred and no
condition exists which could reasonably be expected to have a material adverse
effect on the financial condition, business or operations of Borrower since
December 31, 1996.
(l) Accuracy of Information Furnished. None of the Operative
Documents and none of the other certificates, statements or information
furnished to Lender by or on behalf of Borrower in connection with the Operative
Documents or the transactions contemplated thereby contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Lender recognizes that all
financial projections furnished to the Lender by or on behalf of Borrower in
connection with the Operative Documents or the transactions contemplated thereby
are not to be viewed as facts and that actual results during the period or
periods covered by such projections may differ from the projected or forecasted
results.
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(m) Certain Agreements of Officers, Employees and Consultants.
(i) No officer, employee or consultant of Borrower is, or is now expected to be,
in violation of any term of any employment contract, proprietary information
agreement, nondisclosure agreement, noncompetition agreement, or any other
contract or agreement or any restrictive covenant relating to the right of any
such officer, employee or consultant to be employed by Borrower because of the
nature of the business conducted or to be conducted by Borrower or relating to
the use of trade secrets or proprietary information of others, and to the best
of Borrower's knowledge, after due inquiry, the continued employment of
Borrower's officers, employees and consultants do not subject Borrower to any
liability for any claim or claims arising out of or in connection with any such
contract, agreement, or covenant. (ii) To the knowledge of Borrower, no officers
of Borrower, and no employee or consultant of Borrower whose termination, either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect, has any present intention of terminating his or her
employment or consulting relationship with Borrower.
IV
REPORTING REQUIREMENTS
4.01. Furnishing Reports. Borrower shall furnish to Lender:
(a) Financial Statements. So long as Borrower is not subject to
the reporting requirements of Section 12 or Section 15 of the Securities and
Exchange Act of 1934, as amended, promptly as they are available, unaudited
monthly and audited annual financial statements of Borrower and such other
financial information as Lender may reasonably request from time to time. From
and after such time as Borrower becomes a publicly reporting company, promptly
as they are available and in any event: (i) not later than three (3) days after
the time of filing of Borrower's Form 10-K with the Securities and Exchange
Commission after the end of each fiscal year of Borrower, the financial
statements of Borrower filed with such Form 10-K; and (ii) not later than three
days after the time of filing of Borrower's Form 10-Q with the Securities and
Exchange Commission after the end of each of the first three fiscal quarters of
Borrower, the financial statements of Borrower filed with such Form 10-Q.
(b) Notice of Defaults. As soon as possible, and in any event
within five (5) Business Days after the discovery of a Default or Event of
Default provide Lender with an Officer's Certificate of Borrower setting forth
the facts relating to or giving rise to such Default or Event of Default and the
action which Borrower proposes to take with respect thereto.
V
GRANT OF SECURITY INTEREST
GENERAL PROVISIONS CONCERNING SECURITY
5.01. Grant of Security Interest. Borrower, in order to secure the
payment of the principal and interest with respect to the Loan made pursuant to
this Agreement, all other sums due under and in respect hereof and of the other
Operative Documents, including fees, charges, expenses and attorneys' fees and
costs and the performance and observance by Borrower of all other terms,
conditions, covenants and agreements herein and in the other Operative Documents
(all such amounts and obligations being herein sometimes called the
"Obligations"), does hereby grant to Lender and its successors and assigns, a
security interest in
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and to the following property (collectively, the "Collateral"): All right,
title, interest, claims and demands of Borrower in and to:
(a) All goods and equipment now owned or hereafter acquired,
including, without limitation, all laboratory equipment, computer equipment,
office equipment, machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory now owned or hereafter acquired, including,
without limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's books relating to any of the foregoing;
(c) All contract rights and general intangibles, including
Intellectual Property, now owned or hereafter acquired, including, without
limitation, goodwill, license agreements, franchise agreements, blueprints,
drawings, purchase orders, customer lists, route lists, infringements, claims,
computer programs, computer disks, computer tapes, literature, reports,
catalogs, design rights, income tax refunds, payments of insurance and rights to
payment of any kind;
(d) All now existing and hereafter arising accounts, contract
rights, royalties, license rights and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods, the licensing of technology
or the rendering of services by Borrower (subject, in each case, to the
contractual rights of third parties to require funds received by Borrower to be
expended in a particular manner), whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, letters of credit,
certificates of deposit, instruments, chattel paper and investment property,
including, without limitation, all securities, whether certificated or
uncertificated, security entitlements, securities accounts, commodity contracts
and commodity accounts, and all financial assets held in any securities account
or otherwise, wherever located, now owned or hereafter acquired and Borrower's
books relating to the foregoing; and
(f) Any and all claims, rights and interests in any of the above
and all substitutions for, additions and accessions to and proceeds thereof,
including, without limitation, insurance, condemnation, requisition or similar
payments.
5.02. Duration of Security Interest. Lender's security interest in the
Collateral shall continue until the payment in full of all payment Obligations,
whereupon such security interest shall terminate. Lender, upon payment in full
of all payment Obligations, shall execute such further documents and take such
further actions as may be necessary to effect the release and/or termination
contemplated by this Section 5.02, including duly executing and delivering
termination statements for filing in all relevant jurisdictions.
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5.03. Possession of Collateral. Except as set forth in Section 5.04, so
long as no Event of Default has occurred and is continuing, Borrower shall
remain in full possession, enjoyment and control of the Collateral (except only
as may be otherwise required by Lender for perfection of its security interest
therein) and to manage, operate and use the same and each part thereof with the
rights and franchises appertaining thereto; provided, however, that the
possession, enjoyment, control and use of the Collateral shall at all times be
subject to the observance and performance of the terms of this Agreement.
5.04 Location of Collateral. The Collateral is and shall remain in the
possession of Borrower at Borrower's address stated on the cover page of this
Agreement.
5.05 Lien Subordination. Lender agrees that the Liens granted to it
hereunder shall be subordinate to the Liens of Silicon Valley Bank and Comdisco,
Inc. with respect to the Indebtedness specified in the Disclosure Schedule;
provided, that the Obligations hereunder shall not be subordinate in right of
payment to any obligations to such parties and Lender's rights and remedies
hereunder shall not in any way be subordinate to the rights and remedies of any
such parties. Lender agrees to execute and deliver such agreements and documents
as may be reasonably requested by Borrower from time to time which set forth the
lien subordination described in this Section 5.05 and are reasonably acceptable
to Lender. Lender shall have no obligation to execute any agreement or document
which would impose obligations, restrictions or lien priority on Lender which
are less favorable to Lender than those described in this Section 5.05.
VI
AFFIRMATIVE COVENANTS
6.01. Affirmative Covenants.
(a) Payment of Taxes, etc. Borrower shall pay and discharge all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits, or upon any properties belonging to it, prior to the date
on which penalties attach thereto, and all lawful claims which, if unpaid, might
become a Lien upon any of its properties; provided that there shall be no
requirement to pay any such tax, assessment, charge, levy or claim (i) which is
being contested in good faith and by appropriate proceedings or which presents
no risk of seizure, forfeiture, levy or other event which could jeopardize any
Collateral or (ii) for which payment in full is bonded or reserved in Borrower's
financial statements.
(b) Inspection Rights. Borrower shall, at any reasonable time and
from time to time, permit Lender or any of its agents or representatives to
inspect the Collateral, to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, Borrower and to
discuss the affairs, finances and accounts of Borrower with any of its officers
or directors relating in each case to Lender's capacity as lender and secured
party hereunder and with respect to the Collateral.
(c) Maintenance of Equipment and Similar Assets. Borrower shall
keep and maintain all items of equipment and other similar types of personal
property that form any significant portion or portions of the Collateral in good
operating condition and repair and shall make all necessary replacements thereof
and renewals thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved. Borrower shall not permit any such
material item of Collateral to become a fixture to real estate or an accession
to other personal property, without the prior written consent of Lender.
Borrower shall not permit any such material item of Collateral to be operated or
maintained in violation of
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any applicable law, statute, rule or regulation. With respect to items of leased
equipment (to the extent Lender has any security interest in any residual
Borrower's interest in such equipment under the lease), Borrower shall keep,
maintain, repair, replace and operate such leased equipment in accordance with
the terms of the applicable lease.
(d) Insurance. (i) Borrower shall, obtain and maintain for the
Term, at its own expense, (x) "all risk" insurance against loss or damage to the
Collateral, (y) commercial general liability insurance (including contractual
liability, products liability and completed operations coverages) reasonably
satisfactory to Lender, and (z) such other insurance against such other risks of
loss and with such terms, as shall in each case be reasonably satisfactory to or
reasonably required by Lender (as to carriers, amounts and otherwise). The
amount of the "all risk" insurance shall be determined to Lender's reasonable
satisfaction. (ii) The deductible with respect to "all-risk" insurance required
by clause (x) above and product liability insurance required by clause (y) above
shall not exceed $25,000; otherwise there shall be no deductible with respect to
any insurance required to be maintained hereunder. The amount of commercial
general liability insurance (other than products liability coverage and
completed operations insurance) required by clause (y) above shall be at least
$5,000,000 per occurrence. The amount of the products liability and completed
operations insurance required by clause (y) above shall be at least $5,000,000
per occurrence. Each "all risk" policy shall: (x) name Lender as loss payee, (y)
provide for each insurer's waiver of its right of subrogation against Lender,
and (z) provide that such insurance (A) shall not be invalidated by any action
of, or breach of warranty by, Borrower of a provision of any of its insurance
policies, and (B) shall waive set-off, counterclaim or offset against Lender.
Each liability policy shall (w) name Lender as an additional insured in the full
amount of Borrower's liability coverage limits (or the coverage limits of any
successor to Borrower or such successor's parent which is providing coverage)
and (x) provide that such insurance shall have cross-liability and severability
of interest endorsements (which shall not increase the aggregate policy limits
of Borrower's insurance). All insurance policies shall (y) provide that
Borrower's insurance shall be primary without a right of contribution of
Lender's insurance, if any, or any obligation on the part of Lender to pay
premiums of Borrower, and (z) shall contain a clause requiring the insurer to
give Lender at least 30 days' prior written notice of its cancellation (other
than cancellation for non-payment for which 10 days' notice shall be
sufficient). Borrower shall on or prior to the first Funding Date and prior to
each policy renewal, furnish to Lender certificates of insurance or other
evidence satisfactory to Lender that such insurance coverage is in effect.
VII
NEGATIVE AND FINANCIAL COVENANTS
7.01. Negative Covenants. So long as the Obligations remain outstanding,
Borrower shall not:
(a) Name; Location of Chief Executive Office and Collateral.
Without thirty (30) days prior written notice to Lender, change its chief
executive office or principal place of business or remove or cause to be removed
from the location set forth on the cover page hereof or move any Collateral to a
location other than that set forth on the cover page hereof.
(b) Liens on Collateral. Create, incur, assume or suffer to exist
any Lien of any kind upon any Collateral, whether now owned or hereafter
acquired, except Permitted Liens.
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(c) Dispositions of Collateral or Intellectual Property. Convey,
sell, offer to sell, lease, transfer, exchange or otherwise dispose of
(collectively, a "Transfer") all or any part of the Collateral to any Person,
other than: (i) transfers of inventory in the ordinary course of business; (ii)
transfers of non-exclusive licenses and similar arrangements for the use of the
property of Borrower in the ordinary course of business; or (iii) transfers of
worn-out or obsolete equipment. It is expressly agreed and understood that the
ordinary course of Borrower's business includes entering into agreements and
arrangements with third parties for research, development, manufacturing, sale
or marketing of products and the licensing of Intellectual Property in
connection with such agreements and arrangements.
(d) Distributions. (i) Pay any dividends or make any
distributions on its Equity Securities; (ii) purchase, redeem, retire, defease
or otherwise acquire for value any of its Equity Securities (other than
repurchases by cancellation of indebtedness pursuant to the terms of employee
stock purchase plans, employee restricted stock agreements or similar
arrangements in an aggregate amount not to exceed $100,000); (iii) return any
capital to any holder of its Equity Securities as such; (iv) make any
distribution of assets, Equity Securities, obligations or securities to any
holder of its Equity Securities as such; or (v) set apart any sum for any such
purpose; provided, however, that Borrower may pay dividends payable solely in
Common Stock.
(e) Mergers or Acquisitions. Merge or consolidate with or into
any other Person or acquire or all or substantially all of the capital stock or
assets of another Person.
(f) Transactions With Affiliates. Enter into any contractual
obligation with any affiliate or engage in any other transaction with any
affiliate except upon terms at least as favorable to Borrower as an arms-length
transaction with unaffiliated Persons.
(g) Maintenance of Accounts. Maintain any deposit accounts or
accounts holding securities owned by Borrower except (i) accounts located at
Silicon Valley Bank and (ii) other accounts with respect to which Lender takes
such action as it deems necessary to obtain a perfected security interest in
such account.
(h) Indebtedness Payments. Prepay, redeem, purchase, defease or
otherwise satisfy in any manner prior to the scheduled repayment thereof any
Indebtedness for borrowed money (other than amounts due under this Loan
Agreement or the Note) or lease obligations, (ii) amend, modify or otherwise
change the terms of any Indebtedness for borrowed money (other than the
Obligations) or lease obligations so as to accelerate the scheduled repayment
thereof or (iii) repay any notes to officers, directors or shareholders.
(i) Subsidiaries. Without the prior written consent of Lender,
form any Subsidiary.
(j) Indebtedness. Create, incur, assume or permit to exist any
Indebtedness except Permitted Indebtedness.
(k) Investments. Make any Investment except for Permitted
Investments.
VIII
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CONDITIONS PRECEDENT
8.01. Closing. At the time of execution and delivery of this Agreement,
Borrower shall have duly executed and/or delivered to Lender the items set forth
in Part I of Schedule 3.
8.02. Other Conditions. The obligation of Lender to make the Loan shall
be subject to the execution and/or delivery to Lender of each of the items set
forth in Part I of Schedule 3 and the satisfaction of by Borrower of each
condition set forth in Part II of Schedule 3.
8.03. Covenant to Deliver. Borrower agrees (not as a condition but as a
covenant) to deliver to Lender each item required to be delivered to Lender as a
condition to the Loan, if the Loan is advanced. Borrower expressly agrees that
the extension of the Loan prior to the receipt by Lender of any such item shall
not constitute a waiver by Lender of Borrower's obligation to deliver such item.
IX
DEFAULT AND REMEDIES
9.01. Events of Default. An "Event of Default" shall mean the occurrence
of one or more of the following described events:
(a) Borrower shall (i) default in the payment of principal of or
interest on the Loan when the same is due, or (ii) default in the payment of any
expense or other amount payable hereunder or thereunder for five (5) days after
receipt of written notice from Lender that the same is due; or
(b) Borrower shall breach any provision of Section 7.01, Section
7.02 or Section 6.01(d); or
(c) Borrower shall default in the performance of any covenant,
agreement or obligation (other than a covenant, agreement or obligation referred
to in, Section 9.01(a) or Section 9.01(b)) contained in any Operative Document
(other than the Warrant) and Borrower shall fail to cure within thirty (30) days
after receipt of written notice from Lender any default in the performance of
any such covenant, agreement or obligation contained therein; or
(d) Borrower shall have breached the terms of the Warrant; or
(e) Any representation or warranty made herein or on the Funding
Date by Borrower in any Operative Document, or any certificate or financial
statement furnished pursuant to the provisions of any Operative Document, shall
prove to have been false or misleading in any material respect as of the time
made or furnished; or
(f) Any Operative Document shall in any material respect cease to
be, or Borrower shall assert that any Operative Document is not, a legal, valid
and binding obligation of Borrower enforceable in accordance with its terms; or
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(g) A default shall exist under any agreement with any third
party or parties which consists of the failure to pay any Indebtedness at
maturity or which results in a right by such third party or parties, whether or
not exercised, to accelerate the maturity of any Indebtedness of Borrower in an
amount in excess of One Hundred Thousand Dollars ($100,000); or
(h) A proceeding shall have been instituted in a court of
competent jurisdiction seeking a decree or order for relief in respect of
Borrower in an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or for the appointment of a
receiver, liquidator, assignee, custodian, trustee (or similar official) of
Borrower or for any substantial part of its property, or for the winding-up or
liquidation of its affairs, and such proceeding shall remain undismissed or
unstayed and in effect for a period of thirty (30) consecutive days or such
court shall enter a decree or order granting the relief sought in such
proceeding; or
(i) Borrower shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian (or other similar official)
of Borrower or for any substantial part of its property, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any corporate action in furtherance of
any of the foregoing; or
(j) A final judgment or order for the payment of money in excess
of One Hundred Thousand Dollars ($100,000) (exclusive of amounts covered by
insurance issued by an insurer not an affiliate of Borrower) shall be rendered
against Borrower and the same shall remain undischarged for a period of thirty
(30) days during which execution shall not be effectively stayed, or any
judgment, writ, assessment, warrant of attachment, or execution or similar
process shall be issued or levied against a substantial part of the property of
Borrower and such judgment, writ, or similar process shall not be released,
stayed, vacated or otherwise dismissed within thirty (30) days after issue or
levy.
9.02. Consequences of Event of Default.
(a) If an Event of Default specified under any of clauses (a)
through (g) or (j) of Section 9.01 shall occur and be continuing, Lender may (i)
declare the Loan, together with interest thereon, plus the Applicable Premium
and all other liabilities of Borrower hereunder and under the other Operative
Documents to be immediately due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived,
and (ii) terminate its commitment to make the Loan and terminate any commitment
to advance money or extend credit to or for the benefit of Borrower pursuant to
any other agreement or commitment extended by Lender to Borrower.
(b) If an Event of Default specified under clause (h) or (i) of
Section 9.01 shall occur, then immediately and without notice (i) the Loan,
together with interest thereon, plus the Applicable Premium, and all other
liabilities of Borrower hereunder and under the other Operative Documents shall
automatically become due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, and (ii) Lender's
commitment hereunder to make the Loan and any other commitment of Lender to
Borrower to advance money or extend credit pursuant to any other agreement or
commitment shall be terminated.
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9.03. Rights Regarding Collateral. Borrower agrees that when any Event
of Default has occurred and is continuing, Lender shall have the rights,
options, duties and remedies of a secured party as permitted by law and, in
addition to and without limiting the foregoing, Lender may exercise any one or
more or all, and in any order, of the remedies herein set forth, including the
following:
(a) Lender, personally or by agents or attorneys, shall have the
right (subject to compliance with any applicable mandatory legal requirements)
to require Borrower to assemble the Collateral and make it available to Lender
at a place to be designated by Lender or to take immediate possession of the
Collateral, or any portion thereof, and for that purpose may pursue the same
wherever it may be found, and may enter any of premises of Borrower, with or
without notice, demand, process of law or legal procedure, to the extent
permitted by applicable law, and search for, take possession of, remove, keep
and store the same, or use and operate or lease the same until sold. In
furtherance of Lender's rights hereunder, Borrower hereby grants to Lender an
irrevocable, non-exclusive license (exercisable without royalty or other payment
by Lender) to use, license or sublicense any patent, trademark, trade name,
copyright or other intellectual property in which Borrower now or hereafter has
any right, title or interest together with the right of access to all media in
which any of the foregoing may be recorded or stored; provided, however, that
such license shall only be exercisable in connection with the disposition of
Collateral upon Lender's exercise of its remedies hereunder.
(b) Lender may, if at the time such action may be lawful and
always subject to compliance with any mandatory legal requirements, either with
or without taking possession and either before or after taking possession,
without instituting any legal proceedings whatsoever, having first given notice
of such sale by registered or certified mail to Borrower once at least ten (10)
days prior to the date of such sale, and having first given any other notice
which may be required by law, sell and dispose of the Collateral, or any part
thereof, at a private sale or at public auction, to the highest bidder, in one
lot as an entirety or in separate lots, and either for cash or on credit and on
such terms as Lender may determine, and at any place (whether or not it be the
location of the Collateral or any part thereof) designated in the notice
referred to above. To the extent permitted by applicable law, any such sale or
sales may be adjourned from time to time by announcement at the time and place
appointed for such sale or sales, or for any such adjourned sale or sales,
without further published notice, and Borrower, Lender or the holder or holders
of the Note, or of any interest therein, may bid and become the purchaser at any
such sale.
(c) Lender may proceed to protect and enforce this Agreement and
the other Operative Documents by suit or suits or proceedings in equity, at law
or in bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted;
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for any real property security or any part thereof, or for the recovery of
judgment for the Obligations or for the enforcement of any other proper, legal
or equitable remedy available under applicable law.
9.04. Waiver by Borrower. Upon the occurrence of an Event of Default, to
the extent permitted by law, Borrower covenants that it will not at any time
insist upon or plead, or in any manner whatsoever claim or take any benefit or
advantage of, any stay or extension law now or at any time hereafter in force,
nor claim, take nor insist upon any benefit or advantage of or from any law now
or hereafter in force providing for the valuation or appraisement of the
Collateral or any part thereof prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or to the decree, judgment or order
of any court of competent jurisdiction; nor, after such sale or sales, claim or
exercise any right under any statute now or
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hereafter made or enacted by any state or otherwise to redeem the property so
sold or any part thereof, and, to the full extent legally permitted, except as
to rights expressly provided herein, hereby expressly waives for itself and on
behalf of each and every Person, except decree or judgment creditors of
Borrower, acquiring any interest in or title to the Collateral or any part
thereof subsequent to the date of this Agreement, all benefit and advantage of
any such law or laws, and covenants that it will not invoke or utilize any such
law or laws or otherwise hinder, delay or impede the execution of any power
herein granted and delegated to Lender, but will suffer and permit the execution
of every such power as though no such power, law or laws had been made or
enacted.
9.05. Effect of Sale. Any sale, whether under any power of sale
available to Lender or by virtue of judicial proceedings, shall operate to
divest all right, title, interest, claim and demand whatsoever, either at law or
in equity, of Borrower in and to the property sold, and shall be a perpetual
bar, both at law and in equity, against Borrower, its successors and assigns,
and against any and all persons claiming the property sold or any part thereof
under, by or through Borrower, its successors or assigns.
9.06. Application of Collateral Proceeds. The proceeds and/or avails of
the Collateral, or any part thereof, and the proceeds and the avails of any
remedy hereunder (as well as any other amounts of any kind held by Lender at the
time of, or received by Lender after, the occurrence of an Event of Default
hereunder) shall be paid to and applied as follows:
(a) First, to the payment of reasonable costs and expenses,
including all amounts expended to preserve the value of the Collateral, of
foreclosure or suit, if any, and of such sale and the exercise of any other
rights or remedies, and of all proper fees, expenses, liability and advances,
including reasonable legal expenses and attorneys' fees, incurred or made
hereunder by Lender;
(b) Second, to the payment to Lender of the amount then owing or
unpaid on the Note, and in case such proceeds shall be insufficient to pay in
full the whole amount so due, owing or unpaid upon the Note, then first, to the
unpaid interest thereon, second, to unpaid principal thereof and third to the
remaining balance of the Obligations under the Note; such application to be made
upon presentation of the Note, and the notation thereon of the payment, if
partially paid, or the surrender and cancellation thereof, if fully paid;
(c) Third, to the payment of other amounts then payable to Lender
under any of the Operative Documents; and
(d) Fourth, to the payment of the surplus, if any, to Borrower,
its successors and assigns, or to whomsoever may be lawfully entitled to receive
the same.
9.07. Reinstatement of Rights. If Lender shall have proceeded to enforce
any right under this Agreement or any other Operative Document by foreclosure,
sale, entry or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely, then and in
every such case (unless otherwise ordered by a court of competent jurisdiction),
Lender shall be restored to its former position and rights hereunder with
respect to the property subject to the security interest created under this
Agreement.
X
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MISCELLANEOUS
10.01. Modifications, Amendments or Waivers. The provisions of any
Operative Document may be modified, amended or waived only by a written
instrument signed by the parties thereto.
10.02. No Implied Waivers; Cumulative Remedies; Writing Required. No
delay or failure of Lender in exercising any right, power or remedy hereunder
shall affect or operate as a waiver thereof; nor shall any single or partial
exercise thereof or any abandonment or discontinuance of steps to enforce such a
right, power or remedy preclude any further exercise thereof or of any other
right, power or remedy. The rights and remedies hereunder of Lender are
cumulative and not exclusive of any rights or remedies which it would otherwise
have. Any waiver, permit, consent or approval of any kind or character on the
part of Lender of any breach or default under this Agreement or any such waiver
of any provision or condition of this Agreement must be in writing and shall be
effective only in the specified instance and to the extent specifically set
forth in such writing.
10.03. Expenses; Indemnification. Borrower agrees upon demand to pay or
reimburse Lender for all liabilities, obligations and out-of-pocket expenses,
including reasonable fees and expenses of counsel for Lender, from time to time
arising in connection with the enforcement or collection of sums due under the
Operative Documents. Borrower shall indemnify, reimburse and hold Lender, each
of Lender's partners, and each of their respective successors, assigns, agents,
officers, directors, shareholders, servants, agents and employees harmless from
and against all liabilities, losses, damages, actions, suits, demands, claims of
any kind and nature (including claims relating to environmental discharge,
cleanup or compliance), all costs and expenses whatsoever to the extent they may
be incurred or suffered by such indemnified party in connection therewith
(including reasonable attorneys' fees and expenses), fines, penalties (and other
charges of applicable governmental authorities), licensing fees relating to any
item of Collateral, damage to or loss of use of property (including
consequential or special damages to third parties or damages to Borrower's
property), or bodily injury to or death of any person (including any agent or
employee of Borrower) (each, a "Claim"), directly or indirectly relating to or
arising out of the use of the proceeds of the Loan or otherwise, the falsity of
any representation or warranty of Borrower or Borrower's failure to comply with
the terms of this Agreement or any other Operative Document during the Term. The
foregoing indemnity shall cover, without limitation, (i) any Claim in connection
with a design or other defect (latent or patent) in any item of equipment
included in the Collateral, (ii) any Claim for infringement of any patent,
copyright, trademark or other intellectual property right, (iii) any Claim
resulting from the presence on or under or the escape, seepage, leakage,
spillage, discharge, emission or release of any Hazardous Materials on the
premises of Borrower, including any Claims asserted or arising under any
Environmental Law, or (iv) any Claim for negligence or strict or absolute
liability in tort; provided, however, that Borrower shall not indemnify Lender
for any liability incurred by Lender as a direct and sole result of Lender's
gross negligence or willful misconduct. Such indemnities shall continue in full
force and effect, notwithstanding the expiration or termination of this
Agreement. Upon Lender's written demand, Borrower shall assume and diligently
conduct, at its sole cost and expense, the entire defense of Lender, each of its
partners, and each of their respective, agents, employees, directors, officers,
shareholders, successors and assigns against any indemnified Claim described in
this Section 10.03. Borrower shall not settle or compromise any Claim against or
involving Lender without first obtaining Lender's written consent thereto, which
consent shall not be unreasonably withheld.
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10.04. Waivers. (a) Borrower shall give Lender written notice within one
hundred eighty (180) days of obtaining knowledge of the occurrence of any claim
or cause of action it believes it has, or may seek to assert to allege against
Lender whether such claim is based in law or equity, arising under or related to
this Agreement or any of the other Operative Documents or to the transactions
contemplated hereby or thereby, or any act or omission to act by Lender with
respect hereto or thereto, and that if it shall fail to give such notice to
Lender with regard to any such claim or cause of action, Borrower shall be
deemed to have waived, and shall be forever barred from bringing or asserting
such claim or cause of action in any suit, action or proceeding in any court or
before any governmental agency or authority or any arbitrator. (b)
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR ANYWHERE
ELSE, BORROWER AGREES THAT IT SHALL NOT SEEK FROM LENDER UNDER ANY THEORY OF
LIABILITY (INCLUDING ANY THEORY IN TORTS), ANY SPECIAL, INDIRECT, CONSEQUENTIAL
OR PUNITIVE DAMAGES.
10.05. Notices; Payments.
(a) All notices and other communications given to or made upon
any party hereto in connection with this Agreement shall be in writing
(including telexed, telecopied or telegraphic communication) and mailed (by
certified or registered mail), telexed, telegraphed, telecopied or delivered to
the respective parties, as follows:
Borrower: At the address set forth on the cover page of this
Agreement.
Lender: MMC/GATX PARTNERSHIP NO. I
c/o GATX Capital Corporation
Four ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Contract Administration
with a copy of all financial information to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & COMPANY
▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or in accordance with any subsequent written direction from either party to the
other. All such notices and other communications shall, except as otherwise
expressly herein provided, be effective when received; or in the case of
delivery by messenger or overnight delivery service, when left at the
appropriate address.
(b) Unless Lender specifies otherwise in writing, all payments shall be
made to:
GATX Capital Corporation, as Agent
▇/▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
-▇▇-
▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ref: Packeteer Inc. Invoice #__
10.06. Termination. This Agreement shall terminate at the end of the
Term; provided, however, that the termination of this Agreement shall not affect
any of the rights and remedies of Lender hereunder, it being understood and
agreed that all such rights and remedies shall continue in full force and effect
until payment of all amounts owed to Lender under or in connection with the
Operative Documents, whether on account of principal, interest, fees or
otherwise.
10.07. Severability. If any provision of any Operative Document is held
invalid or unenforceable to any extent or in any application, the remainder of
such Operative Document and all other Operative Documents, or the application of
such provision to different Persons or circumstances or in different
jurisdictions, shall not be affected thereby.
10.08. Survival. All representations, warranties, covenants and
agreements of Borrower contained herein or made in writing in connection
herewith shall survive the execution and delivery of the Operative Documents,
the making of the Loan hereunder, the granting of security and the issuance of
the Note.
10.09. Governing Law. This Agreement, the other Operative Documents and
the rights and obligations of the parties hereto and thereto shall be governed
by and construed and enforced in accordance with the laws of the State of
California. Any action to enforce this Agreement against Borrower may be brought
in California or, with regard to Collateral, may also be brought wherever such
Collateral is located.
10.10. Successors and Assigns. This Agreement and the other Operative
Documents shall be binding upon and inure to the benefit of Lender, all future
holders of the Note, Borrower and their respective successors and permitted
assigns, except that Borrower may not assign or transfer its rights hereunder or
any interest herein without the prior written consent of Lender. Lender may sell
to any other financial entity (a "Participant") participation interests in
Lender's rights under this Agreement and the other Operative Documents; provided
that notwithstanding the sale of participations, Lender shall remain solely
responsible for the performance of its obligations under this Agreement, Lender
shall remain the holder of the Note for all purposes under this Agreement and
Borrower shall continue to deal solely and directly with Lender in connection
with this Agreement and the other Loan Documents. Lender may disclose the
Operative Documents and any other financial or other information relating to
Borrower or any Subsidiary to any potential Participant, provided that such
Participant agrees to protect the confidentiality of such documents and
information using the same measures that it uses to protect its own confidential
information.
10.11. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.
10.12. Further Assurances. Borrower will, at its own expense, from time
to time do, execute, acknowledge and deliver all further acts, deeds,
conveyances, transfers and assurances, and all financing and continuation
statements and similar notices, reasonably necessary or proper for the
perfection of the security interest being herein provided for in the Collateral,
whether now owned or hereafter acquired.
10.13. Power of Attorney in Respect of the Collateral. Borrower does
hereby irrevocably appoint Lender (which appointment is coupled with an
interest), the true and lawful attorney-in-fact of Borrower
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with full power of substitution, for it and in its name (a) to perform (but
Lender shall not be obligated to and shall incur no liability to Borrower or any
third party for failure to perform) any act which Borrower is obligated by this
Agreement to perform, (b) to ask, demand, collect, receive, receipt for, ▇▇▇
for, compound and give acquittance for any and all rents, issues, profits,
avails, distributions, income, payment draws and other sums in which a security
interest is granted under Section 5.01 with full power to settle, adjust or
compromise any claim thereunder as fully as if Lender were Borrower itself, (c)
to receive payment of and to endorse the name of Borrower to any items of
Collateral (including checks, drafts and other orders for the payment of money)
that come into Lender's possession or under Lender's control, (d) to make all
demands, consents and waivers, or take any other action with respect to, the
Collateral, (e) in Lender's discretion, to file any claim or take any other
action or institute proceedings, either in its own name or in the name of
Borrower or otherwise, which Lender may reasonably deem necessary or appropriate
to protect and preserve the right, title and interest of Lender in and to the
Collateral, and (f) to otherwise act with respect thereto as though Lender were
the outright owner of the Collateral; provided, however, that the power of
attorney herein granted shall be exercisable only upon the occurrence and during
the continuation of an Event of Default unless in Lender's reasonable opinion
immediate action is necessary to preserve or protect the Collateral. Borrower
agrees to reimburse Lender upon demand for all reasonable costs and expenses,
including attorneys' fees and expenses, which Lender may incur while acting as
Borrower's attorney in fact hereunder, all of which costs and expenses are
included within the Obligations.
10.14 Confidentiality. All information (other than periodic reports
filed by Borrower with the Securities and Exchange Commission) disclosed by
Borrower to Lender in writing or through inspection pursuant to this Agreement
shall be considered confidential. Lender agrees to use the same degree of care
to safeguard and prevent disclosure of such confidential information as Lender
uses with its own confidential information, but in any event no less than a
reasonable degree of care. Lender shall not disclose such information to any
third party (other than Lender's or Lender's partner's attorneys and auditors
subject to the same confidentiality obligation set forth herein) and shall use
such information only for purposes of evaluation of its investment in Borrower
and the exercise of Lender's rights and the enforcement of its remedies under
this Agreement and the other Operative Agreements. The obligations of
confidentiality shall not apply to any information that (a) was known to the
public prior to disclosure by Borrower under this Agreement, (b) becomes known
to the public through no fault of Lender, (c) is disclosed to Lender by a third
party' having a legal right to make such disclosure, or (d) is independently
developed by Lender.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.
PACKETEER INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer and
Secretary
MMC/GATX PARTNERSHIP NO. I
By: GATX Capital Corporation,
as general partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President
-24-
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SCHEDULES
1 Funding Certificate
2 Disclosure Schedule
3 Conditions Precedent
EXHIBITS
A Form of Secured Promissory Note
B Form of Warrant
C Form of Opinion of Counsel
-25-
26
SCHEDULE 1
FUNDING CERTIFICATE
The undersigned, , being the duly elected and acting ___________________
of PACKETEER INC., a Delaware corporation ("Borrower"), does hereby certify to
MMC/GATX PARTNERSHIP NO. I, in connection with that certain Loan and Security
Agreement dated as of May 20, 1999, (the "Loan Agreement"; with other
capitalized terms used below having the meanings ascribed thereto in the Loan
Agreement) that:
1. The representations and warranties made by Borrower in Article III of
the Loan Agreement and in the other Operative Documents are true and correct as
of the date hereof.
2. No event or condition has occurred and is continuing that would
constitute a Default or an Event of Default under the Loan Agreement or any
other Operative Document.
3. Borrower is in compliance with the covenants and requirements
contained in Articles IV, VI and VII of the Loan Agreement.
4. All conditions referred to in Article VIII of the Loan Agreement to
the making of the Loan to be made on or about the date hereof been satisfied.
5. No material adverse change in the general affairs, management,
results of operations, condition (financial or otherwise) or prospects of
Borrower, whether or not arising from transactions in the ordinary course of
business, has occurred.
Dated: May 21, 1999
PACKETEER INC.
By:_________________________________
Name:_______________________________
Title:______________________________
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SCHEDULE 2
DISCLOSURE SCHEDULE
-27-
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SCHEDULE 3
CONDITIONS PRECEDENT
PART I:
At the time of execution and delivery of this Agreement, there shall
also have been duly executed and delivered to Lender:
(a) The Warrant;
(b) A favorable opinion of counsel for Borrower, dated as of the closing
date, in the form attached hereto as Exhibit C;
(c) Copies, certified by the Secretary, Assistant Secretary or Chief
Financial Officer of Borrower as of the closing date, of Borrower's charter
documents and bylaws and of all documents evidencing corporate action taken by
Borrower authorizing the execution, delivery and performance of the Operative
Documents to which Borrower is a party, in form and substance satisfactory to
Lender and its counsel;
(d) Good standing certificate from Borrower's state of incorporation and
the state in which Borrower's principal place of business is located, dated as
of a recent date;
(e) Evidence of the insurance coverage required by Section 6.01(d) of
this Agreement;
(f) All necessary consents of shareholders and other third parties with
respect to the execution, delivery and performance of this Agreement, the
Warrant, the Note and the other Operative Documents;
(g) Form UCC-1 Financing Statements, duly executed by Borrower, or other
documents, and Borrower shall have taken such actions, if any, as Lender shall
reasonably determine are necessary or desirable to perfect and protect its
security interest in the Collateral;
(h) Grants of Security Interest in Intellectual Property in the forms
provided by Lender;
(i) Notices of Security Interest to Depository Banks in the forms
provided by Lender; and
(j) All other documents as Lender shall have reasonably requested.
-28-
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PART II
On or prior to the Funding Date of the Loan, each of the items set forth
in Part I of this Schedule 3 shall have been delivered to Lender and the
following conditions shall have been satisfied or waived by Lender:
(a) Borrower shall have provided to Lender such documents, instruments
and agreements as Lender shall reasonably request to evidence the perfection and
priority of the security interests granted to Lender pursuant to Article V;
(b) No Event of Default or Default shall have occurred and be
continuing;
(c) Borrower shall have duly executed and delivered to Lender the Note;
(d) In Lender's sole discretion, there shall not have occurred any
material adverse change in the general affairs, management, results of
operations, condition (financial or otherwise) or prospects of Borrower, whether
or not arising from transactions in the ordinary course of business, and there
shall not have occurred since the date first written on the cover page of this
Agreement any material adverse deviation by Borrower from the business plan of
Borrower presented to and not disapproved by Lender;
(e) The representations and warranties contained in this Agreement and
the other Operative Documents to which Borrower is a party shall be true and
correct in all material respects as if made on such Funding Date;
(f) Each of the Operative Documents remains in full force and effect;
and
(g) The Funding Date of the Loan shall not be later than the Commitment
Termination Date.
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EXHIBIT A
SECURED PROMISSORY NOTE
$2,500,000 May 21, 1999
FOR VALUE RECEIVED, the undersigned, PACKETEER INC. ("Borrower"), a
Delaware corporation, HEREBY PROMISES TO PAY to the order of MMC/GATX
PARTNERSHIP NO. I, a California general partnership ("Lender") the principal
amount of two million five hundred thousand dollars ($2,500,000) or such lesser
amount as shall equal the outstanding principal balance of the Loan made by
Lender to Borrower pursuant to the Loan and Security Agreement referred to below
(the "Loan Agreement"), and to pay all other amounts due with respect to the
Loan on the dates and in the amounts set forth in the Loan Agreement.
Interest on the principal amount of this Note from the date of this Note
shall accrue at the Loan Rate or, if applicable, the Default Rate. The Loan Rate
for this Note is 12.76% per annum based on a year of twelve 30 day months.
Accrued interest only on this Note shall be payable on the last Business Day of
each calendar month, commencing on June 30, 1999 and continuing through and
including April 30, 2000. On May 31, 2000, Borrower shall make a final payment
equal to the entire outstanding principal amount of the Loan, plus accrued and
unpaid interest.
Principal, interest and all other amounts due with respect to the Loan,
are payable in lawful money of the United States of America to Lender as
follows: GATX Capital Corporation, ▇.▇. ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, in
immediately available funds. The Loan made by Lender to Borrower and the
interest rate applicable thereto, and all payments made with respect thereto,
shall be recorded by Lender and, prior to any transfer hereof, endorsed on the
grid attached hereto which is part of this Note.
This Note is the Note referred to in, and is entitled to the benefits
of, the Loan and Security Agreement, dated as of May 20, 1999, between Borrower
and Lender. The Loan Agreement, among other things, (a) provides for the making
of a secured Loan by Lender to Borrower in the principal amount first above
mentioned, and (b) contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events.
Borrower may, at its option, prepay the Loan evidenced by this Note in
its entirety at a prepayment price equal to the principal amount of the Loan so
to be prepaid, plus interest accrued thereon through and including the date of
such prepayment, plus the premium set forth in the Loan Agreement. If the
maturity of the Loan is accelerated under the Loan Agreement, Borrower shall pay
to Lender, in addition to principal, interest and all other amounts due with
respect to the Loan, as liquidated damages for loss of Lender's benefit of the
bargain and not as a penalty, an amount equal to the premium payable if the Loan
were prepaid on the date of such acceleration.
This Note and the obligation of Borrower to repay the unpaid principal
amount of the Loan, interest on the Loan and all other amounts due Lender under
the Loan Agreement is secured under the Loan Agreement.
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Presentment for payment, demand, notice of protest and all other demands
and notices of any kind in connection with the execution, delivery, performance
and enforcement of this Note are hereby waived.
Borrower shall pay all reasonable fees and expenses, including, without
limitation, reasonable attorneys' fees and costs, incurred by Lender in the
enforcement or attempt to enforce any of Borrower's obligations hereunder not
performed when due. This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of California.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by
one of its officers thereunto duly authorized on the date hereof.
PACKETEER INC.
By:_________________________________
Name:_______________________________
Title:______________________________
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LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL
-32-
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EXHIBIT B
WARRANT
-33-
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EXHIBIT C
FORM OF OPINION OF COUNSEL
May 20, 1999
MMC/GATX Partnership No. I
c/o GATX Capital Corporation, Agent
Four ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We have acted as counsel for PACKETEER INC. (the "Borrower") in
connection with (i) the execution of the Loan and Security Agreement of even
date herewith (the "Loan") between Borrower and MMC/GATX Partnership No. I
("Lender"), (ii) the issuance of a warrant to purchase 45,000 shares of
Borrower's Series D Preferred Stock (the "Warrant") and (iii) the transactions
contemplated thereby. This opinion is being rendered to you pursuant to Section
8.01 of the Loan Agreement. Capitalized terms not otherwise defined in this
opinion have the meaning given them in the Loan Agreement.
In connection with this opinion and our representation, we have examined
originals, or copies certified or otherwise identified to our satisfaction, of
the following:
(i) The Loan Agreement;
(ii) The Warrant and exhibits thereto dated as of May 20, 1999, issued
by Borrower to Lender;
(iii) The Note dated as of May 20, 1999;
(iv) The Restated Certificate of Incorporation and the Bylaws of
Borrower, each as in effect on the date hereof;
(v) The certificate of an officer of Borrower as to certain factual
matters ("Officer Certificate");
(vi) Certificates issued by the Secretary of State of the State of
Delaware dated _______________________, 1999, and the Secretary of State of the
State of California, dated _________________________, 199_____, certifying the
good standing of Borrower;
(vi) Such other documents, records, and certificates as we have deemed
necessary or appropriate as a basis for the opinions hereafter expressed.
The Loan Agreement, the Note and the Warrant are hereinafter referred to
as the "Transaction Documents."
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35
In such examinations we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity to originals of all documents submitted to us as certified,
facsimile, telecopied or photostatic copies thereof. As to certain matters of
fact material to our opinion, we have relied upon the Officer Certificate and
upon your representations in the Transaction Documents.
As used in this opinion, the expression "to the best of our knowledge,"
means the actual present knowledge or belief of those attorneys in our firm who
have or who are currently representing Borrower. We have not undertaken any
independent investigation to determine the existence or nonexistence of other
facts, and no inference as to our knowledge of the existence or nonexistence of
other facts should be drawn from the fact of this firm's representation of
Borrower in connection with the Transaction Documents.
Based upon and subject to the foregoing and subject to the
qualifications contained herein, we are of the opinion that:
(a) Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is duly qualified to
do business and in good standing in the State of California.
(b) Borrower has the requisite corporate power and authority to execute,
deliver and perform the Transaction Documents and to issue the Warrant. All
action on the part of Borrower, its directors and its shareholders necessary for
the authorization, execution, delivery and performance of the Transaction
Documents, has been taken. The Transaction Documents have been duly executed and
delivered by an authorized officer of Borrower.
(c) The execution, delivery and performance of the Transaction Documents
do not conflict with or violate any provision of Borrower's Restated
[Certificate] [Articles] of Incorporation or Bylaws or of applicable law and, to
the best of our knowledge, do not conflict with or constitute a default under
any provision of any judgment, writ, decree, order or material agreement,
indenture, or instrument to which Borrower is a party or by which it is bound.
(d) The Transaction Documents constitute legal, valid and binding
obligations of Borrower, enforceable in accordance with their respective terms.
To our knowledge, no filing need be made with any governmental authority with
respect to the Transaction Documents in connection with an exemption from state
usury laws or in connection with any other matter.
(e) The Series D Preferred Stock issuable upon exercise of the Warrant
have been duly authorized and reserved for issuance upon such exercise, and when
issued in accordance with the terms of the Warrant, will be duly authorized,
validly issued, fully paid and non-assessable.
(f) The shares of Common Stock issuable upon conversion of the Series D
Preferred Stock into which the Warrant is convertible, have been duly authorized
and reserved and for issuance, when so issued in accordance with the terms of
Borrower's Restated Certificate of Incorporation, will be validly issued, fully
paid and non-assessable.
The opinions set forth above are subject to the following additional
qualifications, assumptions, limitations and exceptions:
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36
(A) The effect of bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium and other similar laws relating to or affecting the
rights and remedies of creditors generally.
(B) Limitations imposed by general equitable principles upon the
specific enforceability of any of the provisions of the Transaction Documents
and upon the availability of injunctive relief or other equitable remedies.
(C) We express no opinion as to the enforceability of any choice of law
provision in the documents.
(D) We express no opinion as to the compliance or noncompliance with
applicable antifraud statutes under the rules and regulations of state and
federal securities laws concerning the issuance of the Warrant.
(E) We express no opinion herein concerning any law other than the law
of the State of California, the general corporate law of the State of Delaware
and the federal laws of the United States of America.
This opinion is furnished to you solely for your benefit and may not be
relied upon by any other person (other than assignees of any of your rights)
without our prior written consent, which consent shall not be unreasonably
withheld or delayed.
Very truly yours,
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THIS NOTE IS SUBJECT TO A SUBORDINATION AGREEMENT DATED AS
OF MAY 20, 1999, BY AND BETWEEN COMDISCO, INC., AND
MMC/GATX PARTNERSHIP NO. I, AND A SUBORDINATION AGREEMENT
DATED AS OF MAY 20, 1999, BY AND BETWEEN SILICON VALLEY
BANK AND MMC/GATX PARTNERSHIP NO. I
SECURED PROMISSORY NOTE
$2,500,000 May 24, 1999
FOR VALUE RECEIVED, the undersigned, PACKETEER INC. ("Borrower"), a
Delaware corporation, HEREBY PROMISES TO PAY to the order of MMC/GATX
PARTNERSHIP NO. I, a California general partnership ("Lender") the principal
amount of two million five hundred thousand dollars ($2,500,000) or such lesser
amount as shall equal the outstanding principal balance of the Loan made by
Lender to Borrower pursuant to the Loan and Security Agreement referred to below
(the "Loan Agreement"), and to pay all other amounts due with respect to the
Loan on the dates and in the amounts set forth in the Loan Agreement.
Interest on the principal amount of this Note from the date of this Note
shall accrue at the Loan Rate or, if applicable, the Default Rate. The Loan Rate
for this Note is 12.76% per annum based on a year of twelve 30 day months.
Accrued interest only on this Note shall be payable on the last Business Day of
each calendar month, commencing on June 30, 1999 and continuing through and
including April 30, 2000. On May 31, 2000, Borrower shall make a final payment
equal to the entire outstanding principal amount of the Loan, plus accrued and
unpaid interest.
Principal, interest and all other amounts due with respect to the Loan,
are payable in lawful money of the United States of America to Lender as
follows: GATX Capital Corporation, ▇.▇. ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, in
immediately available funds. The Loan made by Lender to Borrower and the
interest rate applicable thereto, and all payments made with respect thereto,
shall be recorded by Lender and, prior to any transfer hereof, endorsed on the
grid attached hereto which is part of this Note.
This Note is the Note referred to in, and is entitled to the benefits of,
the Loan and Security Agreement, dated as of May 20, 1999, between Borrower and
Lender. The Loan Agreement, among other things, (a) provides for the making of a
secured Loan by Lender to Borrower in the principal amount first above
mentioned, and (b) contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events.
Borrower may, at its option, prepay the Loan evidenced by this Note in its
entirety at a prepayment price equal to the principal amount of the Loan so to
be prepaid, plus interest accrued thereon through and including the date of such
prepayment, plus the premium set forth in the Loan Agreement. If the maturity of
the Loan is accelerated under the Loan Agreement, Borrower shall pay to Lender,
in addition to principal, interest and all other amounts due with respect to the
Loan, as liquidated damages for loss of Lender's benefit of the bargain and not
as a penalty, an amount equal to the premium payable if the Loan were prepaid on
the date of such acceleration.
38
This Note and the obligation of Borrower to repay the unpaid principal
amount of the Loan, interest on the Loan and all other amounts due Lender under
the Loan Agreement is secured under the Loan Agreement.
Presentment for payment, demand, notice of protest and all other demands
and notices of any kind in connection with the execution, delivery, performance
and enforcement of this Note are hereby waived.
Borrower shall pay all reasonable fees and expenses, including, without
limitation, reasonable attorneys' fees and costs, incurred by Lender in the
enforcement or attempt to enforce any of Borrower's obligations hereunder not
performed when due. This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of California.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by
one of its officers thereunto duly authorized on the date hereof.
PACKETEER INC.
By:_________________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer and Secretary
39
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION
OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THIS WARRANT.
PACKETEER INC.
WARRANT TO PURCHASE 45,000 SHARES
OF SERIES D PREFERRED STOCK
THIS CERTIFIES THAT, for value received, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & COMPANY and its
assignees are entitled to subscribe for and purchase 45,000 shares of the fully
paid and nonassessable Series D Preferred Stock (as adjusted pursuant to Section
4 hereof, the "Shares") of PACKETEER INC., a Delaware corporation (the
"Company"), at the price of $6.25 per share (such price and such other price as
shall result, from time to time, from the adjustments specified in Section 4
hereof is herein referred to as the "Warrant Price"), subject to the provisions
and upon the terms and conditions hereinafter set forth. As used herein, (a) the
term "Series Preferred" shall mean the Company's presently authorized Series D
Preferred Stock, and any stock into or for which such Series D Preferred Stock
may hereafter be converted or exchanged, and after the automatic conversion of
the Series D Preferred Stock to Common Stock shall mean the Company's Common
Stock, (b) the term "Date of Grant" shall mean May 20, 1999, and (c) the term
"Other Warrants" shall mean any other warrants issued by the Company in
connection with the transaction with respect to which this Warrant was issued,
and any warrant issued upon transfer or partial exercise of or in lieu of this
Warrant. The term "Warrant" as used herein shall be deemed to include Other
Warrants unless the context clearly requires otherwise.
1. Term. The purchase right represented by this Warrant is exercisable, in
whole or in part, at any time and from time to time from the Date of Grant
through the later of (i) ten (10) years after the Date of Grant or (ii) five (5)
years after the closing of the Company's initial public offering of its Common
Stock ("IPO") effected pursuant to a Registration Statement on Form S-1 (or its
successor) filed under the Securities Act of 1933, as amended (the "Act").
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A-1
duly completed and executed) at the principal office of the Company and by the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company (a "Wire
40
Transfer") of an amount equal to the then applicable Warrant Price multiplied by
the number of Shares then being purchased; (b) if in connection with a
registered public offering of the Company's securities, the surrender of this
Warrant (with the notice of exercise form attached hereto as Exhibit A-2 duly
completed and executed) at the principal office of the Company together with
notice of arrangements reasonably satisfactory to the Company for payment to the
Company either by certified or bank check or by Wire Transfer from the proceeds
of the sale of shares to be sold by the holder in such public offering of an
amount equal to the then applicable Warrant Price per share multiplied by the
number of Shares then being purchased; or (c) exercise of the "net issuance"
right provided for in Section 10.2 hereof. The person or persons in whose
name(s) any certificate(s) representing shares of Series Preferred shall be
issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in any
event within thirty (30) days after such exercise and, unless this Warrant has
been fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such thirty-day period; provided, however, at such time as the
Company is subject to the reporting requirments of the Securities Exchange Act
of 1934, as amended, if requested by the holder of this Warrant, the Company
shall cause its transfer agent to deliver the certificate representing Shares
issued upon exercise of this Warrant to a broker or other person (as directed by
the holder exercising this Warrant) within the time period required to settle
any trade made by the holder after exercise of this Warrant.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance
pursuant to the terms and conditions herein, be fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the issue thereof.
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 the issue upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Series Preferred to provide for
the exercise of the rights represented by this Warrant and a sufficient number
of shares of its Common Stock to provide for the conversion of the Series
Preferred into Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification
or change of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), or in
case of any merger of the Company with or into another corporation (other than a
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merger with another corporation in which the Company is the acquiring and the
surviving corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant), or in
case of any sale of all or substantially all of the assets of the Company, the
Company, or such successor or purchasing corporation, as the case may be, shall
duly execute and deliver to the holder of this Warrant a new Warrant (in form
and substance satisfactory to the holder of this Warrant), or the Company shall
make appropriate provision without the issuance of a new Warrant, so that the
holder of this Warrant shall have the right to receive, at a total purchase
price not to exceed that payable upon the exercise of the unexercised portion of
this Warrant, and in lieu of the shares of Series Preferred theretofore issuable
upon exercise of this Warrant, (i) the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change,
merger or sale by a holder of the number of shares of Series Preferred then
purchasable under this Warrant, or (ii) in the case of such a merger or sale in
which the consideration paid consists all or in part of assets other than
securities of the successor or purchasing corporation, at the option of the
Holder of this Warrant, the securities of the successor or purchasing
corporation having a value at the time of the transaction equivalent to the
valuation of the Series Preferred at the time of the transaction. Any new
Warrant shall provide for adjustments that shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 4. The provisions
of this subparagraph (a) shall similarly apply to successive reclassifications,
changes, mergers and transfers.
(b) Subdivision or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its outstanding shares of Series Preferred, the Warrant Price shall be
proportionately decreased and the number of Shares issuable hereunder shall be
proportionately increased in the case of a subdivision and the Warrant Price
shall be proportionately increased and the number of Shares issuable hereunder
shall be proportionately decreased in the case of a combination.
(c) Stock Dividends and Other Distributions. If the Company at
any time while this Warrant is outstanding and unexpired shall (i) pay a
dividend with respect to Series Preferred payable in Series Preferred, then the
Warrant Price shall be adjusted, from and after the date of determination of
shareholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior to such
date of determination by a fraction (A) the numerator of which shall be the
total number of shares of Series Preferred outstanding immediately prior to such
dividend or distribution, and (B) the denominator of which shall be the total
number of shares of Series Preferred outstanding immediately after such dividend
or distribution; or (ii) make any other distribution with respect to Series
Preferred (except any distribution specifically provided for in Sections 4(a)
and 4(b)), then, in each such case, provision shall be made by the Company such
that the holder of this Warrant shall receive upon exercise of this Warrant a
proportionate share of any such dividend or distribution as though it were the
holder of the Series Preferred (or Common Stock issuable upon conversion
thereof) as of the record date fixed for the determination of the shareholders
of the Company entitled to receive such dividend or distribution.
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(d) Adjustment of Number of Shares. Upon each adjustment in the
Warrant Price, the number of Shares of Series Preferred purchasable hereunder
shall be adjusted, to the nearest whole share, to the product obtained by
multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
(e) Antidilution Rights. The other antidilution rights applicable
to the Shares of Series Preferred purchasable hereunder are set forth in the
Company's Certificate of Incorporation, as amended through the Date of Grant, a
true and complete copy of which is attached hereto as Exhibit B (the "Charter").
Such antidilution rights shall not be restated, amended, modified or waived in
any manner that is adverse to the holder hereof without such holder's prior
written consent. The Company shall promptly provide the holder hereof with any
restatement, amendment, modification or waiver of the Charter promptly after the
same has been made.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, and shall cause copies of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage prepaid) to
the holder of this Warrant. In addition, whenever the conversion price or
conversion ratio of the Series Preferred shall be adjusted, the Company shall
make a certificate signed by its chief financial officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the
conversion price or ratio of the Series Preferred after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (without
regard to Section 13 hereof, by first class mail, postage prepaid) to the holder
of this Warrant.
6. Fractional Shares. No fractional shares of Series Preferred will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Series Preferred on the date of exercise as reasonably determined
in good faith by the Company's Board of Directors.
7. Compliance with Act; Disposition of Warrant or Shares of Series
Preferred.
(a) Compliance with Act. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant, and the shares of Series Preferred
to be issued upon exercise hereof and any Common Stock issued upon conversion
thereof are being acquired for investment and that such holder will not offer,
sell or otherwise dispose of this Warrant, or any shares of Series Preferred to
be issued upon exercise hereof or any Common Stock issued upon conversion
thereof except under circumstances which will not result in a violation of the
Act or any applicable state securities laws. Upon exercise of this Warrant,
unless the Shares being acquired are registered under the Act and any
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applicable state securities laws or an exemption from such registration is
available, the holder hereof shall confirm in writing that the shares of Series
Preferred so purchased (and any shares of Common Stock issued upon conversion
thereof) are being acquired for investment and not with a view toward
distribution or resale in violation of the Act and shall confirm such other
matters related thereto as may be reasonably requested by the Company. This
Warrant and all shares of Series Preferred issued upon exercise of this Warrant
and all shares of Common Stock issued upon conversion thereof (unless registered
under the Act and any applicable state securities laws) shall be stamped or
imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION
MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO,
(ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION
LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE
SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
Said legend shall be removed by the Company, upon the request of a holder,
which shall be accompanied by an opinion of counsel, if requested by the
Company, at such time as the restrictions on the transfer of the applicable
security shall have terminated. In addition, in connection with the issuance of
this Warrant, the holder specifically represents to the Company by acceptance of
this Warrant as follows:
(1) The holder is aware of the Company's business affairs
and financial condition, and has acquired information about the Company
sufficient to reach an informed and knowledgeable decision to acquire this
Warrant. The holder is acquiring this Warrant for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any
"distribution" thereof in violation of the Act.
(2) The holder understands that this Warrant has not been
registered under the Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the holder's
investment intent as expressed herein.
(3) The holder further understands that this Warrant must
be held indefinitely unless subsequently registered under the Act and qualified
under any applicable state securities laws, or unless exemptions from
registration and qualification are otherwise available. The holder is aware of
the provisions of Rule 144, promulgated under the Act.
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(4) The holder is an "accredited investor" as such term is
defined in Rule 501 of Regulation D promulgated under the Act.
(b) Disposition of Warrant or Shares. With respect to any offer,
sale or other disposition of this Warrant or any shares of Series Preferred
acquired pursuant to the exercise of this Warrant prior to registration of such
Warrant or shares, the holder hereof agrees to give written notice to the
Company prior thereto, describing briefly the manner thereof, together with a
written opinion of such holder's counsel, or other evidence, if reasonably
satisfactory to the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the Act
as then in effect or any federal or state securities law then in effect) of this
Warrant or such shares of Series Preferred or Common Stock and indicating
whether or not under the Act certificates for this Warrant or such shares of
Series Preferred to be sold or otherwise disposed of require any restrictive
legend as to applicable restrictions on transferability in order to ensure
compliance with such law. Upon receiving such written notice and reasonably
satisfactory opinion or other evidence, the Company, as promptly as practicable
but no later than fifteen (15) days after receipt of the written notice, shall
notify such holder that such holder may sell or otherwise dispose of this
Warrant or such shares of Series Preferred or Common Stock, all in accordance
with the terms of the notice delivered to the Company. If a determination has
been made pursuant to this Section 7(b) that the opinion of counsel for the
holder or other evidence is not reasonably satisfactory to the Company, the
Company shall so notify the holder promptly with details thereof after such
determination has been made. Notwithstanding the foregoing, this Warrant or such
shares of Series Preferred or Common Stock may, as to such federal laws, be
offered, sold or otherwise disposed of in accordance with Rule 144 or 144A under
the Act, provided that the Company shall have been furnished with such
information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 or 144A have been satisfied. Each
certificate representing this Warrant or the shares of Series Preferred thus
transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend
as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance with such
laws. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
(c) Applicability of Restrictions. Neither any restrictions of
any legend described in this Warrant nor the requirements of Section 7(b) above
shall apply to any transfer of, or grant of a security interest in, this Warrant
(or the Series Preferred or Common Stock obtainable upon exercise thereof) or
any part hereof (i) to a partner of the holder if the holder is a partnership or
to a member of the holder if the holder is a limited liability company, (ii) to
a partnership of which the holder is a partner or to a limited liability company
of which the holder is a member, or (iii) to any affiliate of the holder if the
holder is a corporation; provided, however, in any such transfer, if applicable,
the transferee shall on the Company's request agree in writing to be bound by
the terms of this Warrant as if an original holder hereof.
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8. Rights as Shareholders; Information. No holder of this Warrant, as
such, shall be entitled to vote or receive dividends or be deemed the holder of
Series Preferred or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. Notwithstanding the foregoing, the Company will
transmit to the holder of this Warrant such information, documents and reports
as are generally distributed to the holders of any class or series of the
securities of the Company concurrently with the distribution thereof to the
shareholders.
9. [Reserved]
10. Additional Rights.
10.1 Acquisition Transactions. The Company shall provide the holder of
this Warrant with at least twenty (20) days' written notice prior to closing
thereof of the terms and conditions of any of the following transactions (to the
extent the Company has notice thereof): (i) the sale, lease, exchange,
conveyance or other disposition of all or substantially all of the Company's
property or business, or (ii) its merger into or consolidation with any other
corporation (other than a wholly-owned subsidiary of the Company), or any
transaction (including a merger or other reorganization) or series of related
transactions, in which more than 50% of the voting power of the Company is
disposed of.
10.2 Right to Convert Warrant into Stock: Net Issuance.
(a) Right to Convert. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "Conversion Right")
into shares of Series Preferred (or Common Stock if the Series Preferred has
been automatically converted into Common Stock) as provided in this Section 10.2
at any time or from time to time during the term of this Warrant. Upon exercise
of the Conversion Right with respect to a particular number of shares subject to
this Warrant (the "Converted Warrant Shares"), the Company shall deliver to the
holder (without payment by the holder of any exercise price or any cash or other
consideration) that number of shares of fully paid and nonassessable Series
Preferred (or Common Stock if the Series Preferred has been automatically
converted into Common Stock) as is determined according to the following
formula:
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X = B-A
---
Y
Where: X = the number of shares of Series Preferred (or Common
Stock if the Series Preferred has been automatically
converted to Common Stock) that shall be issued to
holder
Y = the fair market value of one share of Series Preferred
(or Common Stock if the Series Preferred has been
automatically converted to Common Stock)
A = the aggregate Warrant Price of the specified number of
Converted Warrant Shares immediately prior to the
exercise of the Conversion Right (i.e., the number of
Converted Warrant Shares multiplied by the Warrant
Price)
B = the aggregate fair market value of the specified
number of Converted Warrant Shares (i.e., the number of
Converted Warrant Shares multiplied by the fair market
value of one Converted Warrant Share)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). For purposes
of Section 9 of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.
(b) Method of Exercise. The Conversion Right may be exercised by
the holder by the surrender of this Warrant at the principal office of the
Company together with a written statement (which may be in the form of Exhibit
A-1 or Exhibit A-2 hereto) specifying that the holder thereby intends to
exercise the Conversion Right and indicating the number of shares subject to
this Warrant which are being surrendered (referred to in Section 10.2(a) hereof
as the Converted Warrant Shares) in exercise of the Conversion Right. Such
conversion shall be effective upon receipt by the Company of this Warrant
together with the aforesaid written statement, or on such later date as is
specified therein (the "Conversion Date"), and, at the election of the holder
hereof, may be made contingent upon the closing of the sale of the Company's
Common Stock to the public in a public offering pursuant to a Registration
Statement under the Act (a "Public Offering"). Certificates for the shares
issuable upon exercise of the Conversion Right and, if applicable, a new warrant
evidencing the balance of the shares remaining subject to this Warrant, shall be
issued as of the Conversion Date and shall be delivered to the holder within
thirty (30) days following the Conversion Date.
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(c) Determination of Fair Market Value. For purposes of this
Section 10.2, "fair market value" of a share of Series Preferred (or Common
Stock if the Series Preferred has been automatically converted into Common
Stock) as of a particular date (the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection
with and contingent upon a Public Offering, and if the Company's Registration
Statement relating to such Public Offering ("Registration Statement") has been
declared effective by the Securities and Exchange Commission, then the initial
"Price to Public" specified in the final prospectus with respect to such
offering.
(ii) If the Conversion Right is not exercised in
connection with and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange, the fair market value of
the Common Stock shall be deemed to be the average of the closing prices of the
Common Stock on such exchange over the 30-day period ending five business days
prior to the Determination Date, and the fair market value of the Series
Preferred shall be deemed to be such fair market value of the Common Stock
multiplied by the number of shares of Common Stock into which each share of
Series Preferred is then convertible;
(B) If traded on the Nasdaq Stock Market or other
over-the-counter system, the fair market value of the Common Stock shall be
deemed to be the average of the closing bid prices of the Common Stock over the
30-day period ending five business days prior to the Determination Date, and the
fair market value of the Series Preferred shall be deemed to be such fair market
value of the Common Stock multiplied by the number of shares of Common Stock
into which each share of Series Preferred is then convertible; and
(C) If there is no public market for the Common Stock, then fair
market value shall be determined by by the Board of Directors of the Company.
10.3 Exercise Prior to Expiration. To the extent this Warrant is not
previously exercised as to all of the Shares subject hereto, and if the fair
market value of one share of the Series Preferred is greater than the Warrant
Price then in effect, this Warrant shall be deemed automatically exercised
pursuant to Section 10.2 above (even if not surrendered) immediately before its
expiration. For purposes of such automatic exercise, the fair market value of
one share of the Series Preferred upon such expiration shall be determined
pursuant to Section 10.2(c). To the extent this Warrant or any portion thereof
is deemed automatically exercised pursuant to this Section 10.3, the Company
agrees to promptly notify the holder hereof of the number of Shares, if any, the
holder hereof is to receive by reason of such automatic exercise.
11. Representations and Warranties. The Company represents and warrants to
the holder of this Warrant as follows:
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(a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable;
(c) The rights, preferences, privileges and restrictions granted
to or imposed upon the Series Preferred and the holders thereof are as set forth
in the Charter, and on the Date of Grant, each share of the Series Preferred
represented by this Warrant is convertible into one share of Common Stock;
(d) The shares of Common Stock issuable upon conversion of the
Shares have been duly authorized and reserved for issuance by the Company and,
when issued in accordance with the terms of the Charter will be validly issued,
fully paid and nonassessable;
(e) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Charter or by-laws, do
not and will not contravene any law, governmental rule or regulation, judgment
or order applicable to the Company, and do not and will not conflict with or
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument of which the Company is a party or by
which it is bound or require the consent or approval of, the giving of notice
to, the registration or filing with or the taking of any action in respect of or
by, any Federal, state or local government authority or agency or other person,
except for the filing of notices pursuant to federal and state securities laws,
which filings will be effected by the time required thereby; and
(f) There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
(g) The number of shares of Common Stock of the Company
outstanding on the date hereof, on a fully diluted basis (assuming the
conversion of all outstanding convertible securities and the exercise of all
outstanding options and warrants), does not exceed 25,000,000 shares.
12. 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.
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13. Notices. Any notice, request, communication or other document required
or permitted to be given or delivered to the holder hereof or the Company shall
be delivered, or shall be sent by certified or registered mail, postage prepaid,
to each such holder at its address as shown on the books of the Company or to
the Company at the address indicated therefor on the signature page of this
Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Series Preferred issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof.
15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company 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.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
17. Governing Law. 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.
18. Survival of Representations, Warranties and Agreements. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
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20. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against impairment.
21. Severability. The invalidity or unenforceability of any provision of
this Warrant in any jurisdiction shall not affect the validity or enforceability
of such provision in any other jurisdiction, or affect any other provision of
this Warrant, which shall remain in full force and effect.
22. Recovery of Litigation Costs. If any legal action or other proceeding
is brought for the enforcement of this Warrant, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Warrant, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they
may be entitled.
23. Entire Agreement; Modification. This Warrant constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
The Company has caused this Warrant to be duly executed and delivered as
of the Date of Grant specified above.
PACKETEER INC.
By:______________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer and
Secretary
Address: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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EXHIBIT A-1
NOTICE OF EXERCISE
To: PACKETEER INC. (the "Company")
1. The undersigned hereby:
[ ] elects to purchase________ shares of Series D Preferred Stock
[Common Stock] of the Company pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase
price of such shares in full, or
[ ] elects to exercise its net issuance rights pursuant to Section
10.2 of the attached Warrant with respect to________Shares of
Series D Preferred Stock [Common Stock].
2. Please issue a certificate or certificates representing ________ shares
in the name of the undersigned or in such other name or names as are specified
below:
________________________________
(Name)
________________________________
(Address)
3. The undersigned represents that the aforesaid shares are being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares, all except as in
compliance with applicable securities laws.
____________________________________________
(Signature)
_____________
(Date)
52
EXHIBIT A-2
NOTICE OF EXERCISE
To: PACKETEER INC. (the "Company")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S___, filed________, 19__, the undersigned hereby:
[ ] elects to purchase________shares of Series D Preferred Stock [Common
Stock] of the Company (or such lesser number of shares as may be sold on behalf
of the undersigned at the Closing) pursuant to the terms of the attached
Warrant, or
[ ] elects to exercise its net issuance rights pursuant to Section 10.2
of the attached Warrant with respect to________Shares of Series D Preferred
Stock [Common Stock].
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such________shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $________or, if less, the net proceeds
due the undersigned from the sale of shares in the aforesaid public offering. If
such net proceeds are less than the purchase price for such shares, the
undersigned agrees to deliver the difference to the Company prior to the
Closing.
______________________________________
(Signature)
___________________
(Date)
53
EXHIBIT B
CHARTER
54
SUBORDINATION AGREEMENT
This Subordination Agreement is made as of this 20th day of May, 1999, by
and between Comdisco, Inc. ("Senior Creditor"), a Delaware corporation having
its principal place of business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
and MMC/GATX Partnership No. I, a California general partnership, having its
principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Creditor").
RECITALS
A. Packeteer, Inc. ("Borrower") has requested and/or obtained certain
loans or other credit accommodations from Senior Creditor to Borrower which are
or may be from time to time secured by assets and property of Borrower.
B. Creditor has extended a loan in the aggregate original principal amount
of Two Million Five Hundred Thousand and 00/100 Dollars ($2,500,000.00) as
evidenced by a Secured Promissory Note (as the same may from time to time be
amended, modified, supplemented, extended, renewed, restated or replaced, the
"Subordinated Note") made by Borrower in favor of Creditor. The Borrower's
obligations to Creditor evidenced by the Subordinated Note are secured by the
personal property collateral granted by the Borrower to Creditor pursuant to a
Loan and Security Agreement dated as of May 20, 1999 (as the same may from time
to time be amended, modified, supplemented or restated, the "Subordinated
Security Agreement").
C. In order to induce Senior Creditor to extend credit to Borrower and, at
any time or from time to time, at Senior Creditor's option, to make such further
loans, extensions of credit, or other accommodations to or for the account of
Borrower, or to purchase or extend credit upon any instrument or writing in
respect of which Borrower may be liable in any capacity, or to grant such
renewals or extension of any such loan, extension of credit, purchase, or other
accommodation as Senior Creditor may deem advisable, Creditor is willing to
subordinate: (i) all of Borrower's indebtedness and obligations to Creditor,
whether presently existing or arising in the future under or relating to the
Subordinated Security Agreement and Subordinated Note (collectively, the
"Subordinated Debt") to Borrower's indebtedness and obligations to Senior
Creditor up to $2,500,000.00 plus the cost of collecting such obligations
(including attorneys' fees), including, without limitations, all interest
accruing after the commencement by or against Borrower of an bankruptcy,
reorganization or similar proceeding; and (ii) all of Creditor's security
interests, if any, to all of Senior Creditor's security interests in the
Borrower's property up to $2,500,000.00 plus cost of collecting such obligations
(including attorneys' fees), including, without limitations, all interest
accruing after the commencement by or against Borrower of an bankruptcy,
reorganization or similar proceeding. Notwithstanding anything to the contrary
contained in this definition of "Subordinated Debt", there shall be expressly
excluded from such definition (1) the warrant executed by Borrower in favor of
the Creditor pursuant to which Borrower granted Creditor the right to purchase
shares of its Preferred Stock ("Warrant Agreement"); and (2) all amounts due or
to become due relating to the Warrant Agreement, including, without limitation,
all interest and all fees, expenses and costs (including attorneys' fees),
including costs of enforcement, amounts reimbursable and other liabilities
(including interest, fees, professional fees and costs which would become due
but for the operation of the Bankruptcy Code) (collectively, the "Excluded
Agreements").
D. Senior Creditor is a party to a Subordination Agreement, dated as of
January 21, 1999, entered into with Silicon Valley Bank (the "Comdisco/SVB
Subordination Agreement") pursuant to which Senior Creditor has subordinated to
Silicon Valley Bank its liens and rights under its subordinated note and its
subordinated loan and security agreement with Borrower to the liens and rights
of Silicon Valley Bank (the "SVB Debt"). Creditor is a party to a Subordination
Agreement, dated as of May 20, 1999, entered into with Silicon Valley Bank (the
"MMC/SVB Subordination Agreement") pursuant to which Creditor has subordinated
to Silicon Valley Bank its liens and rights under the Subordinated Debt to the
SVB Debt.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
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1. Creditor subordinates to Senior Creditor any security interest or lien,
subject to the limit set forth herein, that Creditor may have in any property of
Borrower, other than with respect to the Excluded Agreements. Notwithstanding
the respective dates of attachment or perfection of the security interest of
Creditor and the security interest of Senior Creditor, the security interest of
Senior Creditor in the Collateral, as defined in the Loan and Security
Agreement, dated as of [January 21, 1999], between Borrower and Senior Creditor
(the "Loan Agreement"), shall at all times be prior to the security interest of
Creditor.
2. On the terms and conditions set forth below, all Subordinated Debt is
subordinated in right of payment to all obligations of Borrower to Senior
Creditor now existing or hereafter arising, together with all costs of
collecting such obligations (including attorneys' fees), including, without
limitation, all interest accruing after the commencement by or against Borrower
of any bankruptcy, reorganization or similar proceeding, and all obligations
under the Loan Agreement not to exceed Two Million Five Hundred Thousand Dollars
($2,500,000.00) (the "Senior Debt") provided, that Senior Debt shall not include
obligations pursuant to agreements other than the Subordinated Loan and Security
Agreement dated January 21, 1999 between Borrower and the Senior Creditor
incurred after default or workout acceleration of debt or the commencement of
any liquidation, dissolution, bankruptcy, receivership, or reorganization case
by or against Borrower.
Nothing herein shall be deemed to subordinate, waive or restrict the
payment or performance of the obligations arising under the Excluded Agreements
or subordinate the priority of any lien or interest in property securing or
evidenced by the Excluded Agreements, provided, however, such exclusion shall be
limited to the property securing such Excluded Agreements.
3. Subject to and except as set forth in Section 4 below, Creditor will
not demand or receive from Borrower (and Borrower will not pay to Creditor) all
or any part of the Subordinated Debt, by way of payment, prepayment, setoff,
lawsuit or otherwise, nor will Creditor exercise any remedy with respect to the
Collateral, nor will Creditor commence, or cause to commence, prosecute or
participate in any administrative, legal or equitable action against Borrower,
for so long as any portion of the Senior Debt remains outstanding.
4. (a) Notwithstanding anything to the contrary contained in Sections 2
and 3 above, but expressly subject to (b) below, Borrower shall be permitted to
make, and Creditor shall be permitted to accept or receive the following
permitted payments ("Permitted Payments"): (i) scheduled repayments of principal
when due under the Subordinated Note and Subordinated Security Agreement, (ii)
scheduled payments of accrued interest when due under the Subordinated Note and
Subordinated Security Agreement, (iii) payments of reimbursable expenses, costs
and professional fees and expenses as and when due under the Subordinated Note
and the Subordinated Security Agreement, (iv) cancellation of Subordinated Debt
in consideration of the exercise price for stock purchased by Creditor under the
Warrant Agreement, and (v) other payments consented to in writing by the Senior
Creditor.
(b) Notwithstanding anything to the contrary contained in this
Section 4 or elsewhere in this Agreement, if the Senior Creditor delivers to
Creditor written notice (a "Blockage Notice") which states that either:
(i) a specific default by Borrower involving the payment of
the Senior Debt (a "Payment Default") has occurred under the Loan
Agreement and continues to exist after the giving of any required notice
and the expiration of any applicable grace or cure period, or
(ii) a specific default by Borrower not involving the payment
of Senior Debt (a "Non-Payment Default") has occurred under the Loan
Agreement and continues to exist after the giving of any required notice
and the expiration of any applicable grace or cure period, such notice to
include all such defaults in existence at the time, and
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56
(iii) Senior Creditor has received a blockage notice from
Silicon Valley Bank ("SVB") under the terms of a subordination agreement
dated January 21, 1999 between Senior Creditor and SVB.
then from and after the date of delivery of any such Blockage Notice, (i)
Creditor shall not accept or receive any payment of any kind of or on account of
the Subordinated Debt (including any Permitted Payment), unless and until the
earlier of (A) the time such Payment Default or Non-Payment Default shall have
been cured by Borrower or waived in writing by Senior Creditor, or (B) the
expiration of the Blockage Period (as defined below) for such Blockage Notice,
and (ii) Creditor shall disgorge any Permitted Payments received, for a period
not to exceed two (2) months during the time commencing upon the occurrence of a
Payment Default or Non-Payment Default until the date of receipt by Creditor of
such Blockage Notice, provided, that while the SVB Debt is outstanding or
Creditor remains bound by the terms of the MMC/SVB Subordination Agreement, such
disgorgement shall be made to SVB pursuant to the terms of the MMC/SVB
Subordination Agreement.
As used herein, "Blockage Period" means a period of time beginning on the
date a Blockage Notice is delivered to Creditor and termination on the earlier
to occur of:
(1) 180 days following such date; provided that if, prior to the
expiration of such 180-day period, Senior Creditor has commenced a
judicial proceeding or non-judicial actions to collect or enforce the
Senior Debt or the collateral for the Senior Debt, or a case or proceeding
by or against Borrower is commenced under the federal Bankruptcy Code or
any other insolvency law, then such period shall be extended during the
continuation of such proceedings and actions under the payment in cash or
other property or securities in the full amount of the allowed claim of
the Senior Debt; or
(2) Senior Creditor's written consent to such termination.
With respect to Non-Payment Defaults, in no event shall the Blockage
Period during any period of 365 consecutive days exceed 180 days in the
aggregate, whether pursuant to one (1) Blockage Notice or multiple Blockage
Notices; provided, however, the foregoing limitation shall not apply in the
event that prior to the expiration of such 180 day period Senior Creditor has
commenced a judicial proceeding or non-judicial actions to collect or enforce
the Senior Debt or a case of proceeding by or against Borrower is commenced
under the federal Bankruptcy Code or any other insolvency law, then such period
shall be extended during the continuation of such proceedings and actions until
the payment in cash or other property or securities in the full amount of the
allowed claim of the Senior Debt. After the satisfaction of the applicable
conditions specified in (1) or (2) above, Creditor shall be entitled to receive
all Permitted Payments until Creditor's receipt of a subsequent Blockage Notice
from Senior Creditor.
5. Creditor shall promptly deliver to Senior Creditor in the form received
(except for endorsement or assignment by Creditor where required by Senior
Creditor) for application to the Senior Debt any payment, distribution, security
or proceeds received by Creditor with respect to the Subordinated Debt other
than in accordance with this Agreement provided, that while the SVB Debt is
outstanding or Creditor remains bound by the terms of the MMC/SVB Subordination
Agreement, such delivery shall be made to SVB pursuant to the terms of the
MMC/SVB Subordination Agreement.
6. In the event of Borrower's insolvency, reorganization or any case or
proceeding under any bankruptcy or insolvency law or laws relating to the relief
of debtors, these provisions shall remain in full force and effect, and Senior
Creditor's claims against Borrower and the estate of Borrower shall be paid in
full before any payment is made to Creditor.
7. For so long as any of the Senior Debt remains unpaid, Creditor
irrevocably appoints Senior Creditor as Creditor's attorney-in-fact, and grants
to Senior Creditor a power of attorney with full power of substitution, in the
name of Creditor or in the name of Senior Creditor, for the use and benefit of
Senior Creditor, without notice to Creditor, in any bankruptcy, insolvency or
similar proceeding involving Borrower to (i) file the appropriate claim or
claims in respect of the Subordinated Debt on behalf of Creditor if (a) Creditor
does not do so prior to 30 days before the expiration of the time to file claims
in
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such proceeding, and (b) if Senior Creditor elects, in its sole discretion, to
file such claim or claims and (ii) accept or reject any plan or reorganization
or arrangement on behalf of Creditor and to otherwise vote Creditor's claims in
respect of any Subordinated Debt in any manner that Senior Creditor deems
appropriate for the enforcement of its rights hereunder if Creditor does not
accept, reject or otherwise vote its claims within fifteen (15) days of receipt
of written notice from Senior Creditor of its intent to do so on behalf of
Creditor, provided, that while the SVB Debt is outstanding or Creditor remains
bound by the terms of the MMC/SVB Subordination Agreement, the rights granted to
Senior Creditor may only be exercised with the prior written consent of SVB.
8. Creditor shall immediately affix a legend to the instruments evidencing
the Subordinated Debt stating that the instruments are subject to the terms of
this Agreement. No amendment of the documents evidencing or relating to the
Subordinated Debt shall directly or indirectly modify the provisions of this
Agreement in any manner which might terminate or impair the subordination of the
Subordinated Debt or the subordination of the security interest or lien that
Creditor may have in any property of Borrower. By way of example, such
instruments shall not be amended to (i) increase the rate of interest with
respect to the Subordinated Debt, or (ii) accelerate the payment of the
principal or interest or any other portion of the Subordinated Debt.
9. This Agreement shall remain effective for so long as Borrower owes any
amounts to Senior Creditor under the Loan Agreement or otherwise in an amount
not to exceed the Senior Debt. If, at any time after payment in full of the
Senior Debt any payments of the Senior Debt must be disgorged by Senior Creditor
for any reason (including, without limitation, the bankruptcy of Borrower), this
Agreement and the relative rights and priorities set forth herein shall be
reinstated as to all such disgorged payments as though such payments had not
been made and Creditor shall immediately pay over to Senior Creditor all
payments received with respect to the Subordinated Debt to the extent that such
payments would have been prohibited hereunder, provided, that while the SVB Debt
is outstanding or Creditor remains bound by the terms of the MMC/SVB
Subordination Agreement, such payments shall be paid over to SVB pursuant to the
terms of the MMC/SVB Subordination Agreement. At any time and from time to time,
without notice to Creditor, Senior Creditor may take such actions with respect
to the Senior Debt as Senior Creditor, in its sole discretion, may deem
appropriate, including, without limitation, terminating advances to Borrower,
increasing the principal amount in an amount not to exceed $2,500,000.00,
extending the time of payment, increasing applicable interest rates, renewing,
compromising or otherwise amending the terms of any documents affecting the
Senior Debt and any collateral securing the Senior Debt, and enforcing or
failing to enforce any rights against Borrower or any other person. Creditor
waives the benefits, if any, of any statutory or common law rule that may permit
a subordinating creditor to assert any defenses of a surety or guarantor, or
that may give the subordinating creditor the right to require a senior creditor
to marshal assets, and Creditor agrees that it shall not assert any such
defenses or rights.
10. This Agreement shall bind any successors or assignees of Creditor and
shall benefit any successors or assigns of Senior Creditor. This Agreement is
solely for the benefit of Creditor and Senior Creditor and not for the benefit
of Borrower or any other party. Creditor further agrees that if Borrower is in
the process of refinancing a portion of the Senior Debt with a new lender, and
if Senior Creditor makes a request of Creditor, Creditor shall agree to enter
into a new subordination agreement with the new lender on substantially the
terms and conditions of this Agreement.
11. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
instrument. This Agreement shall become effective only when it shall have been
executed by Creditor and Senior Creditor (provided, however, in no event shall
this Agreement become effective until signed by an officer of Senior Creditor in
California).
12. This Agreement shall be governed by and construed in accordance with
the laws of the State of California without giving effect to conflicts of law
principles. Creditor and Senior Creditor submit to the exclusive jurisdiction of
the state and federal courts located in San Francisco County, California.
CREDITOR AND SENIOR CREDITOR WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREIN.
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13. This Agreement represents the entire agreement with respect to the
subject matter hereof, and supersedes all prior negotiations, agreements and
commitments. Creditor is not relying on any representations by Senior Creditor
or Borrower in entering into this Agreement, and Creditor has kept and will
continue to keep itself fully apprised of the financial and other condition of
Borrower. This Agreement may be amended only by written instrument signed by
Creditor and Senior Creditor.
14. In the event of any legal action to enforce the rights of a party
under this Agreement, the party prevailing in such action shall be entitled, in
addition to such other relief as may be granted, all reasonable costs and
expenses, including reasonable attorneys' fees, incurred in such action.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
"SENIOR CREDITOR" "CREDITOR"
COMDISCO, INC. MMC/GATX PARTNERSHIP NO. I,
BY: GATX CAPITAL CORPORATION,
ITS GENERAL PARTNER
By: ______________________________ By: ______________________________
Title: ______________________________ Title: ______________________________
THE UNDERSIGNED APPROVES OF THE TERMS OF THIS AGREEMENT.
"BORROWER"
PACKETEER, INC.
By: ______________________________
Title: ______________________________
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SUBORDINATION AGREEMENT
This Subordination Agreement is made as of this 20th day of May, 1999, by
and between Silicon Valley Bank ("Senior Creditor") having its principal place
of business at ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and MMC/GATX
Partnership No. I, a California general partnership, having its principal place
of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ("Creditor").
RECITALS
A. Packeteer, Inc. ("Borrower") has requested and/or obtained certain
loans or other credit accommodations from Senior Creditor to Borrower which are
or may be from time to time secured by assets and property of Borrower.
B. Creditor has extended a loan in the aggregate original principal amount
of Two Million Five Hundred Thousand and 00/100 Dollars ($2,500,000.00) as
evidenced by a Secured Promissory Notes (as the same may from time to time be
amended, modified, supplemented, extended, renewed, restated or replaced, the
"Subordinated Note") made by Borrower in favor of Creditor. The Borrower's
obligations to Creditor evidenced by the Subordinated Note are secured by the
personal property collateral granted by the Borrower to Creditor pursuant to a
Loan and Security Agreement dated as of May 20, 1999 (as the same may from time
to time be amended, modified, supplemented or restated, the "Subordinated
Security Agreement").
C. In order to induce Senior Creditor to extend credit to Borrower and, at
any time or from time to time, at Senior Creditor's option, to make such further
loans, extensions of credit, or other accommodations to or for the account of
Borrower, or to purchase or extend credit upon any instrument or writing in
respect of which Borrower may be liable in any capacity, or to grant such
renewals or extension of any such loan, extension of credit, purchase, or other
accommodation as Senior Creditor may deem advisable, Creditor is willing to
subordinate: (i) all of Borrower's indebtedness and obligations to Creditor,
whether presently existing or arising in the future under or relating to the
Subordinated Security Agreement and Subordinated Note (collectively, the
"Subordinated Debt") to Borrower's indebtedness and obligations to Senior
Creditor up to $3,000,000.00 plus cost of collecting such obligations (including
attorneys' fees), including, without limitations, all interest accruing after
the commencement by or against Borrower of an bankruptcy, reorganization or
similar proceeding; and (ii) all of Creditor's security interests, if any, to
all of Senior Creditor's security interests in the Borrower's property up to
$3,000,000.00 plus cost of collecting such obligations (including attorneys'
fees), including, without limitations, all interest accruing after the
commencement by or against Borrower of an bankruptcy, reorganization or similar
proceeding. Notwithstanding anything to the contrary contained in this
definition of "Subordinated Debt", there shall be expressly excluded from such
definition (1) Warrant Agreement(s) between Borrower and the Creditor pursuant
to which Borrower granted Creditor the right to purchase shares of its Preferred
Stock ("Warrant Agreement"); and (2) all amounts due or to become due relating
to the Warrant Agreement(s), including, without limitation, all interest and all
fees, expenses and costs (including attorneys' fees), including costs of
enforcement, amounts reimbursable and other liabilities (including interest,
fees, professional fees and costs which would become due but for the operation
of the Bankruptcy Code) (collectively, the "Excluded Agreements").
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Creditor subordinates to Senior Creditor any security interest or lien,
subject to the limit set forth herein, that Creditor may have in any property of
Borrower, other than with respect to the Excluded Agreements. Notwithstanding
the respective dates of attachment or perfection of the security interest of
Creditor and the security interest of Senior Creditor, the security interest of
Senior Creditor in the Collateral, as defined in the Loan and Security
Agreement, dated as of January 15, 1999, between Borrower and Senior Creditor
(the "Loan Agreement"), shall at all times be prior to the security interest of
Creditor.
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2. On the terms and conditions set forth below, all Subordinated Debt is
subordinated in right of payment to all obligations of Borrower to Senior
Creditor now existing or hereafter arising, together with all costs of
collecting such obligations (including attorneys' fees), including, without
limitation, all interest accruing after the commencement by or against Borrower
of any bankruptcy, reorganization or similar proceeding, and all obligations
under the Loan Agreement not to exceed Three Million Dollars ($3,000,000.00)
(the "Senior Debt") provided, that Senior Debt shall not include obligations
pursuant to agreements other than the Loan Agreement incurred after acceleration
of debt or the commencement of any liquidation, dissolution, bankruptcy,
receivership, or reorganization case by or against Borrower.
Nothing herein shall be deemed to subordinate, waive or restrict the
payment or performance of the obligations arising under the Excluded Agreements
or subordinate the priority of any lien or interest in property securing or
evidenced by the Excluded Agreements, provided, however, such exclusion shall be
limited to the property securing such Excluded Agreements.
3. Subject to and except as set forth in Section 4 below, Creditor will
not demand or receive from Borrower (and Borrower will not pay to Creditor) all
or any part of the Subordinated Debt, by way of payment, prepayment, setoff,
lawsuit or otherwise, nor will Creditor exercise any remedy with respect to the
Collateral, nor will Creditor commence, or cause to commence, prosecute or
participate in any administrative, legal or equitable action against Borrower,
for so long as any portion of the Senior Debt remains outstanding.
4. (a) Notwithstanding anything to the contrary contained in Sections 2
and 3 above, but expressly subject to (b) below, Borrower shall be permitted to
make, and Creditor shall be permitted to accept or receive the following
permitted payments ("Permitted Payments"): (i) scheduled repayments of principal
when due under the Subordinated Note and Subordinated Security Agreement, (ii)
scheduled payments of accrued interest when due under the Subordinated Note and
Subordinated Security Agreement, (iii) payments of reimbursable expenses, costs
and professional fees and expenses as and when due under the Subordinated Note
and the Subordinated Security Agreement, (iv) cancellation of Subordinated Debt
in consideration of the exercise price for stock purchased by Creditor under the
Warrant Agreement, and (v) other payments consented to in writing by the Senior
Creditor.
(b) Notwithstanding anything to the contrary contained in this
Section 4 or elsewhere in this Agreement, if the Senior Creditor delivers to
Creditor written notice (a "Blockage Notice") which states that either:
(i) a specific default by Borrower involving the payment of
the Senior Debt (a "Payment Default") has occurred under the Loan
Agreement and continues to exist after the giving of any required notice
and the expiration of any applicable grace or cure period, or
(ii) a specific default by Borrower not involving the payment
of Senior Debt (a "Non-Payment Default") has occurred under the Loan
Agreement and continues to exist after the giving of any required notice
and the expiration of any applicable grace or cure period, such notice to
include all such defaults in existence at the time.
then from and after the date of delivery of any such Blockage Notice, (i)
Creditor shall not accept or receive any payment of any kind of or on account of
the Subordinated Debt (including any Permitted Payment), unless and until the
earlier of (A) the time such Payment Default or Non-Payment Default shall have
been cured by Borrower or waived in writing by Senior Creditor, or (B) the
expiration of the Blockage Period (as defined below) for such Blockage Notice,
and (ii) Creditor shall disgorge any Permitted Payments received, for a period
not to exceed two (2) months during the time commencing upon the occurrence of a
Payment Default or Non-Payment Default until the date of receipt by Creditor of
such Blockage Notice.
As used herein, "Blockage Period" means a period of time beginning on the
date a Blockage Notice is delivered to Creditor and termination on the earlier
to occur of:
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(1) 180 days following such date; provided that if, prior to the
expiration of such 180-day period, Senior Creditor has commenced a
judicial proceeding or non-judicial actions to collect or enforce the
Senior Debt or the collateral for the Senior Debt, or a case or proceeding
by or against Borrower is commenced under the federal Bankruptcy Code or
any other insolvency law, then such period shall be extended during the
continuation of such proceedings and actions under the payment in cash or
other property or securities in the full amount of the allowed claim of
the Senior Debt; or
(2) Senior Creditor's written consent to such termination.
With respect to Non-Payment Defaults, in no event shall the Blockage
Period during any period of 365 consecutive days exceed 180 days in the
aggregate, whether pursuant to one (1) Blockage Notice or multiple Blockage
Notices; provided, however, the foregoing limitation shall not apply in the
event that prior to the expiration of such 180 day period Senior Creditor has
commenced a judicial proceeding or non-judicial actions to collect or enforce
the Senior Debt or a case of proceeding by or against Borrower is commenced
under the federal Bankruptcy Code or any other insolvency law, then such period
shall be extended during the continuation of such proceedings and actions until
the payment in cash or other property or securities in the full amount of the
allowed claim of the Senior Debt. After the satisfaction of the applicable
conditions specified in (1) or (2) above, Creditor shall be entitled to receive
all Permitted Payments until Creditor's receipt of a subsequent Blockage Notice
from Senior Creditor.
5. Creditor shall promptly deliver to Senior Creditor in the form received
(except for endorsement or assignment by Creditor where required by Senior
Creditor) for application to the Senior Debt any payment, distribution, security
or proceeds received by Creditor with respect to the Subordinated Debt other
than in accordance with this Agreement.
6. In the event of Borrower's insolvency, reorganization or any case or
proceeding under any bankruptcy or insolvency law or laws relating to the relief
of debtors, these provisions shall remain in full force and effect, and Senior
Creditor's claims against Borrower and the estate of Borrower shall be paid in
full before any payment is made to Creditor.
7. For so long as any of the Senior Debt remains unpaid, Creditor
irrevocably appoints Senior Creditor as Creditor's attorney-in-fact, and grants
to Senior Creditor a power of attorney with full power of substitution, in the
name of Creditor or in the name of Senior Creditor, for the use and benefit of
Senior Creditor, without notice to Creditor, in any bankruptcy, insolvency or
similar proceeding involving Borrower to (i) file the appropriate claim or
claims in respect of the Subordinated Debt on behalf of Creditor if (a) Creditor
does not do so prior to 30 days before the expiration of the time to file claims
in such proceeding, and (b) if Senior Creditor elects, in its sole discretion,
to file such claim or claims and (ii) accept or reject any plan or
reorganization or arrangement on behalf of Creditor and to otherwise vote
Creditor's claims in respect of any Subordinated Debt in any manner that Senior
Creditor deems appropriate for the enforcement of its rights hereunder if
Creditor does not accept, reject or otherwise vote its claims within fifteen
(15) days of receipt of written notice from Senior Creditor of its intent to do
so on behalf of Creditor.
8. Creditor shall immediately affix a legend to the instruments evidencing
the Subordinated Debt stating that the instruments are subject to the terms of
this Agreement. No amendment of the documents evidencing or relating to the
Subordinated Debt shall directly or indirectly modify the provisions of this
Agreement in any manner which might terminate or impair the subordination of the
Subordinated Debt or the subordination of the security interest or lien that
Creditor may have in any property of Borrower. By way of example, such
instruments shall not be amended to (i) increase the rate of interest with
respect to the Subordinated Debt, or (ii) accelerate the payment of the
principal or interest or any other portion of the Subordinated Debt.
9. This Agreement shall remain effective for so long as Borrower owes any
amounts to Senior Creditor under the Loan Agreement or otherwise in an amount
not to exceed the Senior Debt. If, at any time after payment in full of the
Senior Debt any payments of the Senior Debt must be disgorged by Senior Creditor
for any reason (including, without limitation, the bankruptcy of Borrower), this
Agreement
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and the relative rights and priorities set forth herein shall be reinstated as
to all such disgorged payments as though such payments had not been made and
Creditor shall immediately pay over to Senior Creditor all payments received
with respect to the Subordinated Debt to the extent that such payments would
have been prohibited hereunder. At any time and from time to time, without
notice to Creditor, Senior Creditor may take such actions with respect to the
Senior Debt as Senior Creditor, in its sole discretion, may deem appropriate,
including, without limitation, terminating advances to Borrower, increasing the
principal amount in an amount not to exceed $3,000,000.00, extending the time of
payment, increasing applicable interest rates, renewing, compromising or
otherwise amending the terms of any documents affecting the Senior Debt and any
collateral securing the Senior Debt, and enforcing or failing to enforce any
rights against Borrower or any other person. Creditor waives the benefits, if
any, of any statutory or common law rule that may permit a subordinating
creditor to assert any defenses of a surety or guarantor, or that may give the
subordinating creditor the right to require a senior creditor to marshal assets,
and Creditor agrees that it shall not assert any such defenses or rights.
10. This Agreement shall bind any successors or assignees of Creditor and
shall benefit any successors or assigns of Senior Creditor. This Agreement is
solely for the benefit of Creditor and Senior Creditor and not for the benefit
of Borrower or any other party. Creditor further agrees that if Borrower is in
the process of refinancing a portion of the Senior Debt with a new lender, and
if Senior Creditor makes a request of Creditor, Creditor shall agree to enter
into a new subordination agreement with the new lender on substantially the
terms and conditions of this Agreement.
11. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
instrument. This Agreement shall become effective only when it shall have been
executed by Creditor and Senior Creditor (provided, however, in no event shall
this Agreement become effective until signed by an officer of Senior Creditor in
California).
12. This Agreement shall be governed by and construed in accordance with
the laws of the State of California without giving effect to conflicts of law
principles. Creditor and Senior Creditor submit to the exclusive jurisdiction of
the state and federal courts located in San Francisco County, California.
CREDITOR AND SENIOR CREDITOR WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREIN.
13. This Agreement represents the entire agreement with respect to the
subject matter hereof, and supersedes all prior negotiations, agreements and
commitments. Creditor is not relying on any representations by Senior Creditor
or Borrower in entering into this Agreement, and Creditor has kept and will
continue to keep itself fully apprised of the financial and other condition of
Borrower. This Agreement may be amended only by written instrument signed by
Creditor and Senior Creditor.
14. All parties acknowledge that Creditor is subordinated in right of
payment first to Senior Creditor and second to Comdisco, Inc.
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15. In the event of any legal action to enforce the rights of a party
under this Agreement, the party prevailing in such action shall be entitled, in
addition to such other relief as may be granted, all reasonable costs and
expenses, including reasonable attorneys' fees, incurred in such action.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
"SENIOR CREDITOR" "CREDITOR"
SILICON VALLEY BANK MMC/GATX PARTNERSHIP NO. I,
BY: GATX CAPITAL CORPORATION,
ITS GENERAL PARTNER
By:______________________________ By: __________________________________
Title: __________________________ Title:________________________________
THE UNDERSIGNED APPROVES OF THE TERMS OF THIS AGREEMENT.
"BORROWER"
PACKETEER, INC.
By: ______________________________
Title: ______________________________
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