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EXHIBIT 10.28
[LETTERHEAD FOR TRANSAMERICA BUSINESS CREDIT]
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Controller
AboveNet Communications, Inc.
▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ #▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇▇▇:
Transamerica Business Credit Corporation - Technology Finance Division
("Lender") is pleased to offer this commitment (this "Commitment") to Loan the
equipment described below to AboveNet Communications, Inc. ("Borrower"). Except
with respect to the transactions consummated (or to be consummated) under a
commitment letter dated as of April 29, 1998 and the Master Loan and Security
Agreement dated as of May 28, 1998, this Commitment supercedes all prior
correspondence, proposals, and oral or other communications relating to leasing
arrangements between ▇▇▇▇▇▇ and Borrower.
The outline of this offer is as follows:
Lender: Transamerica Business Credit Corporation - Technology
Finance Division and/or its affiliates, successors or
assigns.
Borrower: AboveNet Communications, Inc,
Equipment Cost: Not to exceed $9,000,000 in the aggregate (in
addition to prior commitment).
Equipment: Network operating center equipment, office equipment
and leasehold improvements (as listed on a capital
expenditure forecast provided to Lender) (the
"Equipment"). All Equipment is subject to Lender
approval prior to funding.
Security: Lender will require, junior only to the prior lien of
Silicon Valley Bank securing a working capital loan
in an amount not to exceed $1,500,000, a perfected
lien and security interest in all assets of Borrower,
now owned or hereafter acquired, including cash,
accounts receivable, inventory, machinery, equipment,
furniture, fixtures, tools, copyrights, licenses,
patents, trademarks, tradenames, other intellectual
property, leases, leasehold improvements, general
intangibles, and all other assets.
Location of Equipment: California, Washington D.C. vicinity and other U.S.
locations as identified
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by ▇▇▇▇▇▇▇▇.
Anticipated Draw-Down A minimum of $100,000 will be drawn on or before
Schedule: October 15, 1998 and the remaining availability will
be drawn on or before October 31, 1999.
Draw-Down Expiration: No Loans will be funded after October 31, 1999.
Loan Term: Each Loan Term will commence upon delivery of the
equipment or upon each delivery of items of equipment
having an aggregate cost of not less than $50,000,
and will continue through 42 months from the first
day of the month next following or coincident with
commencement of that Loan Term.
Payment Terms: Monthly Rent equal to 2.7395% of Equipment Cost will
be payable monthly in advance. The first and last
Monthly Rent payments will be due and payable on or
before commencement of each Loan Term.
Lender reserves the right to increase the rate set
forth above as of the date each Loan Term commences
proportionally to the change in the weekly average of
the interest rates of 4-year U.S. Treasury Securities
(as published in the Wall Street Journal) from the
week ending August 7, 1998 to the week preceding the
commencement of such Loan Term. As of the date each
Loan Term commences, the Monthly Rent will be fixed
for that entire Loan Term. A schedule of actual
Monthly Rent payment amounts will be provided by the
Lender following commencement of each Loan Term.
Balloon Payment: At the end of each Loan Term, the Borrower will be
obligated to make one final Balloon Payment equal to
12.5% of the original principal amount of such Loan,
plus any other amounts then due and owing to Lender.
Interim Rent: Interim Rent will accrue from the date each Loan Term
commences until the next following first day of a
month (unless the Loan Term commences on the first
day of a month). Interim Rent will be calculated at
the daily equivalent of the currently adjusted
Monthly Rent.
Warrants: As an inducement to the Lender to provide financing
on the terms generally outlined herein, Borrower will
grant to Lender at the time of commitment, Warrants
to purchase 100,000 shares of the common stock of the
Borrower at a price per share of $2.50, with the
price per share with respect to 50,000 shares to be
adjusted to a price equal to 80% of (1) the price per
share paid by investors in the Borrower's Series F
Preferred Stock financing or (2) the "price to
public" in the Borrower's Initial Public Offering.
The Warrants will be exercisable for 5 years from the
date of issuance. The Lender will have the option to
exercise the Warrants without payment of the exercise
price and receive only that number of shares which
represents the value of the difference between the
fair market value of the shares and the exercise
price (i.e., "net issuance" or "cashless exercise").
Insurance. Prior to any delivery of equipment, the Borrower will
furnish confirmation of insurance acceptable to the
Lender covering the Equipment including
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primary, all risk, physical damage, property damage
and bodily injury with appropriate loss payee and
additional insured endorsements in favor of the
Lender.
Conditions Precedent Each Loan will be subject to the following:
to Lending: 1. No material adverse change in the financial
condition, operations or prospects of the
Borrower prior to funding. The Lender reserves
the right to rescind any unused portion of its
commitment in the event of a material adverse
change in the financial condition, operation or
prospects of the Borrower.
2. Completion of the documentation and final terms
of the proposed financing satisfactory to ▇▇▇▇▇▇
and ▇▇▇▇▇▇'s counsel.
3. Results of all due diligence, including lien,
judgment and tax search and other matters Lender
may request shall be satisfactory to Lender and
▇▇▇▇▇▇'s counsel.
4. Receipt by ▇▇▇▇▇▇ of duly executed loan
documentation in form and substance satisfactory
to Lender and its counsel.
5. Lender shall receive a valid and perfected first
priority lien and security interest in the
Equipment and Lender shall have received
satisfactory evidence that there are no liens on
the Equipment except as expressly permitted
herein.
6. $3,000,000 of this Commitment will be made
available immediately upon satisfaction of
Conditions 1 - 5 above, with the remainder
becoming available upon completion of an equity
financing with gross proceeds in an amount not
less than $40,000,000, provided that such
financing is completed on or before March 31,
1999. If the equity financing does not close
prior to the such date, the Lender reserves the
right to rescind the balance of this Commitment.
Additional There will be no actual or threatened conflict with,
Covenants: or violation of, any regulatory statute, standard or
rule relating to the Borrower, its present or future
operations, or the Equipment.
Borrower will be required to provide quarterly
financial information. All information supplied by
the Borrower will be correct and will not omit any
statement necessary to make the information supplied
not be misleading. There will be no material breach
of the representations and warranties of the Borrower
in the Loan.
Expenses: All costs and expenses incurred by the Lender in
connection with the underwriting and closing of the
Loans will be paid by the Borrower whether or not any
Loans are consummated and funds are advanced by the
Lender. Said expenses will not exceed $7,000 without
prior written consent from the Borrower.
Law: This letter and the proposed Loan are intended to be
governed by and construed in accordance with Illinois
law without regard to its conflict of law provisions.
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Indemnity: ▇▇▇▇▇▇▇▇ agrees to indemnify and to hold harmless
Lender, and its officers, directors and employees
against all claims, damages, liabilities and expenses
which may be incurred by or asserted against any such
person in connection with or arising out of this
letter and the transactions contemplated hereby,
other than claims, damages, liability, and expense
resulting from such person's gross negligence or
willful misconduct.
Confidentiality: This letter is delivered to you with the
understanding that neither it nor its substance shall
be disclosed publicly or privately to any third
person except those who are in a confidential
relationship to you (such as your legal counsel and
accountants), or where the same is required by law
and then only on the basis that it not be further
disclosed, which conditions Borrower and its agents
agree to be bound by upon acceptance of this letter.
Without limiting the generality of the foregoing,
none of such persons shall use or refer to Lender or
to any affiliate name in any disclosures made in
connection with any of the transactions without
▇▇▇▇▇▇'s prior written consent.
Upon completion of the initial takedown by ▇▇▇▇▇▇▇▇,
the Borrower will no longer be required to obtain
▇▇▇▇▇▇'s prior written consent to disclose the
transaction contemplated hereby. In addition, the
Borrower agrees to provide camera ready artwork of
typestyles and logos of the Borrower for use in
promotional material by the Lender.
Conditions of Acceptance: This Commitment Letter is intended to be a summary of
the most important elements of the agreement to enter
into a loan transaction with Borrower, and it is
subject to all requirements and conditions contained
in Loan documentation proposed by Lender or its
counsel in the course of closing the Loans described
herein. Not every provision that imposes duties,
obligations, burdens, or limitations on Borrower is
contained herein, but shall be contained in the final
Loan documentation satisfactory to Lender and its
counsel.
EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY SUIT, ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATED TO THIS LETTER OR THE TRANSACTION
DESCRIBED IN THIS LETTER.
Commitment Fee: A non-refundable Commitment Fee equal to $45,000
(0.50% of the maximum amount of this Commitment) is
due upon acceptance of this Commitment, to be
retained by the Lender as compensation for the
Commitment. The $45,000 Application Fee previously
paid by the Borrower will be applied to the
Commitment Fee.
Commitment Expiration: This commitment shall expire on September 30, 1998
unless prior thereto either extended in writing by
the Lender or accepted as provided below by the
Borrower.
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Should you have any questions, please call me. If you wish to accept this
Commitment, please so indicate by signing and returning the enclosed duplicate
copy of this letter to me by September 30, 1998.
Yours truly,
TRANSAMERICA BUSINESS CREDIT
CORP - TECHNOLOGY FINANCE
DIVISION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President - Marketing
Accepted this 29th day of September, 1998
ABOVENET COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Executive Vice President
and Chief Financial Officer
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Vice President,
Finances Controller
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AMENDED AND RESTATED
MASTER LOAN AND SECURITY AGREEMENT
THIS AGREEMENT dated as of May 28 1998, and amended and restated as of
September 29, 1998, is made by AboveNet Communications, Inc. (the "Borrower"),
a California corporation having its principal place of business and chief
executive office at ▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ #▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ in favor of Transamerica Business Credit Corporation, a Delaware
corporation (the "Lender"), having its principal office at Riverway II, West
Office Tower, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
WHEREAS, the Borrower has requested that the Lender make Loans to it from
time to time; and
WHEREAS, the Lender has agreed to make such Loans on the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce the Lender
to extend credit, the Borrower hereby agrees with the Lender as follows:
SECTION 1. DEFINITIONS.
As used herein, the following terms shall have the following meanings, and
shall be equally applicable to both the singular and plural forms of the terms
defined;
Additional Collateral shall have the meaning specified in Section 2(b).
Agreement shall mean this Master Loan and Security Agreement together with all
schedules and exhibits hereto, as amended, supplemented, or otherwise modified
from time to time.
Applicable Law shall mean the laws of the State of Illinois (or any other
jurisdiction whose laws are mandatorily applicable notwithstanding the
parties' choice of Illinois law) or the laws of the United States of America,
whichever laws allow the greater interest, as such laws now exist or may be
changed or amended or come into effect in the future.
Business Day shall mean any day other than a Saturday, Sunday, or public
holiday or the equivalent for banks in New York City.
Code shall have the meaning specified in Section 8(d).
Collateral shall have the meaning specified in Section 2.
Collateral Access Agreement shall mean any landlord waiver, mortgage waiver,
bailee letter, or similar acknowledgement of any warehouseman or processor in
possession or any Equipment.
Effective Date shall mean the date on which all of the conditions specified in
Section 3.3 shall have been satisfied.
Equipment shall have the meaning specified in Section 2.
Event of Default shall mean any event specified in Section 7.
Financial Statements shall have the meaning specified in Section 6.1.
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GAAP shall mean generally accepted accounting principles in the United States
of America, as in effect from time to time.
Loans shall mean the loans and financial accommodations made by the Lender to
the Borrower in accordance with the terms of this Agreement and the Notes.
Loan Documents shall mean, collectively, this Agreement, the Notes, and all
other documents, agreements, certificates, instruments, and opinions executed
and delivered in connection herewith and therewith, as the same may be modified,
extended, restated, or supplemented from time to time.
Material Adverse Change shall mean, with respect to any Person, a material
adverse change in the business, prospects, operations, results of operations,
assets, liabilities, or condition (financial or otherwise) of such Person taken
as a whole.
Material Adverse Effect shall mean, with respect to any Person, a material
adverse effect on the business, prospects, operations, results of operations,
assets, liabilities, or condition (financial or otherwise) of such Person taken
as a whole.
Note shall mean each Promissory Note made by the Borrower in favor of the
Lender, as amended, supplemented, or otherwise modified from time to time.
Obligations shall mean all indebtedness, obligations, and liabilities of the
Borrower under the Notes and under this Agreement, whether on account of
principal, interest, indemnities, fees (including, without limitation,
attorneys' fees, remarketing fees, origination fees, collection fees, and all
other professionals' fees), costs, expenses, taxes, or otherwise.
Permitted Liens shall mean such of the following as to which no enforcement,
collection, execution, levy, or foreclosure proceeding shall have been
commenced: (a) liens for taxes, assessments, and other governmental charges or
levies or the claims or demands of landlords, carriers, warehousemen, mechanics,
laborers, materialmen, and other like Persons arising by operation of law in the
ordinary course of business for sums which are not yet due and payable, or liens
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP; (b) deposits or pledges to secure the payment of
worker's compensation, unemployment insurance, or other social security benefits
or obligations, public or statutory obligations, surety or appeal bonds, bid or
performance bonds, or other obligations of a like nature incurred in the
ordinary course of business; (c) licenses, restrictions, or covenants for or on
the use of the Equipment which do not materially impair either the use of the
Equipment in the operation of the business of the Borrower or the value of the
Equipment; (d) attachment or judgment liens that do not constitute an Event of
Default; (e) security interests in and liens granted to current and future
lenders to the Borrower which are subordinate to the security interest and lien
granted to Lender hereunder; (f) subject to a maximum limit of $2,000,000,
purchase money security interests or liens representing equipment leases for
equipment purchased after the date hereof; (g) purchase money security interests
or liens representing equipment leases for equipment purchased prior to the date
hereof and (h) with respect to the Additional Collateral only, senior security
interests and liens in favor of Silicon Valley Bank.
Person shall mean any individual, sole proprietorship, partnership, limited
liability partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, entity, party,
or government (including any division, agency, or department thereof), and the
successors, heirs, and assigns of each.
Schedule shall mean each Schedule in the form of Schedule A hereto delivered by
the Borrower to the Lender from time to time.
Solvent means, with respect to any Person, that as of the date as to which such
Person's solvency is measured:
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(a) the fair saleable value of its assets is in excess of the total amount
of its liabilities (including contingent liabilities as valued in accordance
with GAAP) as they become absolute and matured;
(b) it has sufficient capital to conduct its business; and
(c) it is able generally to meet its debts as they mature.
Taxes shall have the meaning specified in section 5.5.
SECTION 2. CREATION OF SECURITY INTEREST; COLLATERAL. (a) The Borrower
hereby assigns and grants to the Lender a continuing general, first priority
lien on, and security interest in, all the Borrower's right, title, and interest
in and to the collateral described in the next sentence (the "Collateral") to
secure the payment and performance of all the Obligations. Subject to paragraph
(b) below, the Collateral consists of all equipment set forth on all the
Schedules delivered from time to time under the terms of this Agreement (the
"Equipment"), together with all present and future additions, parts,
accessories, attachments, substitutions, repairs, improvements, and replacements
thereof or thereto, and any and all proceeds thereof, including, without
limitation, proceeds of insurance and all manuals, blueprints, know-how,
warranties, and records in connection therewith, all rights against suppliers,
warrantors, manufacturers, sellers, or others in connection therewith, and
together with all substitutes for any of the foregoing.
(b) In addition to the foregoing, the Borrower hereby assigns and grants
to the Lender a continuing general lien on, and security interest in, all the
Borrower's right, title, and interest in and to the collateral described in the
next sentence (the "Additional Collateral") to secure the payment and
performance of all the Obligations. The Additional Collateral consists of
(i) all present and future machinery, equipment, furniture, fixtures,
leasehold improvements, conveyors, tools, materials, storage and handling
equipment, hydraulic presses, cutting equipment, computer equipment and
hardware, including central processing units, terminals, drives, memory
units, printers, keyboards, screens, peripherals and input or output
devices, molds, dies, stamps, and other equipment of every kind and nature
and wherever situated now or hereafter owned and held for use by the
Borrower or in which the Borrower may have any interest as lessee (to the
extent of such interest), together with all additions and accessions
thereto, all replacements and all accessories and parts therefore, all
manuals, blueprints, know-how, warranties and records in connection
therewith (including, without limitation, any computer software, whether on
tape, disc, card, strip or cartridge or in any other form) and all rights
against suppliers, warrantors, manufacturers, and sellers or others in
connection therewith, together with all substitutes for any of the
foregoing;
(ii) all present and future goods intended for sale, lease or other
disposition by the Borrower including, without limitation, all raw
materials, work in process, systems, accessories, spare parts, finished
goods and other retail inventory, goods in the possession of outside
processors or other third parties, consigned goods (to the extent of the
consignee's interest therein), materials, parts and supplies of any kind,
nature or description which are or might be used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of any
such goods, all documents of title or documents representing the same and
all records, files and writings (including, without limitation, any
computer software, whether on tape, disc, card, strip or cartridge or in
any other form) with respect thereto;
(iii) all of the Borrower's present and future accounts (including
rights to receive payments for goods sold or services rendered arising out
of the sale or delivery of personal property or work done or labor
performed), contract rights, agreements, understandings, open purchase and
sale orders, promissory notes, chattel paper, documents, tax refunds,
rights to receive tax refunds, bonds, certificates, insurance policies,
insurance proceeds, patents, parent
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applications, copyrights (registered and unregistered), royalties,
licenses, rights to receive fees, royalties and other payments under
license agreements, permits, franchise rights, authorizations,
customer and supplier lists, rights of indemnification, contribution
and subrogation, leases, computer tapes, programs, discs and software,
trade secrets, computer service contracts, trademarks, trade names,
service marks and names, logos, goodwill, deposits, causes of action,
chooses in action, judgments, designs, blueprints, quotations and
bids, plans, specifications, sales literature, know-how, all other
general intangibles, claims against third parties of every kind or
nature, investment securities, notes, drafts, acceptances, letters of
credit and rights to receive payments under letters of credit, deposit
accounts, book accounts, prepaid expenses, credits and reserves and
all forms of obligations whatsoever owing, instruments, documents of
title, leasehold rights, including in any goods, books, ledgers, files
(including credit and project files) and records (including tax
records) with respect to any collateral or security, together with all
right, title, security and guaranties with respect to thereto,
including any right of stoppage in transit; and
(iv) all proceeds of the foregoing.
SECTION 3. THE CREDIT FACILITY.
SECTION 3.1. BORROWINGS. Each Loan shall be in an amount not
less than $100,000, and in no event shall the sum of the aggregate Loans made
exceed the amount of the Lender's written commitment to the Borrower in effect
from time to time. Notwithstanding anything herein to the contrary, the Lender
shall be obligated to make the initial Loan and each other Loan only after the
Lender, in its good faith business judgment, determines that the applicable
conditions for borrowing contained in Sections 3.3 and 3.4 are satisfied. The
timing and financial scope of ▇▇▇▇▇▇'s obligation to make Loans hereunder are
limited as set forth in a-the commitment letters executed by ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇, dated as of April 29, 1998 and September 25, 1998, and attached hereto
as Exhibits A and B (the "Commitment Letters").
SECTION 3.2. APPLICATION OF PROCEEDS. The Borrower shall not
directly or indirectly use any proceeds of the Loans, or cause, assist, suffer,
or permit the use of any proceeds of the Loans, for any purpose other than for
the purchase, acquisition, installation, or upgrading of Equipment or the
reimbursement of the Borrower for its purchase, acquisition, installation, or
upgrading of Equipment.
SECTION 3.3. CONDITIONS TO INITIAL LOAN.
(a) The obligation of the Lender to make the initial Loan is subject
to the Lender's receipt of the following, each dated the date of the initial
Loan or as of an earlier date acceptable to the Lender, in form and substance
satisfactory to the Lender and its counsel:
(i) completed requests for information (Form UCC-11) listing
all effective Uniform Commercial Code financing statements naming the Borrower
as debtor and all tax lien, judgment, and litigation searches for the Borrower
as the Lender shall deem necessary or desirable;
(ii) Uniform Commercial Code financing statements (Form
UCC-1) duly executed by the Borrower (naming the Lender as secured party and the
Borrower as debtor and in form acceptance for filing in all jurisdictions that
the Lender deems necessary or desirable to perfect the security interests
granted to it hereunder) and, if applicable, termination statements or other
releases duly filed in all jurisdictions that the Lender deems necessary or
desirable to perfect and protect the priority of the security interests granted
to it hereunder in the Equipment related to such initial Loan;
(iii) a Note duly executed by the Borrower evidencing the
amount of such Loan;
(iv) a Collateral Access Agreement duly executed by the
lessor or mortgagee, as the case may be, of premises in Vienna, Virginia where
the Equipment is located;
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(v) certificates of insurance required under Section 5.4
of this Agreement together with loss payee endorsements for all
such policies naming the Lender as lender loss payee and as an
additional insured;
(vi) a copy of the resolutions of the Board of Directors
of the Borrower (or a unanimous consent of directors in lieu
thereof) authorizing the execution, delivery, and performance of
this Agreement, the other Loan Documents, and the transactions
contemplated hereby and thereby, attached to which is a
certificate of the Secretary or an Assistant Secretary of the
Borrower certifying (A) that the copy of the resolutions is true,
complete, and accurate, that such resolutions have not been
amended or modified since the date of such certification and are
in full force and effect and (B) the Incumbency, names, and true
signatures of the officers of the Borrower authorized to sign the
Loan Documents to which it is a party;
(vii) the opinion of counsel for the Borrower covering
such matters incident to the transactions contemplated by this
Agreement as the Lender may reasonably require; and
(viii) such other agreements and instruments as the Lender
deems necessary in its good faith business judgment in connection
with the transactions contemplated hereby.
(b) There shall be no pending or, to the knowledge of the
Borrower after due inquiry, threatened litigation, proceeding, inquiry, or
other action (i) seeking an injunction or other restraining order, damages, or
other relief with respect to the transactions contemplated by this Agreement or
the other Loan Documents or thereby or (ii) which affects or could affect the
business, prospects, operations, assets, liabilities, or condition (financial
or otherwise) of the Borrower, except, in the case of clause (ii), where such
litigation, proceeding, inquiry, or other action could not be expected to have
a Material Adverse Effect in the judgment of the Lender.
(c) The Borrower shall have paid all fees and expenses
required to be paid by it to the Lender as of such date (fees and expenses in
connection closing this transaction are capped at $57,000).
(d) The security interests in the Collateral and the
Additional Collateral granted in favor of the Lender under this Agreement shall
have been duly perfected and, with respect to the Equipment related to the
initial Loan, shall constitute first priority liens.
SECTION 3.4. CONDITIONS PRECEDENT TO EACH LOAN. The
obligation of the Lender to make each Loan is subject to the satisfaction of
the following conditions precedent:
(a) the Lender shall have received the documents, agreements,
and instruments set forth in Section 3.3(a)(i) through (v) applicable to such
Loan, each in form and substance satisfactory to the Lender and its counsel and
each dated the date of such Loan or as of an earlier date acceptable to the
Lender;
(b) the Lender shall have received a Schedule of the Equipment
related to such Loan, in form and substance satisfactory to the Lender and its
counsel, and the security interests in such Equipment related to such Loan
granted in favor of the Lender under this Agreement shall have been duly
perfected and shall constitute first priority liens;
(c) all representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct on and as of
the date such Loan as if then made, other than representations and warranties
that expressly relate solely to an earlier date, in which case they shall have
been true and correct as of such earlier date;
(d) no Event of Default or event which with the giving of
notice or the passage of time, or both, would constitute an Event of Default
shall have occurred and be continuing or would result from the making
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of the requested Loan as of the date of such request; and
(e) the Borrower shall be deemed to have hereby reaffirmed and
ratified all security interests, liens, and other encumbrances heretofore
granted by the Borrower to the Lender.
SECTION 4. THE BORROWER'S REPRESENTATIONS AND WARRANTIES.
SECTION 4.1. GOOD STANDING; QUALIFIED TO DO BUSINESS. The
Borrower (a) is duly organized, validly existing, and in good standing under
the laws of the State of its organization, (b) has the power and authority to
own its properties and assets and to transact the business in which it is
presently, or proposes to be, engaged, and (c) is duly qualified and authorized
to do business and is in good standing in every jurisdiction in which the
failure to be so qualified could have a Material Adverse Effect on (i) the
Borrower, (ii) the Borrower's ability to perform its obligations under the
Loan Documents, or (iii) the rights of the Lender hereunder.
SECTION 4.2. DUE EXECUTION, ETC. The execution, delivery,
and performance by the Borrower of each of the Loan Documents to which it is a
party are within the powers of the Borrower, do not contravene the
organizational documents, if any, of the Borrower, and do not (a) violate any
law or regulation, or any order or decree of any court or governmental
authority, (b) conflict with or result in a breach of, or constitute a default
under, any material indenture, mortgage, or deed of trust or any material
lease, agreement, or other instrument binding on the Borrower or any of its
properties, or (c) require the consent, authorization by, or approval of or
notice to or filing or registration with any governmental authority or other
Person. This Agreement is, and each of the other Loan Documents to which the
Borrower is or will be a party, when delivered hereunder or thereunder, will
be, the legal, valid, and binding obligation of the Borrower enforceable
against the Borrower in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, or similar laws affecting creditors'
rights generally and by general principles of equity.
SECTION 4.3. SOLVENCY; NO LIENS. The Borrower is Solvent
and will be Solvent upon the completion of all transactions contemplated to
occur hereunder (including, without limitation, the Loan to be made on the
Effective Date); the security interests granted herein constitute and shall at
all times constitute the first and only liens on the Collateral other than
Permitted Liens, and, with respect to the Additional Collateral, the first lien
other than the lien of Silicon Valley Bank; and the Borrower is, or will be at
the time additional Collateral is acquired by it, the absolute owner of the
Collateral with full right to pledge, sell, consign, transfer, and create a
security interest therein, free and clear of any and all claims or liens in
favor of any other Person other than Permitted Liens.
SECTION 4.4. NO JUDGMENTS, LITIGATION. No judgments are outstanding
against the Borrower nor is there now pending or, to the best of the Borrower's
knowledge after diligent inquiry, threatened any litigation, contested claim, or
governmental proceeding by or against the Borrower except judgments and pending
or threatened litigation, contested claims, and governmental proceedings which
would not, in the aggregate, have a Material Adverse Effect on the Borrower.
SECTION 4.5. NO DEFAULTS. The Borrower is not in default
or has not received a notice of default under any material contract, lease, or
commitment to which it is a party or by which it is bound. The Borrower knows
of no dispute regarding any contract, lease, or commitment which could have a
Material Adverse Effect on the Borrower.
SECTION 4.6. COLLATERAL LOCATIONS. On the date hereof,
each item of the Collateral is located at the place of business specified in
the applicable Schedule.
SECTION 4.7. NO EVENTS OF DEFAULT. No Event of Default
has occurred and is continuing nor has any event occurred which, with the
giving of notice or the passage of time, or both, would constitute an Event of
Default.
SECTION 4.8. NO LIMITATION ON LENDER'S RIGHTS. Except as
permitted herein,
12
none of the Collateral is subject to contractual obligations that may restrict
or inhibit the Lender's rights or abilities to sell or dispose of the Collateral
or any part thereof after the occurrence of an Event of Default.
SECTION 4.9. PERFECTION AND PRIORITY OF SECURITY INTEREST. This
Agreement creates a valid and, upon completion of all required filings of
financing statements, perfected first priority and exclusive security interest
in the Collateral, and, subject to Permitted Liens and, in the Additional
Collateral, the senior lien of Silicon Valley Bank securing the payment of all
the Obligations.
SECTION 4.10. MODEL AND SERIAL NUMBERS. The Schedules set forth the
true and correct model number and serial number of each item of Equipment that
constitutes Collateral.
SECTION 4.11. ACCURACY AND COMPLETENESS OF INFORMATION. All data,
reports, and information heretofore, contemporaneously, or hereafter furnished
by or on behalf of the Borrower in writing to the Lender or for purposes of or
in connection with this Agreement or any other Loan Document, or any transaction
contemplated hereby or thereby, are or will be true and accurate in all material
respects on the date as of which such data, reports, and information are dated
or certified and not incomplete by omitting to state any material fact necessary
to make such data, reports, and information not misleading at such time. There
are no facts now known to the Borrower which individually or in the aggregate
would reasonably be expected to have a Material Adverse Effect and which have
not been specified herein, in the Financial Statements, or in any certificate,
opinion, or other written statement previously furnished by the Borrower to the
Lender.
SECTION 4.12. PRICE OF EQUIPMENT. The cost of each item of Equipment
does not exceed the fair and usual price for such type of equipment purchased in
like quantity and reflects all discounts, rebates and allowances for the
Equipment (including, without limitation, discounts for advertising, prompt
payment, testing, or other services) given to the Borrower by the manufacturer,
supplier, or any other person.
SECTION 5. COVENANTS OF THE BORROWER.
SECTION 5.1. EXISTENCE, ETC. The Borrower shall: (a) retain its
existence and its current yearly accounting cycle, (b) maintain in full force
and effect all licenses, bonds, franchises, leases, trademarks, patents,
contracts, and other rights necessary or desirable to the profitable conduct of
its business unless the failure to do so could not reasonably be expected to
have a Material Adverse Effect on the Borrower, (c) continue in, and limit its
operations to, the same general lines of business as those presently conducted
by it, and (d) comply with all applicable laws and regulations of any federal,
state, or local governmental authority, except for such laws and regulations the
violations of which would not, in the aggregate, have a Material Adverse Effect
on the Borrower.
SECTION 5.2. NOTICE TO THE LENDER. As soon as possible, and in any
event within five days after the Borrower learns of the following, the Borrower
will given written notice to the Lender of (a) any proceeding instituted or
threatened to be instituted by or against the Borrower in any federal, state,
local, or foreign court or before any commission or other regulatory body
(federal, state, local, or foreign) involving a sum, together with the sum
involved in all other similar proceedings, in excess of $100,000 in the
aggregate, (b) any contract that is terminated or amended and which has had or
could reasonably be expected to have a Material Adverse Effect on the Borrower,
(c) the occurrence of any Material Adverse Change with respect to the Borrower,
and (d) the occurrence of any Event of Default or event or condition which,
with notice or lapse of time or both, would constitute an Event of Default,
together with a statement of the action which the Borrower has taken or proposes
to take with respect thereto.
SECTION 5.3. MAINTENANCE OF BOOKS AND RECORDS. The Borrower will
maintain books and records pertaining to the Collateral in such detail, form,
and scope as the Lender shall require in its commercially reasonable judgment.
The Borrower agrees that the Lender or its agents may enter upon the Borrower's
premises at any time and from time to time during normal business hours after
reasonable notice, and at any time upon the occurrence and continuance of an
Event of Default, for the purpose of inspecting the Collateral and any and all
records pertaining thereto.
13
SECTION 5.4. INSURANCE. The Borrower will maintain insurance on the
Collateral under such policies of insurance, with such insurance companies, in
such amounts, and covering such risks as are at all times satisfactory to the
lender. All such policies shall be made payable to the Lender, in case of loss,
under a standard non-contributory "lender" or "secured party" clause and are to
contain such other provisions as the Lender may reasonably require to protect
the Lender's interests in the Collateral and to any payments to be made under
such policies. Certificates of insurance policies are to be delivered to the
Lender, premium prepaid, with the loss payable endorsement in the Lender's
favor, and shall provide for not less than thirty days' prior written notice to
the Lender, of any alteration or cancellation of coverage. If the Borrower fails
to maintain such insurance, the Lender may, after notice to the Borrower,
arrange for (at the Borrower's expense and without any responsibility on the
Lender's part for) obtaining the insurance. Unless the Lender shall otherwise
agree with the Borrower in writing, the Lender shall have the sole right, in the
name of the Lender or the Borrower, to file claims under any insurance policies,
to receive and give acquittance for any payments that may be payable thereunder,
and to execute any endorsements, receipts, releases, assignments, reassignments,
or other documents that may be necessary to effect the collection, compromise,
or settlement of any claims under any such insurance policies.
SECTION 5.5. TAXES. The Borrower will pay, when due, all taxes,
assessments, claims, and other charges ("Taxes") lawfully levied or assessed
against the Borrower or the Collateral other than taxes that are being
diligently contested in good faith by the Borrower by appropriate proceedings
promptly instituted and for which an adequate reserve is being maintained by the
Borrower in accordance with GAAP. If any Taxes remain unpaid after the date
fixed for the payment thereof, or if any lien shall be claimed therefor, then,
without notice to the Borrower, but on the Borrower's behalf, the Lender may pay
such Taxes, and the amount thereof shall be included in the Obligations.
SECTION 5.6. ▇▇▇▇▇▇▇▇ TO DEFEND COLLATERAL AGAINST CLAIMS; FEES ON
COLLATERAL. The Borrower will defend the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest therein.
The Borrower will not permit any notice creating or otherwise relating to liens
on the Collateral or any portion thereof to exist or be on file in any public
office other than Permitted Liens. The Borrower shall promptly pay, when
payable, all transportation, storage, and warehousing charges and license fees,
registration fees, assessments, charges, permit fees, and taxes (municipal,
state, and federal) which now or hereafter be imposed upon the ownership,
leasing, renting, possession, sale, or use of the Collateral, other than taxes
on or measured by the Lender's income and fees, assessments, charges, and taxes
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP.
SECTION 5.7. NO CHANGE OF LOCATION, STRUCTURE, OR IDENTITY. The Borrower
will not (a) change the location of its chief executive office or establish any
place of business other than those specified herein or (b) move or permit the
movement of any item of Collateral from the location specified in the
applicable Schedule, except that the Borrower may change its chief executive
office and keep Collateral at other locations within the United States provided
that the Borrower has delivered to the Lender (i) prior written notice thereof
and (ii) duly executed financing statements and other agreements and instruments
(all in form and substance satisfactory to the Lender) necessary or, in the
opinion of the Lender, desirable to perfect and maintain in favor of the Lender
a first priority security interest in the Collateral. Notwithstanding anything
to the contrary in the immediately preceding sentence, the Borrower may keep any
Collateral consisting of motor vehicles or rolling stock at any location in the
United States provided that the Lender's security interest in any such
Collateral is conspicuously marked on the certificate of title thereof and the
Borrower has complied with the provisions of section 5.9.
SECTION 5.8. USE OF COLLATERAL; LICENSES; REPAIR. The Collateral shall
be operated by competent, qualified personnel in connection with the Borrower's
business purposes, for the purpose for which the Collateral was designed and in
accordance with applicable operating instructions, laws, and government
regulations, and the Borrower shall use every reasonable precaution to prevent
loss or damage to the Collateral from fire and other hazards. The Collateral
shall not be used or operated for personal, family, or household purposes. The
Borrower shall procure and maintain in effect all orders, licenses,
certificates, permits, approvals, and consents required by federal, state, or
local laws or by any governmental body, agency, or authority in connection with
the
14
delivery, installation, use, and operation of the Collateral. The Borrower
shall keep all of the Equipment in a satisfactory state of repair and
satisfactory operating condition in accordance with industry standards, and
will make all repairs and replacements when and where necessary and practical.
The Borrower will not waste or destroy the Equipment or any part thereof, and
will not be negligent in the care or use thereof. The Equipment shall not be
annexed or affixed to or become part of any realty without the Lender's prior
written consent.
SECTION 5.9. FURTHER ASSURANCES. The Borrower will, promptly upon request
by the Lender, execute and deliver or use its best efforts to obtain any
document required by the Lender (including, without limitation, warehouseman or
processor disclaimers, mortgagee waivers, landlord disclaimers, or subordination
agreements with respect to the Obligations and the Collateral), give any
notices, execute and file any financing statements, mortgages, or other
documents (all in form and substance satisfactory to the Lender), mark any
chattel paper, deliver any chattel paper or instruments to the Lender, and take
any other actions that are necessary or, in the opinion of the Lender, desirable
to perfect or continue the perfection and the first priority of the Lender's
security interest in the Collateral, to protect the Collateral against the
rights, claims, or interests of any Persons, or to effect the purposes of this
Agreement. The Borrower hereby authorizes the Lender to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral without the signature of the Borrower where permitted
by law. A carbon, photographic, or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law. To the extent
required under this Agreement, the Borrower will pay all costs incurred in
connection with any of the foregoing.
SECTION 5.10. NO DISPOSITION OF COLLATERAL. The Borrower will not in any
way hypothecate or create or permit to exist any lien, security interest,
charge, or encumbrance on or other interest in any of the Collateral, except
for the lien and security interest grated hereby and Permitted Liens which are
junior to the lien and security interest of the Lender, and the Borrower will
not sell, transfer, assign, pledge, collaterally assign, exchange, or otherwise
dispose of any of the Collateral. In the event the Collateral, or any part
thereof, is sold, transferred, assigned, exchanged, or otherwise disposed of in
violation of these provisions, the security interest of the Lender shall
continue in such Collateral or part thereof notwithstanding such sale,
transfer, assignment, exchange, or other disposition, and the Borrower will
hold the proceeds thereof in a separate account for the benefit of the Lender.
Following such a sale, the Borrower will transfer such proceeds to the Lender
in kind.
SECTION 5.11. NO LIMITATION ON LENDER'S RIGHTS. The Borrower will not
enter into any contractual obligations which may restrict or inhibit the
Lender's rights or ability to sell or otherwise dispose of the Collateral or
any part thereof.
SECTION 5.12. PROTECTION OF COLLATERAL. Upon notice to the Borrower
(provided that if an Event of Default has occurred and is continuing the Lender
need not give any notice), the Lender shall have the right at any time to make
any payments and do any other acts the Lender may deem necessary to protect its
security interests in the Collateral, including, without limitation, the rights
to satisfy, purchase, contest, or compromise any encumbrance, charge, or lien
which, in the reasonable judgment of the Lender, appears to be prior to or
superior to the security interests granted hereunder, and appear in, and defend
any action or proceeding purported to affect its security interests in, or the
value of, any of the Collateral. The Borrower hereby agrees to reimburse the
Lender for all payments made and expenses incurred under this Agreement
including reasonable fees, expenses, and disbursements of attorneys and
paralegals (including the allocated costs of in-house counsel) acting for the
Lender, including any of the foregoing payments under, or acts taken to protect
its security interests in, any of the Collateral, which amounts shall be
secured under this Agreement, and agrees it shall be bound by any payment
made or act taken by the Lender hereunder absent the ▇▇▇▇▇▇'s gross negligence
or willful misconduct. The Lender shall have no obligation to make any of the
foregoing payments or perform any of the foregoing acts.
SECTION 5.13. DELIVERY OF ITEMS. The Borrower will (a) promptly (but in no
event later than one Business Day) after its receipt thereof, deliver to the
Lender any documents or certificates of title issued with respect to any
property included in the Collateral, and any promissory notes, letters of
credit or instruments related to or otherwise in connection with any property
included in the Collateral, which in any such
15
case come into the possession of the Borrower, or shall cause the issuer
thereof to deliver any of the same directly to the Lender, in each case with
any necessary endorsement in favor of the Lender and (b) deliver to the Lender
as soon as available copies of any and all press releases and other similar
communications issued by the Borrower.
SECTION 5.14. SOLVENCY. The Borrower shall be and remain Solvent at
all times.
SECTION 5.15. FUNDAMENTAL CHANGES. The Borrower shall not (a) amend
or modify its name, unless the Borrower delivers to the Lender thirty days
prior to any such proposed amendment or modification written notice of such
amendment or modification and within ten days before such amendment or
modification delivers executed Uniform Commercial Code financing statements (in
form and substance satisfactory to the Lender) or (b) merge or consolidate with
any other entity or make any material change in its capital structure, in each
case without the Lender's prior written consent which shall not be unreasonably
withheld.
SECTION 5.16. ADDITIONAL REQUIREMENTS. The Borrower shall take all
such further actions and executive all such further documents and instruments
as the Lender may reasonably request.
SECTION 6. FINANCIAL STATEMENTS. Until the payment and satisfaction in
full of all Obligations, the Borrower shall deliver to the Lender the following
financial information:
SECTION 6.1. ANNUAL FINANCIAL STATEMENTS. As soon as available, but
not later than 120 days after the end of each fiscal year of the Borrower and
its consolidated subsidiaries, the consolidated balance sheet, income
statement, and statements of cash flows and shareholders equity for the
Borrower and its consolidated subsidiaries (the "Financial Statements") for
such year, reported on by independent certified public accountants without an
adverse qualification; and
SECTION 6.2 QUARTERLY FINANCIAL STATEMENTS. As soon as available,
but not later than 60 days after the end of each of the first three fiscal
quarters in any fiscal year of the Borrower and its consolidated subsidiaries,
the Financial Statements for such fiscal quarter, together with a certification
duly executed by a responsible officer of the Borrower that such Financial
Statements have been prepared in accordance with GAAP and are fairly stated in
all material respects (subject to normal year-end audit adjustments).
SECTION 7. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to pay within five days of when due any
amount required to be paid by the Borrower under or in connection with any Note
and this Agreement;
(b) any representation or warranty made or deemed made by the
Borrower under or in connection with any Loan Document or any Financial
Statement shall prove to have been false or incorrect in any material respect
when made;
(c) the Borrower shall fail to perform or observe (i) any of the
terms, covenants or agreements contained in Section 5.4, 5.7, 5.10, 5.14, or
5.15 hereof or (ii) any other term, covenant, or agreement contained in any
Loan Document (other than the other Events of Default specified in this Section
7) and such failure remains unremedied for the earlier of fifteen days from (A)
the date on which the Lender has given the Borrower written notice of such
failure and (B) the date on which the Borrower knew or should have known of
such failure;
(d) any provision of any Loan Document to which the Borrower is a
party shall for any reason cease to be valid and binding on the Borrower, or
the Borrower shall so state;
(e) dissolution, liquidation, winding up, or cessation of the
Borrower's business, failure of the Borrower generally to pay its debts as they
mature, admission in writing by the Borrower of its inability generally to pay
its debts as they mature, or calling of a meeting of the Borrower's creditors
for purposes of compromising any of the Borrower's debts;
16
(f) the commencement by or against the Borrower of any bankruptcy,
insolvency, arrangement, reorganization, receivership, or similar proceedings
under any federal or state law and, in the case of any such involuntary
proceeding, such proceeding remains undismissed or unstayed for forty-five days
following the commencement thereof, or any action by the Borrower is taken
authorizing any such proceedings;
(g) an assignment for the benefit of creditors is made by the
Borrower, whether voluntary or involuntary, the appointment of a trustee,
custodian, receiver, or similar official for the Borrower or for any
substantial property of the Borrower, or any action by the Borrower authorizing
any such proceeding;
(h) the Borrower shall default in (i) the payment of principal or
interest on any indebtedness in excess of $100,000 (other than the Obligations)
beyond the period of grace, if any, provided in the instrument or agreement
under which such indebtedness was created; or (ii) the observance or
performance of any other agreement or condition relating to any such
indebtedness or contained in any instrument or agreement relating thereto, or
any other event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or to permit the holder or holders of
such indebtedness to cause, with the giving of notice if required, such
indebtedness to become due prior to its stated maturity; or (iii) any loan or
other agreement under which the Borrower has received financing from
Transamerica Corporation or any of its affiliates;
(i) the Borrower suffers or sustains a Material Adverse Change;
(j) any tax lien, other than a Permitted Lien, is filed of record
against the Borrower and is not bonded or discharged within five Business Days;
(k) any judgment which has had or could reasonably be expected to
have a Material Adverse Effect on the Borrower and such judgment shall not be
stayed, vacated, bonded, or discharged within sixty days;
(l) any material covenant, agreement, or obligation, as determined
in the sole discretion of the Lender, made by the Borrower and contained in or
evidenced by any of the Loan Documents shall cease to be enforceable, or shall
be determined to be unenforceable, in accordance with its terms; the Borrower
shall deny or disaffirm the Obligations under any of the Loan Documents or any
liens granted in connection therewith; or any liens granted on any of the
Collateral in favor of the Lender shall be determined to be void, voidable, or
invalid, or shall not be given the priority contemplated by this Agreement; or
(m) there is a change, other than a change which results from the
sale of newly issued securities to investors, in more than 35% of the ownership
of any equity interests of the Borrower on the date hereof or more than 35% of
such interests become subject to any contractual, judicial, or statutory lien,
charge, security interest, or encumbrance.
SECTION 8. REMEDIES. If any Event of Default shall have occurred and be
continuing:
(a) The Lender may, without prejudice to any of its other rights
under any Loan Document or Applicable Law, declare all Obligations to be
immediately due and payable (except with respect to any Event of Default set
forth in Section 7(f) hereof, in which case all Obligations shall automatically
become immediately due and payable without necessity of any declaration)
without presentment, representation, demand of payment, or protest, which are
hereby expressly waived.
(b) The Lender may, upon three (3) days' prior notice, take
possession of the Collateral and, for that purpose may enter, with the aid and
assistance of any person or persons, any premises where the Collateral or any
part hereof is, or may be placed, and remove the same.
17
(c) The obligation of the Lender, if any, to make additional Loans
or financial accommodations of any kind to the Borrower shall immediately
terminate.
(d) The Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein (or in any Loan
Document) or otherwise available to it, all the rights and remedies of a
secured party under the applicable Uniform Commercial Code (the "Code") whether
or not the Code applies to the affected Collateral and also may (i) require the
Borrower to, and the Borrower hereby agrees that it will at its expense and
upon request of the Lender forthwith, assemble all or part of the Collateral as
directed by the Lender and make it available to the Lender at a place to be
designated by the Lender that is reasonably convenient to both parties and
(ii) without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the
Lender's offices or elsewhere, for cash, on credit, or for future delivery, and
upon such other terms as the Lender may deem commercially reasonable. The
Borrower agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to the Borrower of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. The Lender shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Lender may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(e) All cash proceeds received by the Lender in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Lender, be held by the Lender as
collateral for, or then or at any time thereafter applied in whole or in part
by the Lender against, all or any part of the Obligations in such order as the
Lender shall elect. Any surplus of such cash or cash proceeds held by the
Lender and remaining after the full and final payment of all the Obligations
shall be paid over to the Borrower or to such other Person to which the Lender
may be required under applicable law, or directed by a court of competent
jurisdiction, to make payment of such surplus.
SECTION 9. MISCELLANEOUS PROVISIONS.
SECTION 9.1. NOTICES. Except as otherwise provided herein, all
notices, approvals, consents, correspondence, or other communications required
or desired to be given hereunder shall be given in writing and shall be
delivered by overnight courier, hand delivery, or certified or registered mail,
postage prepaid, if to the Lender, then to Transamerica Technology Finance
Division, ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
Assistant Vice President, Lease Administration, with a copy to the Lender at
Riverway II, West Office Tower, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: Legal Department, and if to the Borrower, then to AboveNet
Communications, Inc., ▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ #▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: Controller, with a copy to ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇,
Esq. or such other address as shall be designated by the Borrower or the Lender
to the other party in accordance herewith. All such notices and correspondence
shall be effective when received.
SECTION 9.2. HEADINGS. The headings in this Agreement are for
purposes of reference only and shall not affect the meaning or construction of
any provision of this Agreement.
SECTION 9.3. ASSIGNMENTS. The Borrower shall not have the right to
assign any Note or this Agreement or any interest therein unless the Lender
shall have given the Borrower prior written consent and the Borrower and its
assignee shall have delivered assignment documentation in form and substance
satisfactory to the Lender in its sole discretion. The Lender may assign its
rights and delegate its obligations under any Note or this Agreement.
SECTION 9.4. AMENDMENTS, WAIVERS, AND CONSENTS. Any amendment or
waiver of any provision of this Agreement and any consent to any departure by
the Borrower from any provision of this Agreement shall be effective only by a
writing signed by the Lender and shall bind and benefit the Borrower and the
Lender and their respective successors and assigns, subject, in the case of the
Borrower, to the first sentence of
18
Section 9.3
SECTION 9.5. INTERPRETATION OF AGREEMENT. Time is of the essence in each
provision of this Agreement of which time is an element. All terms not defined
herein or in a Note shall have the meaning set forth in the applicable Code,
except where the context otherwise requires. To the extent a term or provision
of this Agreement conflicts with any Note, or any term or provision thereof, and
is not dealt with herein with more specificity, this Agreement shall control
with respect to the subject matter of such term or provision. Acceptance of or
acquiescence in a course of performance rendered under this Agreement shall not
be relevant in determining the meaning of this Agreement even though the
accepting or acquiescing party had knowledge of the nature of the performance
and opportunity for objection.
SECTION 9.6. CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing security interest in the Collateral and shall (i) remain in full
force and effect until the indefeasible payment in full of the Obligations, (ii)
be binding upon the Borrower and its successors and assigns and (iii) inure,
together with the rights and remedies of the Lender hereunder, to the benefit of
the Lender and its successors, transferees, and assigns.
SECTION 9.7. REINSTATEMENT. To the extent permitted by law, this
Agreement and the rights and powers granted to the Lender hereunder and under
the Loan Documents shall continue to be effective or be reinstated if at any
time any amount received by the Lender in respect of the Obligations is
rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation, or reorganization or the
Borrower or upon the appointment of any receiver, intervenor, conservator,
trustee, or similar official for the Borrower or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
SECTION 9.8. SURVIVAL OF PROVISIONS. All representations, warrants, and
covenants of the Borrower contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the full and final
payment and performance by the Borrower of the Obligations secured hereby.
SECTION 9.9 INDEMNIFICATION. The Borrower agrees to indemnify and hold
harmless the Lender and its directors, officers, agents, employees, and counsel
from and against any and all costs, expenses, claims or liability incurred by
the Lender or such Person hereunder and under any other Loan Document or in
connection herewith or therewith, unless such claim or liability shall be due to
willful misconduct or gross negligence on the part of the Lender or such Person.
SECTION 9.10. COUNTERPART; TELECOPIED SIGNATURES. This Agreement may be
executed in counterparts, each of which when so executed and delivered shall be
an original, but both of which shall together constitute one and the same
instrument. This Agreement and each of the other Loan Documents and any notices
given in connection herewith or therewith may be executed and delivered by
telecopier or other facsimile transmission all with the same force and effect as
if the same was a fully executed and delivered original manual counterpart.
SECTION 9.11. SEVERABILITY. In case any provision in or obligation under
this Agreement or any Note or any other Loan Document shall be invalid, illegal,
or unenforceable in any jurisdiction, the validity, legality, and enforceability
of the remaining provisions or obligations, or of such provision or obligation
in nay other jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 9.12. DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay or omission
of the Lender to exercise any right or remedy hereunder, whether before or after
the happening of any Event of Default, shall impair any such right or shall
operate as a waiver thereof or as a waiver of any such Event of Default. No
single or partial exercise by the Lender of any right or remedy shall preclude
any other or further exercise thereof, or preclude any other right or remedy.
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SECTION 9.13. ENTIRE AGREEMENT. The Borrower and the Lender agree that
this Agreement, the Schedule hereto, and the Commitment Letter are the complete
and exclusive statement and agreement between the parties with respect to the
subject matter hereof, superseding all proposals and prior agreements, oral or
written, and all other communications between the parties with respect to the
subject matter hereof. Should there exist any inconsistency between the terms
of the Commitment Letter and this Agreement, the terms of this Agreement shall
prevail.
SECTION 9.14. SETOFF. In addition to and not in limitation of all rights
of offset that the Lender may have under Applicable Law, and whether or not the
Lender has made any demand or the Obligations of the Borrower have matured, the
Lender shall have the right to appropriate and apply to the payment of the
Obligations of the Borrower all deposits and other obligations then or
thereafter owing by the Lender to or for the credit or the account of the
Borrower.
SECTION 9.15. WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 9.16. COVERING LAW. THE VALIDITY, INTERPRETATION, AND ENFORCEMENT
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW
OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
SECTION 9.17. VENUE; SERVICE OF PROCESS. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF ILLINOIS SITUATED IN COOK COUNTY, OR OF THE UNITED
STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND, BY EXECUTION AND
DELIVER OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES, IN CONNECTION WITH
ANY SUCH ACTION OR PROCEEDING, (a) ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND (b) THE RIGHT TO
INTERPOSE ANY NONCOMPULSORY SETOFF, COUNTERCLAIM, OR CROSS-CLAIM. THE BORROWER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS
FOR IT SPECIFIED IN SECTION 9.1 HEREOF. NOTHING HEREIN SHALL AFFECT THE RIGHT
OF THE LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY
OTHER JURISDICTION, SUBJECT IN EACH INSTANCE TO THE PROVISIONS HEREOF WITH
RESPECT TO RIGHTS AND REMEDIES.
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IN WITNESS WHEREOF, the undersigned ▇▇▇▇▇▇▇▇ has caused this Agreement to
be duly executed and delivered by its proper and duly authorized officer as of
the date first set forth above.
ABOVENET COMMUNICATIONS, INC.
By:
---------------------------
Name:
Title:
Federal Tax ID:
Accepted as of the
day of September, 1988
---
TRANSAMERICA BUSINESS CREDIT CORPORATION
By:
---------------------------
Name:
Title:
21
AMENDED AND RESTATED
INTELLECTUAL PROPERTY SECURITY AGREEMENT
THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT is made and entered into as
of this 28th day of May, 1998 (this "Agreement") and amended and restated as of
September 28, 1998, between ABOVENET COMMUNICATIONS, INC., a California
corporation (the "Grantor"), with and in favor of TRANSAMERICA BUSINESS CREDIT
CORPORATION, a Delaware corporation (the "Lender").
WHEREAS, the Grantor is entering into a Master Loan and Security Agreement
dated as of even date herewith (as amended, supplemented or otherwise modified
from time to time, the "Loan Agreement"; terms which are capitalized herein and
not otherwise defined shall have the meanings given to them in the Loan
Agreement) with the Lender, pursuant to which the Lender agreed to make loans
and advances to the Grantor, subject to the terms and conditions set forth in
the Loan Agreement; and
WHEREAS, under the Loan Agreement, the Grantor has granted to the Lender a
security interest in and lien on substantially all of its assets; and
WHEREAS, it is a condition precedent to the effectiveness of the Loan
Agreement that the Grantor shall have executed and delivered this Agreement and
granted a security interest in all of the Grantor's right, title and interest in
and to all of the Intellectual Property Collateral (as hereinafter defined) in
favor of the Lender, as contemplated hereby.
NOW, THEREFORE, in consideration of the premises hereof and to induce the
Lender to enter into the Loan Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. Security for Obligations.
(a) Security Interest in Patents. To secure the full and prompt
payment and performance when due (whether at stated maturity, by acceleration or
otherwise) of all of the Obligations, the Grantor hereby grants and conveys to
the Lender a valid security interest in, with a power of sale to the extent
permitted by law, all of its right, title and interest in the United States and
throughout the world, in and to all of the now owned and hereafter acquired
United States and foreign patents and all patent and design patent applications,
and all issues, reissues, re-examinations, continuations, continuations-in-part
or divisions thereof, and all proceeds thereof (hereinafter collectively
referred to as the "Patents"). All unexpired patents and all currently pending
patent applications in which the Grantor has an interest are listed on Schedule
A attached hereto and made a part hereof. Subject to the provisions of Section
2(n), the Grantor hereby further grants, assigns and conveys to the Lender a
valid security interest in all of the right, title and interest of the Grantor
in and to all products, proceeds, income, royalties, damages and payments now or
hereafter due and payable under or in respect of all Patents and, subject to the
provisions of Section 2(n), in and to all rights during the term of this
Agreement to sue, collect and retain for the Lender's benefit damages and
payments for past or future infringements of the Patents.
(b) Security Interest in Trademarks. To secure the payment and
performance of all of the Obligations, the Grantor hereby grants and conveys to
the Lender a valid security interest in, with a power of sale to the extent
permitted by applicable law, all of its right, title and interest, in the United
States and throughout the world, in and to all of its now owned and hereafter
acquired trademarks, service marks and trade names, and all variants thereof
(whether or not such name is the subject of a registration or an application
therefor), and all registrations and applications to register the same, and all
renewals thereof, and the goodwill of the business relating thereto, and all
proceeds thereof (hereinafter collectively referred to as the "Trademarks"). All
United States trademark registrations and all currently pending trademark
applications in which the Grantor has an interest and all foreign trademark
registrations and all currently pending trademark applications in which the
Grantor has an interest, are listed on Schedule B attached hereto and made a
part hereof. Subject to the provisions of Section 2(n), the Grantor hereby
further grants to the Lender a valid security interest in all of its right,
title and interest in and to
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(i) all products, proceeds, income, royalties, damages and payments now and
hereafter due and payable under or in respect of all Trademarks, (ii) subject
to the provisions of Section 2(n), all rights during the term of this Agreement
to sue, collect and retain for the Lender's benefit damages and payments for
past or future infringements of the Trademarks and (iii) all rights under or
interest in any trademark license agreements or service mark license agreements
with any other party, whether the Grantor is a licensee or licensor under any
such license agreement, and the right to prepare for sale and sell any and all
assets now or hereafter owned by the Grantor and now or hereafter covered by
such licenses.
(c) Security Interest in Copyrights. To secure the payment and
performance of all of the Obligations, the Grantor hereby grants to the Lender
a valid security interest in all of its right, title and interest, in the
United States and throughout the world, in and to all of its now owned and
hereafter acquired copyrights, and all registrations and applications to
register the same, all renewals thereof, any written agreement, naming the
Grantor as licensor or licensee, granting any right under any copyright, any
work which is or may be subject to copyright protection pursuant to Title 17 of
the U.S. Code, and all physical things embodying such works (including, without
limitation, copies thereof) created or otherwise used in the business of the
Grantor, and all proceeds thereof (hereinafter collectively referred to as the
"Copyrights"). All copyright registrations and all currently pending copyright
applications in which the Grantor has an interest are listed on Schedule C
attached hereto and made a part hereof. Subject to the provisions of Section
2(n), the Grantor hereby further grants to the Lender a valid security interest
in all of its right, title and interest in and to all products, proceeds,
income, royalties, damages and payments now and hereafter due and payable under
or in respect of all Copyrights and, subject to the provisions of Section 2(n),
in and to all rights during the term of this Agreement to sue, collect and
retain for the Lender's benefit damages and payments for past or future
infringements of the Copyrights.
(d) Security Interest in Proprietary Information. To Secure the
payment and performance of all of the Obligations, the Grantor hereby grants to
the Lender a valid security interest in all of its right, title and interest, in
the United States and throughout the world, in and to all of its now owned and
hereafter acquired inventions, discoveries, trade secrets, improvements,
processes, methods, formulae, applications, ideas, know-how, customer lists,
corporate and other business records, license rights, advertising materials,
operating manuals, sales literature, drawings, specifications, descriptions,
name plates, catalogues, dealer contracts, supplier contracts, distributor
agreements, confidential information, consulting agreements, engineering
contracts, proprietary information and goodwill (and all other assets which
uniquely reflect such goodwill), and to all income, royalties, damages and
payments now and hereafter due or payable therefor or in respect thereof
(collectively, the "Proprietary Information" and, together with the Patents, the
Trademarks and the Copyrights, the "Intellectual Property Collateral").
SECTION 2. Representations, Warranties and Covenants of the Grantor.
(a) The Grantor is and will continue to be the owner of all of the
Intellectual Property Collateral, free from any adverse claim, security
interest, lien or encumbrance in favor of any Person except for the security
interest granted to the Lender and except for Permitted Liens.
(b) None of the Intellectual Property Collateral is or shall become
subject to any Lien in favor of any Person other than the Lender and except for
any Permitted Liens, and the Grantor agrees that it shall not license,
transfer, convey or encumber any interest in or to the Intellectual Property
Collateral, except for licenses for use outside of the United States.
Notwithstanding the foregoing, the Grantor shall be permitted to license any of
the Trademarks on a non-exclusive basis in the ordinary course of business to
(i) third parties for the sole purpose of manufacturing, marketing,
advertising, distributing, or selling goods that are not manufactured,
marketed, advertised, distributed, or sold by the Grantor, or (ii) third
parties that do not manufacture, market, advertise, distribute, or sell goods
in the United States or to others for sale in the United States. Any license of
the Intellectual Property Collateral granted by the Grantor (each, a "License")
shall be in writing and shall reserve all rights in the Grantor except those
reasonably necessary in the ordinary course of business to fulfill the
permitted purposes herein. The Grantor shall cause a copy of each License to be
delivered to the Lender within thirty (30) days of execution by all parties
thereto.
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23
(c) Except as disclosed in Schedule D hereto, the Grantor has made no
previous assignment, transfer or agreement in conflict herewith or constituting
a present or future assignment, transfer, or encumbrance of any of the
Intellectual Property Collateral.
(d) Except as disclosed in Schedule D hereto, there is no financing
statement or other document or instrument now signed or on file in any public
office granting a security interest in or otherwise encumbering any part of the
Intellectual Property Collateral, except those showing the Lender as secured
party. So long as this Agreement remains in effect, the Grantor will not
execute, and there will not be on file in any public office, any such financing
statement or other document or instruments, except financing statements filed or
to be filed in favor of the Lender or except for those financing statements
disclosed on Schedule D hereto.
(e) Subject to any limitation stated therein or in connection therewith,
all information furnished to the Lender concerning the Intellectual Property
Collateral and proceeds thereof is and will be accurate and correct in all
material respects.
(f) Except as disclosed in Schedule D hereto, all Intellectual Property
Collateral consisting of applications for Patents and for registrations of
Trademarks and Copyrights has been duly and properly filed and all Intellectual
Property Collateral consisting of issued or granted Patents and of registrations
of Trademarks and Copyrights (including, without limitation, any and all
renewals, reissues, continuations or divisions thereof, as the case may be) has
been duly and properly maintained.
(g) Promptly upon the receipt of an official filing receipt indicating
that a patent application or an application for registration of a trademark has
been received by the U.S. Patent and Trademark Office or an application for
registration of a copyright has been received by the U.S. Copyright Office and
upon the issuance of any patent or of any trademark or copyright registration,
the Grantor agrees to notify the Lender in writing, which notice shall identify
such patent, trademark or copyright application or patent, trademark or
copyright registration, and the Grantor shall execute all documents necessary to
perfect a security interest in such patent, trademark or copyright application
or such patent or trademark or copyright registration, and the Grantor shall
annually, or more frequently as the Lender shall request, cause an instrument
sufficient to perfect, protect or establish any Lien hereunder to be recorded in
the U.S. Patent and Trademark Office with respect to all United States patent
applications filed by it or patents issued to it during the prior calendar year
and with respect to all trademark applications filed by it or trademark
registrations issued to it during the prior calendar year, and the Grantor shall
annually, or more frequently as the Lender shall request, cause an instrument
sufficient to perfect, protect or establish any Lien hereunder to be recorded in
the U.S. Copyright Office with respect to United States copyright applications
filed by it or copyright registrations issued to it during the prior calendar
year.
(h) The Grantor shall not take any action or permit any action to be taken
by others subject to the Grantor's control, including licensees, or fail to take
any action, or permit others subject to the Grantor's control, including
licensees, to fail to take any action, subject to the provisions of Section
2(g), which would, in the case of any such actions or failures to act taken
singly or together, adversely affect the validity, grant and enforceability of
the security interest granted to the Lender hereunder. Notwithstanding the
foregoing, the Grantor shall be permitted to abandon any of the Trademarks in
accordance with the terms of Section 2(l).
(i) The Grantor shall promptly notify the Lender, in writing, of any suit,
action, proceeding, claim or counterclaim brought against the Grantor that would
reasonably be expected to affect adversely the Intellectual Property Collateral,
and shall, on request, deliver to the Lender a copy of all pleadings, papers,
orders or decrees theretofore and thereafter filed in any such suit, action or
proceeding, and shall keep the Lender duly advised in writing of the progress of
any such suit.
(j) To the best knowledge and belief of the Grantor after due inquiry, no
infringement or unauthorized use presently is being made of any Intellectual
Property Collateral. In the event of any material infringement of the
Intellectual Property Collateral by others or in the event of any other conduct
detrimental to the Intellectual Property Collateral by others known or brought
to the attention of the Grantor, the Grantor shall promptly notify the Lender in
writing at its address set forth in Section 5(a) of such infringement or
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24
other conduct and the full nature, extent, evidence and facts of such
infringement or other conduct known to the Grantor.
(k) If requested by the Lender, the Grantor shall provide the
Lender a complete status report of all Intellectual Property Collateral. Upon
request by the Lender, the Grantor shall deliver to counsel for the Lender
copies of any such Intellectual Property Collateral and other documents
concerning or related to the prosecution, protection, maintenance, enforcement
and issuance of the Intellectual Property Collateral.
(l) The Grantor shall notify the Lender in writing at the
address set forth in Section 5(a) at least sixty days prior to any proposed
voluntary abandonment of any Intellectual Property Collateral (other than items
of Intellectual Property Collateral that are not useful or beneficial to the
business and operations of the Grantor) and obtain the prior written consent of
the Lender to such abandonment.
(m) During the term of this Agreement, the Grantor agrees:
(i) whenever any of the registered Trademarks are used by or
on behalf of the Grantor, if reasonably practicable, to affix or cause
to be affixed a notice that the mark is a registered trademark or
service mark, which notice shall be in a form accepted or required by
the trademark marking laws of each country in which the mark is so
used and registered; and
(ii) whenever any of the underlying works covered by
registered Copyrights are used by or on behalf of the Grantor, if
reasonably practicable, to affix or cause to be affixed a notice that
said underlying works are to be covered, which notice shall be in a
form accepted or required by the copyright laws of such country in
which said underlying works are so used and registered.
(n) Subject to the provisions of Section 4(g), during the
term of this Agreement, all income, royalties, payments and damages due and
payable to the Grantor under or in respect of the Intellectual Property
Collateral shall be paid to the Grantor.
(o) The Grantor agrees, upon the reasonable request by the
▇▇▇▇▇▇, during the term of this Agreement:
(i) to execute, acknowledge and deliver all additional
instruments and documents necessary or desirable to effect the
purposes and intents of this Agreement, in a form reasonably
acceptable to counsel for the Lender; and
(ii) to do all such other acts as may be necessary or
appropriate to carry out the purposes and intents of this Agreement,
and to create, evidence, perfect and continue the security interests
of the Lender in the Intellectual Property Collateral.
SECTION 3. INDEMNITY. The Grantor agrees to indemnify the Lender from
and against any and all claims, losses and liabilities arising out of or
resulting from this Agreement (including, without limitation, enforcement of
this Agreement and any actions taken pursuant to Section 4 or any failure to act
thereunder).
SECTION 4. Rights and Remedies Upon an Event of Default.
(a) If any Event of Default shall have occurred and be
continuing, then and in every such case, subject to any mandatory Requirements
of Law, the Lender, in addition to other rights and remedies provided for herein
and any rights now or hereafter existing under applicable law, shall have all
rights and remedies as a secured creditor under the Uniform Commercial Code in
all relevant jurisdictions and may:
(i) personally, or any agents or attorneys, upon three days'
prior notice take possession of the Intellectual Property Collateral
or any part thereof, from the Grantor or any
25
other Person who then has possession of any part thereof, with or
without notice or process of law, and for that purpose may enter upon the
Grantor's premises where any of the Intellectual Property Collateral is
located and remove the same and use in connection with such removal any
and all services, supplies, aids and other facilities of the Grantor; and
(ii) sell, assign or otherwise liquidate, or direct the Grantor to
sell, assign or otherwise liquidate, any or all of the Intellectual
Property Collateral or any part thereof, and take possession of the
proceeds of any such sale or liquidation;
(b) Any collateral repossessed by the Lender under or pursuant to
Section 4(a) and any other Intellectual Property Collateral whether or not so
repossessed by the Lender, may be sold, assigned, leased or otherwise disposed
of under one or more contracts or as an entirety, and without the necessity of
gathering at the place of sale the property to be sold, and in general in such
manner, at such time or times, at such place or places and on such terms as the
Lender may, in compliance with any Requirements of Law, determine to be
commercially reasonable. Any such disposition which shall be a private sale or
other private proceedings permitted by such requirements shall be made upon not
less than 10 days' written notice to the Grantor specifying the time at which
such disposition is to be made and the intended sale price or other
consideration therefor, and shall be subject, for the 10 days after the giving
of such notice, to the right of the Grantor or any nominee of the Grantor to
acquire the Intellectual Property Collateral involved at a price or for such
other consideration at least equal to the intended sale price or other
consideration so specified. Any such disposition which shall be a public sale
permitted by such requirements shall be made upon not less than 10 days'
written notice to the Grantor specifying the time and place of such sale and,
in the absence of applicable Requirements of Law, shall be by public auction
(which may, at the option of the Lender, be subject to reserve), after
publication of notice of such auction not less than 10 days prior thereto in
two newspapers of general circulation in the jurisdiction in which such auction
is to be held. To the extent permitted by any such Requirements of Law, the
Lender may bid for and become the purchaser of the Intellectual Property
Collateral or any item thereof, offered for sale in accordance with this
Section without accountability to the Grantor (except to the extent of surplus
money received). If, under mandatory Requirements of Law, the Lender shall be
required to make disposition of the Intellectual Property Collateral within a
period of time which does not permit the giving of notice to the Grantor as
hereinabove specified, the Lender need give the Grantor only such notice of
disposition as shall be reasonably practicable in view of such mandatory
Requirements of Law. The Lender shall not be obligated to make any sale of
Intellectual Property Collateral regardless of notice of sale having been
given. The Lender may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(c) Upon the occurrence and continuance of an Event of Default, the
Lender shall have the right at any time to make any payments and do any other
acts the Lender may deem necessary to protect its security interests in the
Intellectual Property Collateral, including, without limitation, the rights to
pay, purchase, contest or compromise any Lien which, in the reasonable judgment
of the Lender, appears to be prior to or superior to the security interests
granted hereunder, and appear in and defend any action or proceeding purporting
to affect its security interests in, or the value of, the Intellectual Property
Collateral. The Grantor hereby agrees to reimburse the Lender for all payments
made and expenses incurred under this Agreement including reasonable fees,
expenses and disbursements of attorneys and paralegals acting for the Lender,
including any of the foregoing payments under, or acts taken to protect its
security interests in, the Intellectual Property Collateral, which amounts
shall be secured under this Agreement, and agrees it shall be bound by any
payment made or act taken by the Lender hereunder absent the Lender's gross
negligence or willful misconduct. The Lender shall have no obligation to make
any of the foregoing payments or perform any of the foregoing acts.
(d) The Grantor hereby irrevocably authorizes and appoints the
Lender, or any Person or agent the Lender may designate, as the Grantor's
attorney-in-fact, with full authority in the place and stead of the Grantor and
in the name of the Grantor or otherwise, at the Grantor's cost and expense, in
the Lender's good faith business judgment, to take any action and to execute
any instrument that the Lender may deem necessary or advisable to accomplish
the purposes and intents of this Agreement and to exercise all of the following
powers upon and at any time after the occurrence and during the continuance of
an Event of Default, which powers, being
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26
coupled with an Interest, shall be irrevocable until all of the Obligations
shall have been paid and satisfied in full:
(i) ask for, demand, collect, bring suit, recover,
compromise, administer, accelerate or extend the time of payment,
issue credits, compromise, receive and give acquittance and
receipts for moneys due and to become due under or in respect of
any of the Intellectual Property Collateral;
(ii) receive, take, endorse, negotiate, sign, assign and
deliver and collect any checks, notes, drafts or other
instruments, documents and chattel paper, in connection with
clause (i) above;
(iii) receive, open and dispose of all mail addressed
to the Grantor and notify postal authorities to change the
address for delivery thereof to such address as the Lender may
designate;
(iv) give customers indebted on the Intellectual
Property Collateral notice of the Lender's interest therein, or
to instruct such customers to make payment directly to the Lender
for the Grantor's account or to request, at any time from
customers indebted on the Intellectual Property Collateral,
verification of information concerning the Intellectual Property
Collateral and the amounts owing thereon;
(v) convey any item of Intellectual Property Collateral
to any purchaser thereof;
(vi) record any instruments under Section 2(g) hereof;
(vii) make any payments or take any acts under Section
4(c) hereof; and
(viii) file any claims or take any action or institute any
proceedings that the Lender may reasonably deem necessary or
desirable for the collection of any of the Intellectual Property
Collateral or otherwise to enforce the rights of the Lender with
respect to any of the Intellectual Property Collateral.
The Lender's authority under this Section 4(d) shall include, without
limitation, the authority to execute and give receipt for any certificate of
ownership or any document, transfer title to any item of Intellectual Property
Collateral, sign the Grantor's name on all financing statements or any other
documents deemed necessary or appropriate to preserve, protect or perfect the
security interest in the Intellectual Property Collateral and to file the same,
prepare, file and sign the Grantor's name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with any Intellectual
Property Collateral and prepare, file and sign the Grantor's name on a proof of
claim in bankruptcy or similar document against any customer of the Grantor,
and to take any other actions arising from or incident to the rights, powers
and remedies granted to the Lender in this Agreement. This power of attorney is
coupled with an interest and is irrevocable by the Grantor.
(e) All cash proceeds received by the Lender in respect
of any sale of, collection from, or other realization upon all or any part of
the Intellectual Property Collateral shall be applied by the Lender against the
Obligations in such order as the Lender may determine.
(f) The Lender shall have the right of setoff with
respect to the Intellectual Property Collateral as provided Section 9.14 of the
Loan Agreement.
(g) Upon the occurrence and during the continuance of an
Event of Default, all income, royalties, payments and damages under or in
respect of the Intellectual Property Collateral, if any, received thereafter
shall be held by the Grantor in trust for the benefit of the Lender, separate
from the Grantor's own property or funds and immediately turned over to the
Lender with proper assignments or endorsements. Upon the occurrence and during
the continuance of an Event of Default, the Lender shall have the right to
notify payors of income, royalties, payments and damages under or in respect of
the Intellectual Property Collateral to make
6
27
payment directly to the Lender.
(h) Each and every right, power and remedy hereby specifically given
to the Lender shall be in addition to every other right, power and remedy
specifically given under this Agreement or under the other Loan Documents or
now or hereafter existing at law or in equity, or by statute, and each and
every right, power and remedy whether specifically herein given or otherwise
existing may be exercised from time to time or simultaneously and as often and
in such order as may be deemed expedient by the Lender. All such rights, powers
and remedies shall be cumulative and the exercise or the beginning of exercise
of one shall not be deemed a waiver of the right to exercise of any other or
others. No delay or omission of the Lender in the exercise of any such right,
power or remedy and no renewal or extension of any of the Obligations shall
impair any such right, power or remedy or shall be construed to be a waiver of
any Default or Event of Default or any acquiescence therein.
SECTION 5. General Provisions.
(a) Notices. All notices, approvals, consents or other communications
required or desired to be given hereunder shall be in writing and sent by
certified or registered mail, return receipt requested, by overnight delivery
service, with all charges prepaid, or by telecopier followed by a hard copy
sent by overnight mail, if to the Lender, then to Transamerica Business Credit
Corporation, ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopy; (860)
677-6766, Attn.: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq., and if to the Grantor, then to AboveNet
Communications, Inc. ▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ #▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇, Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇, Attn.: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Controller, with a
copy to ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.. All such notices and correspondence shall
be deemed given (i) if sent by certified or registered mail, three Business
Days after being postmarked, (ii) if sent by overnight delivery service, when
received at the above stated addresses or when delivery is refused and (iii) if
sent by telecopier transmission, when receipt of such transmission is
acknowledged.
(b) Headings. The headings in this Agreement are for purposes of
reference only and shall not affect the meaning or construction of any
provision of this Agreement.
(c) Severability. The provisions of this Agreement are severable, and
if any clause or provision shall be held invalid or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect, in that jurisdiction only, such clause or provision, or part thereof,
and shall not in any manner affect such clause or provision in any other
jurisdiction or any other clause or provision of this Agreement in any
jurisdiction.
(d) Amendments, Waivers and Consents. Any amendment or waiver of any
provision of this Agreement and any consent to any departure by the Grantor
from any provision of this Agreement shall not be effective unless the same
shall be in writing and signed by the Grantor and the Lender and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
(e) Interpretation. Time is of the essence in each provision of this
Agreement of which time is an element. All terms not defined herein or in the
Loan Agreement shall have the meaning set forth in the Code, except where the
context otherwise requires. To the extent a term or provision of this Agreement
conflicts with the Loan Agreement and is not dealt with herein with more
specificity, the Loan Agreement shall control with respect to the subject
matter of such term or provision. Acceptance of or acquiescence in a course of
performance rendered under this Agreement shall not be relevant in determining
the meaning of this Agreement even though the accepting or acquiescing party
had knowledge of the nature of the performance and opportunity for objection.
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28
(f) Continuing Security Interest. This Agreement shall create a
continuing security interest in the Intellectual Property Collateral and shall
(i) remain in full force and effect until the payment in full in cash of the
Obligations and the termination of the Loan Agreement, (ii) be binding upon the
Grantor and its successors and assigns and (iii) inure, together with the rights
and remedies of the Lender, to the Lender's successors, transferees and assigns.
Without limiting the generality of the foregoing clause (iii), the Lender may,
in accordance with the terms of the Loan Agreement, assign or otherwise transfer
all or any portion of its rights and obligations under the Loan Documents
(including, without limitation all or any portion of any Loans or any Notes held
by it) to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to the Lender herein or
otherwise, in each case as provided in the Loan Agreement.
(g) Reinstatement. To the extent permitted by law, this Agreement
shall continue to be effective or be reinstated if at any time any amount
received by the Lender in respect of the Obligations is rescinded or must
otherwise be restored or returned by the Lender because the Grantor is the
subject of an Insolvency Event, all as though such payments had not been made.
(h) Survival of Provisions. All representations, warranties and
covenants of the Grantor contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the full and final
payment and performance by the Grantor of the Obligations secured hereby and
termination of the Loan Agreement.
(i) Lender May Perform. If the Grantor fails to perform any
agreement contained herein, the Lender may itself perform, or cause performance
of, such agreement, and the expenses of the Lender incurred in connection
therewith shall be payable by the Grantor and shall constitute Obligations
secured by this Agreement.
(j) No Duty on Lender. The powers conferred on the Lender hereunder
are solely to protect the interest of the Lenders in the Intellectual Property
Collateral and shall not impose any duty upon the Lender to exercise any such
powers. Except for the safe custody of any Intellectual Property Collateral in
its possession and the accounting for money actually received by it hereunder,
the Lender shall have no duty as to any Intellectual Property Collateral, as to
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters related to any Intellectual Property
Collateral, whether or not the Lender has or is deemed to have knowledge of such
matters, or as to the taking of any necessary steps to preserve rights against
any Person or any other rights pertaining to any Intellectual Property
Collateral. The Lender shall be deemed to have exercised reasonable care in the
custody and preservation of any Intellectual Property Collateral in its
possession if such Intellectual Property Collateral is accorded treatment
substantially equal to that which the Lender accords its own property. To the
extent the Intellectual Property Collateral is held by a custodian, the Lender
shall be deemed to have exercised reasonable care if it has selected the
custodian with reasonable care.
(k) Delays; Partial Exercise of Remedies. No delay or omission of
the Lender to exercise any right or remedy hereunder, whether before or after
the happening of any Event of Default, shall impair any such right or shall
operate as a waiver thereof or as a waiver of any such Event of Default. No
single or partial exercise by the Lender of any right or remedy shall preclude
any other or further exercise thereof, or preclude any other right or remedy.
(l) Release; Termination of Agreement. Subject to the provisions of
subsection (g) hereof, upon the payment in full in cash of the Obligations and
the termination of the Loan Agreement, this Agreement shall terminate and all
rights in the Intellectual Property Collateral shall revert to the Grantor. At
such time, the Lender shall, upon the request and at the expense of the Grantor,
(A) execute and deliver to the Grantor such documents as the Grantor shall
reasonably request to evidence such termination and (B) reassign and redeliver
to the Grantor all of the Intellectual Property Collateral hereunder which has
not been sold, disposed of, retained or applied by the Lender in accordance with
the terms hereof. Such reassignment and redelivery shall be without warranty by
or recourse to the Lender, except as to the absence of any prior assignments by
the Lender of its interest in the Intellectual Property Collateral.
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29
(m) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but both of which shall
together constitute one and the same agreement.
(n) GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS, WITHOUT
GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES, EXCEPT TO THE EXTENT THAT FEDERAL
LAW IS APPLICABLE.
(o) SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN THE GRANTOR AND
THE LENDER, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS AND THE
COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT THE
LENDER SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO
PROCEED AGAINST THE GRANTOR OR ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED
BY THE LENDER IN GOOD FAITH TO ENABLE THE LENDER TO REALIZE ON SUCH PROPERTY,
OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE LENDER. THE
GRANTOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR
CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY THE LENDER. THE GRANTOR WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE LENDER HAS
COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.
(p) JURY TRIAL. THE GRANTOR AND THE LENDER EACH HEREBY WAIVES TO THE
FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO A TRIAL BY JURY.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
causing this Agreement to be signed by their respective duly authorized
officers on the day and year first above written.
ABOVENET COMMUNICATIONS, INC.
By:
---------------------------
Name:
Title:
Accepted and Agreed as of the
date first above written:
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By:
--------------------------
Name:
Title:
9
30
SCHEDULE A
PATENTS AND PARENT APPLICATIONS
31
SCHEDULE B
TRADEMARKS AND TRADEMARK APPLICATIONS
32
SCHEDULE C
COPYRIGHT REGISTRATIONS
33
SCHEDULE D
ASSIGNMENTS, TRANSFERS, AGREEMENTS, FINANCING STATEMENTS, ETC.
34
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
NO. 3
STOCK SUBSCRIPTION WARRANT
TO PURCHASE COMMON STOCK OF
ABOVENET COMMUNICATIONS, INC. (THE "COMPANY")
DATE OF INITIAL ISSUANCE: SEPTEMBER 30, 1998
THIS CERTIFIES THAT for value received, TBCC FUNDING TRUST II or its
registered assigns (hereinafter called the "Holder") is entitled to purchase
from the Company, at any time during the Term of this Warrant, Fifty Thousand
(50,000) shares of common stock, $0.01 par value, of the Company (the "Common
Stock"), at the Warrant Price, payable as provided herein. The exercise of this
Warrant shall be subject to the provisions, limitations and restrictions herein
contained, and may be exercised in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
COMMON STOCK - shall mean and include the Company's authorized Common
Stock, $0.01 par value, as constituted at the date hereof.
EXCHANGE ACT - shall mean the Securities Exchange Act of 1934, as
amended from time to time.
SECURITIES ACT - the Securities Act of 1933, as amended.
TERM OF THIS WARRANT - shall mean the period beginning on the date of
initial issuance hereof and ending on September 29, 2003.
WARRANT PRICE - $2.50 per share, subject to adjustment in accordance
with Section 5 hereof.
WARRANTS - this Warrant and any other Warrant or Warrants issued in
connection with a Commitment Letter dated September 25, 1998 executed by the
Company and Transamerica Business Credit Corporation (the "Commitment Letter")
to the original holder of this Warrant, or any transferees from such original
holder or this Holder.
WARRANT SHARES - shares of Common Stock purchased or purchasable by the
Holder of this Warrant upon the exercise hereof.
35
SECTION 2. EXERCISE OF WARRANT.
2.1. PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in
whole or in part (but not as to any fractional share of Common Stock), the
Holder shall deliver to the Company at its office referred to in Section 12
hereof at any time and from time to time during the Term of this Warrant: (i)
the Notice of Exercise in the form attached hereto, (ii) cash, certified or
official bank check payable to the order of the Company, wire transfer of funds
to the Company's account, or evidence of any indebtedness of the Company to the
Holder (or any combination of any of the foregoing) in the amount of the Warrant
Price for each share being purchased, and (iii) this Warrant. Notwithstanding
any provisions herein to the contrary, if the Current Market Price (as defined
in Section 5) is greater than the Warrant Price (at the date of calculation, as
set forth below), in lieu of exercising this Warrant as hereinabove permitted,
the Holder may elect to receive shares of Common Stock equal to the value (as
determined below) of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the office of the Company referred to in Section 12
hereof, together with the Notice of Exercise, in which event the Company shall
issue to the Holder that number of shares of Common Stock computed using the
following formula (a "Net Exercise"):
CS = WCS x (CMP-WP)
--------------
CMP
Where
CS equals the number of shares of Common Stock to be issued to the
Holder
WCS equals the number of shares of Common Stock purchasable under
the Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being exercised (at the
date of such calculation)
CMP equals the Current Market Price (at the date of such
calculation)
WP equals the Warrant Price (as adjusted to the date of such
calculation)
In the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as may be
designated by the Holder, shall be delivered to the Holder hereof within a
reasonable time, not exceeding fifteen (15) days, after the rights represented
by this Warrant shall have been so exercised; and, unless this Warrant has
expired, a new Warrant representing the number of shares (except a remaining
fractional share), if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the Holder hereof within such time.
The person in whose name any certificate for shares of Common Stock is issued
upon exercise of this Warrant shall for all purposes be deemed to have become
the holder of record of such shares on the date on which the Warrant was
surrendered and payment of the Warrant Price and any applicable taxes was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date when the stock transfer books of
the Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
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36
2.2. TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the Company the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. COVENANTS AS TO COMMON STOCK. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable in
respect of the issue of this Warrant or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant. If
and so long as the Common Stock issuable upon the exercise of this Warrant is
listed on any national securities exchange, the Company will, if permitted by
the rules of such exchange, list and keep listed on such exchange, upon official
notice of issuance, all shares of such Common Stock issuable upon exercise of
this Warrant.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. ADJUSTMENT OF WARRANT PRICE. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date fixed for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or split-up,
the Warrant Price shall be appropriately decreased so that the number of shares
of Common Stock issuable upon the exercise hereof shall be increased in
proportion to such increase in outstanding shares.
(ii) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Warrant Price shall appropriately increase so that the number
- 3 -
37
of shares of Common Stock issuable upon the exercise hereof shall be decreased
in proportion to such decrease in outstanding shares.
(iii) In case, at any time during the Term of this Warrant, the Company
shall declare a cash dividend upon its Common Stock payable otherwise than out
of earnings or earned surplus or shall distribute to holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by the Company or other
persons, assets (excluding cash dividends and distributions) or options or
rights (excluding options to purchase and rights to subscribe for Common Stock
or other securities of the Company convertible into or exchangeable for Common
Stock), then, in each such case, immediately following the record date fixed for
the determination of the holders of Common Stock entitled to receive such
dividend or distribution, the Warrant Price in effect thereafter shall be
determined by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction of which the numerator shall be an amount equal to the
difference of (x) the Current Market Price of one share of Common Stock minus
(y) the fair market value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of the stock, securities,
evidences of indebtedness, assets, options or rights so distributed in respect
of one share of Common Stock, and of which the denominator shall be such Current
Market Price.
(iv) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(v) For the purpose of any computation pursuant to this Section 5, the
Current Market Price at any date of one share of Common Stock shall be deemed to
be the average of the daily closing prices for the 15 consecutive business days
ending on the last business day before the day in question (as adjusted for any
stock dividend, split, combination or reclassification that took effect during
such 15 business day period). The closing price for each day shall be the last
reported sales price regular way or, in case no such reported sales took place
on such day, the average of the last reported bid and asked prices regular way,
in either case on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or as reported by Nasdaq (or if the
Common Stock is not at the time listed or admitted for trading on any such
exchange or if prices of the Common Stock are not reported by Nasdaq then such
price shall be equal to the average of the last reported bid and asked prices on
such day as reported by The National Quotation Bureau Incorporated or any
similar reputable quotation and reporting service, if such quotation is not
reported by The National Quotation Bureau Incorporated); provided, however, that
if the Common Stock is not traded in such manner that the quotations referred to
in this clause (v) are available for the period required hereunder, the Current
Market Price shall be determined in good faith by the Board of Directors of the
Company or, if such determination cannot be made, by a nationally recognized
independent investment banking firm selected by the Board of Directors of the
Company (or if such selection cannot be made, by a nationally recognized
independent investment banking firm selected by the American Arbitration
Association in accordance with its rules).
(vi) Whenever the Warrant Price shall be adjusted as provided in Section
5, the Company shall prepare a statement showing the facts requiring such
adjustment and the Warrant Price that shall be in effect after such adjustment.
The Company shall cause a copy of such statement to be sent by mail, first class
postage prepaid, to each Holder of this Warrant at its, his or her address
appearing on the Company's records. Where appropriate, such copy may be given in
advance and may be included as part of the notice required to be mailed under
the provisions of subsection (viii) of this Section 5.
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38
(vii) Adjustments made pursuant to clauses (i), (ii) and (iii) above
shall be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
(viii) In the event the Company shall propose to take any action of the
types described in clauses (i), (ii), or (iii) of this Section 5, the Company
shall forward, at the same time and in the same manner, to the Holder of this
Warrant such notice, if any, which the Company shall give to the holders of
capital stock of the Company.
(ix) In any case in which the provisions of this Section 5 shall require
that an adjustment shall become effective immediately after a record date for an
event, the Company may defer until the occurrence of such event issuing to the
Holder of all or any part of this Warrant which is exercised after such record
date and before the occurrence of such event the additional shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event over and above the shares of capital stock issuable upon such exercise
before giving effect to such adjustment exercise; provided, however, that the
Company shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
SECTION 6. OWNERSHIP.
6.1. OWNERSHIP OF THIS WARRANT. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2. TRANSFER AND REPLACEMENT. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees (and in the name of the Holder, if a partial transfer is
effected) shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 12
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such an
instrumentality or institutional holder an irrevocable agreement of indemnity by
such Holder shall be sufficient for all purposes of this Section 6, and no
evidence of loss or theft or destruction shall be necessary. This Warrant shall
be promptly cancelled by the Company upon the surrender hereof in connection
with any transfer or replacement. Except as otherwise provided above, in the
case of the loss, theft or destruction of a Warrant, the Company shall pay all
expenses, taxes and other charges payable in connection with any transfer or
replacement of this Warrant, other than stock transfer taxes (if any) payable in
connection with a transfer of this Warrant, which shall be payable by the
Holder. ▇▇▇▇▇▇ will not transfer this Warrant and the rights hereunder except in
compliance with federal and state securities laws.
- 5 -
39
SECTION 7. MERGERS, CONSOLIDATION, SALES.
(i) In the case of any proposed reorganization or reclassification of
the capital stock of the Company, then, as a condition of such reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable hereunder, such
shares of stock, securities or assets as may (by virtue of such reorganization
or reclassification) be issued or payable with respect to or in exchange for the
number of shares of such Common Stock purchasable hereunder immediately before
such reorganization or reclassification. In any such case appropriate provision
shall be made with respect to the rights and interests of the Holder of this
Warrant to the end that the provisions hereof shall thereafter be applicable as
nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of this Warrant.
(ii) For the purpose of this Warrant, "Acquisition" means any sale,
license, or other disposition of all or substantially all of the assets of the
Company, or any reorganization, consolidation, or merger of the Company where
the holders of the Company's securities before the transaction beneficially own
less than 50% of the outstanding voting securities of the surviving entity after
the transaction.
(iii) If, on the closing date for any Acquisition, the Current Market
Price of the Warrant Shares (or other securities issuable upon exercise of this
Warrant) is greater than or equal to three (3) times the Warrant Price, then the
successor entity may, at its option, either assume the obligations of the
Company under this Warrant or not assume the obligations of the Company under
this Warrant. If, on the closing date for any Acquisition, the Current Market
Price of the Warrant Shares (or other securities issuable upon exercise of this
Warrant) is less than three (3) times the Warrant Price, then the successor
entity shall assume the obligations of the Company under this Warrant. If the
successor entity assumes the obligations of the Company under this Warrant
(whether voluntarily or involuntarily), then this Warrant shall be exercisable
for the same class and amount of securities, cash, and/or other property as
would be payable for the Warrant Shares issuable upon exercise of this Warrant
as if such Warrant Shares were outstanding on the closing date for the
Acquisition. If the successor entity does not assume the obligations of the
Company under this Warrant, then this Warrant shall be deemed to have been
automatically exercised pursuant to the Net Exercise described in Section 2.1
immediately prior to the closing of the Acquisition and thereafter the Holder
shall participate in the Acquisition as a holder of the Warrant Shares (or other
securities issuable upon exercise of this Warrant) on the same terms as other
holders of the same class of securities of the Company.
SECTION 8. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any distribution of
the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution to
shareholders until the expiration of thirty (30) days from the date of mailing
of the aforesaid notice and, in any case, the Holder hereof may exercise this
Warrant within thirty (30) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such thirty-day period shall
thereafter become null and void.
SECTION 9. NOTICE OF EXTRAORDINARY DIVIDENDS. If the Board of Directors of the
Company shall declare any dividend or other distribution on its Common Stock
except out of earned surplus or by way of a stock dividend payable in shares of
its Common Stock, the Company shall mail notice thereof to the
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40
Holder hereof not less than thirty (30) days prior to the record date fixed for
determining shareholders entitled to participate in such dividend or other
distribution, and the Holder hereof shall not participate in such dividend or
other distribution unless this Warrant is exercised prior to such record date.
The provisions of this Section 9 shall not apply to distributions made in
connection with transactions covered by Section 7.
SECTION 10. FRACTIONAL SHARES. Fractional shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 10, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company) over the Warrant Price for
such fractional share.
SECTION 11. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1. WILL RESERVE SHARES. The Company will reserve and set apart and
have available for issuance at all times, free from preemptive or other
preferential rights, the number of shares of authorized but unissued Common
Stock deliverable upon the exercise of this Warrant.
11.2. WILL NOT AMEND CERTIFICATE. The Company will not amend its
Certificate of Incorporation to eliminate as an authorized class of capital
stock that class denominated as "Common Stock" on the date hereof.
11.3. WILL BIND SUCCESSORS. This Warrant shall be binding upon any
corporation or other person or entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets.
SECTION 12. NOTICES. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail to, the Holder at Transamerica Technology Finance Division, ▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Assistant Vice
President, Lease Administration, with a copy to the Lender at Riverway II, West
Office Tower, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Legal
Department or to such other address as shall have been furnished to the Company
in writing by the Holder. Any notice or other document required or permitted to
be given or delivered to the Company shall be delivered at, or sent by certified
or registered mail to, the Company at ▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ #▇▇▇▇, , ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, Attention: Controller or to such other address as shall
have been furnished in writing to the Holder by the Company. Any notice so
addressed and mailed by registered or certified mail shall be deemed to be given
when so mailed. Any notice so addressed and otherwise delivered shall be deemed
to be given when actually received by the addressee.
SECTION 13. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company except upon exercise in accordance with the terms hereof. No provision
hereof, in the absence of affirmative action by the Holder to purchase shares of
Common Stock, and no mere enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of the Holder for the Warrant Price
hereunder or as a shareholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.
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41
SECTION 14. LAW GOVERNING. THE VALIDITY, INTERPRETATION, AND ENFORCEMENT OF THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
SECTION 15. "MARKET STAND-OFF" AGREEMENT. The Holder hereby agrees that it will
not, without the prior written consent of the managing underwriter, during the
period commencing on the date of the final prospectus relating to an
underwritten initial public offering of the Company's securities (an "Initial
Offering") and ending on the date specified by the Company and the managing
underwriter (such period not to exceed one hundred eighty (180) days) (i) lend,
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (whether such shares or any such securities are
then owned by the Holder or are thereafter acquired), or (ii) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
provisions of this Section 15 shall apply only to the Company's Initial
Offering, shall not apply to the sale of any shares to an underwriter pursuant
to an underwriting agreement, and shall only be applicable to the Holder if all
officers and directors and greater than one percent (1%) shareholders of the
Company enter into similar agreements. The underwriters in connection with the
Company's Initial Offering are intended third party beneficiaries of this
Section 15 and shall have the right, power and authority to enforce the
provisions hereof as though they were a party hereto.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
SECTION 16. MISCELLANEOUS. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by both
parties (or any respective predecessor in interest thereof). The headings in
this Warrant are for purposes of reference only and shall not affect the meaning
or construction of any of the provisions hereof
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this _______ day of _________, 199__.
ABOVENET COMMUNICATIONS, INC.
[CORPORATE SEAL]
By: _______________________________
Title: ____________________________
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42
FORM OF NOTICE OF EXERCISE
[TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _________ shares
of Common Stock which the undersigned is entitled to purchase by the terms of
the within Warrant according to the conditions thereof, and herewith
[check one]
[ ] makes payment of $__________ therefor;
or
[ ] directs the Company to issue ______
shares, and to withhold ____ shares in
lieu of payment of the Warrant Price,
as described in Section 2.1 of the
Warrant.
All shares to be issued pursuant hereto shall be issued in the name of and the
initial address of such person to be entered on the books of the Company shall
be:
The shares are to be issued in certificates of the following denominations:
___________________________________
[Type Name of Holder]
By: _______________________________
Title: ____________________________
Dated:______________________
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43
FORM OF ASSIGNMENT
(ENTIRE)
[TO BE SIGNED ONLY UPON TRANSFER OF ENTIRE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto _______________________________ all rights of the undersigned
under and pursuant to the within Warrant, and the undersigned does hereby
irrevocably constitute and appoint _______________________________ Attorney to
transfer the said Warrant on the books of the Company, with full power of
substitution.
___________________________________
[Type Name of Holder]
By: _______________________________
Title: ____________________________
Dated:______________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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44
FORM OF ASSIGNMENT
(PARTIAL)
[TO BE SIGNED ONLY UPON PARTIAL TRANSFER OF WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto _______________________________ (i) the rights of the undersigned
to purchase ___ shares of Common Stock under and pursuant to the within Warrant,
and (ii) on a non-exclusive basis, all other rights of the undersigned under and
pursuant to the within Warrant, it being understood that the undersigned shall
retain, severally (and not jointly) with the transferee(s) named herein, all
rights assigned on such non-exclusive basis. The undersigned does hereby
irrevocably constitute and appoint __________________________ Attorney to
transfer the said Warrant on the books of the Company, with full power of
substitution.
___________________________________
[Type Name of Holder]
By: _______________________________
Title: ____________________________
Dated:______________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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45
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
NO. 4
STOCK SUBSCRIPTION WARRANT
TO PURCHASE COMMON STOCK OF
ABOVENET COMMUNICATIONS, INC. (THE "COMPANY")
DATE OF INITIAL ISSUANCE: _____________, 1998
THIS CERTIFIES THAT for value received, TBCC FUNDING TRUST II or its
registered assigns (hereinafter called the "Holder") is entitled to purchase
from the Company, at any time during the Term of this Warrant, Fifty Thousand
(50,000) shares of common stock, $0.01 par value, of the Company (the "Common
Stock"), at the Warrant Price, payable as provided herein. The exercise of this
Warrant shall be subject to the provisions, limitations and restrictions herein
contained, and may be exercised in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
COMMON STOCK - shall mean and include the Company's authorized Common
Stock, $0.01 par value, as constituted at the date hereof.
EXCHANGE ACT - shall mean the Securities Exchange Act of 1934, as
amended from time to time.
SECURITIES ACT - the Securities Act of 1933, as amended.
TERM OF THIS WARRANT - shall mean the period beginning on the earlier of
(i) the date on which the Company closes its "Series F" round of equity
financing or (ii) the date upon which the Company closes its initial public
offering of securities and ending on the date which is the fifth (5th)
anniversary of the date of issuance.
WARRANT PRICE - shall mean 80% of (i) the price per share paid by
purchasers of shares of the Company's Series F Preferred Stock or (ii) the
"price to public" for one share of Common Stock in the Company's initial public
offering, whichever occurs first, subject to adjustment in accordance with
Section 5 hereof.
WARRANTS - this Warrant and any other Warrant or Warrants issued in
connection with a Commitment Letter dated September 25, 1998 executed by the
Company and Transamerica Business
46
Credit Corporation (the "Commitment Letter") to the original holder of this
Warrant, or any transferees from such original holder or this Holder.
WARRANT SHARES - shares of Common Stock purchased or purchasable by the
Holder of this Warrant upon the exercise hereof.
SECTION 2. EXERCISE OF WARRANT.
2.1. PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in
whole or in part (but not as to any fractional share of Common Stock), the
Holder shall deliver to the Company at its office referred to in Section 12
hereof at any time and from time to time during the Term of this Warrant: (i)
the Notice of Exercise in the form attached hereto, (ii) cash, certified or
official bank check payable to the order of the Company, wire transfer of funds
to the Company's account, or evidence of any indebtedness of the Company to the
Holder (or any combination of any of the foregoing) in the amount of the Warrant
Price for each share being purchased, and (iii) this Warrant. Notwithstanding
any provisions herein to the contrary, if the Current Market Price (as defined
in Section 5) is greater than the Warrant Price (at the date of calculation, as
set forth below), in lieu of exercising this Warrant as hereinabove permitted,
the Holder may elect to receive shares of Common Stock equal to the value (as
determined below) of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the office of the Company referred to in Section 12
hereof, together with the Notice of Exercise, in which event the Company shall
issue to the Holder that number of shares of Common Stock computed using the
following formula (a "Net Exercise"):
CS = WCS x (CMP-WP)
--------------
CMP
Where
CS equals the number of shares of Common Stock to be issued to the
Holder
WCS equals the number of shares of Common Stock purchasable under
the Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being exercised (at the
date of such calculation)
CMP equals the Current Market Price (at the date of such
calculation)
WP equals the Warrant Price (as adjusted to the date of such
calculation)
In the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as may be
designated by the Holder, shall be delivered to the Holder hereof within a
reasonable time, not exceeding fifteen (15) days, after the rights represented
by this Warrant shall have been so exercised; and, unless this Warrant has
expired, a new Warrant representing the number of shares (except a remaining
fractional share), if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the Holder hereof within such time.
The person in whose name any certificate for shares of Common Stock is issued
upon exercise of this Warrant shall for all purposes be deemed to have become
the holder of record of such shares on the date on which the Warrant was
surrendered and payment of the Warrant Price and any applicable taxes was made,
irrespective of the date of delivery of
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47
such certificate, except that, if the date of such surrender and payment is a
date when the stock transfer books of the Company are closed, such person shall
be deemed to have become the holder of such shares at the close of business on
the next succeeding date on which the stock transfer books are open.
2.2. TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the Company the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. COVENANTS AS TO COMMON STOCK. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable in
respect of the issue of this Warrant or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant. If
and so long as the Common Stock issuable upon the exercise of this Warrant is
listed on any national securities exchange, the Company will, if permitted by
the rules of such exchange, list and keep listed on such exchange, upon official
notice of issuance, all shares of such Common Stock issuable upon exercise of
this Warrant.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. ADJUSTMENT OF WARRANT PRICE. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date fixed for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or split-up,
the Warrant Price shall be appropriately decreased so that the number of shares
of Common Stock issuable upon the exercise hereof shall be increased in
proportion to such increase in outstanding shares.
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48
(ii) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Warrant Price shall appropriately increase so that the number
of shares of Common Stock issuable upon the exercise hereof shall be decreased
in proportion to such decrease in outstanding shares.
(iii) In case, at any time during the Term of this Warrant, the Company
shall declare a cash dividend upon its Common Stock payable otherwise than out
of earnings or earned surplus or shall distribute to holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by the Company or other
persons, assets (excluding cash dividends and distributions) or options or
rights (excluding options to purchase and rights to subscribe for Common Stock
or other securities of the Company convertible into or exchangeable for Common
Stock), then, in each such case, immediately following the record date fixed for
the determination of the holders of Common Stock entitled to receive such
dividend or distribution, the Warrant Price in effect thereafter shall be
determined by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction of which the numerator shall be an amount equal to the
difference of (x) the Current Market Price of one share of Common Stock minus
(y) the fair market value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of the stock, securities,
evidences of indebtedness, assets, options or rights so distributed in respect
of one share of Common Stock, and of which the denominator shall be such Current
Market Price.
(iv) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(v) For the purpose of any computation pursuant to this Section 5, the
Current Market Price at any date of one share of Common Stock shall be deemed to
be the average of the daily closing prices for the 15 consecutive business days
ending on the last business day before the day in question (as adjusted for any
stock dividend, split, combination or reclassification that took effect during
such 15 business day period). The closing price for each day shall be the last
reported sales price regular way or, in case no such reported sales took place
on such day, the average of the last reported bid and asked prices regular way,
in either case on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or as reported by Nasdaq (or if the
Common Stock is not at the time listed or admitted for trading on any such
exchange or if prices of the Common Stock are not reported by Nasdaq then such
price shall be equal to the average of the last reported bid and asked prices on
such day as reported by The National Quotation Bureau Incorporated or any
similar reputable quotation and reporting service, if such quotation is not
reported by The National Quotation Bureau Incorporated); provided, however, that
if the Common Stock is not traded in such manner that the quotations referred to
in this clause (v) are available for the period required hereunder, the Current
Market Price shall be determined in good faith by the Board of Directors of the
Company or, if such determination cannot be made, by a nationally recognized
independent investment banking firm selected by the Board of Directors of the
Company (or if such selection cannot be made, by a nationally recognized
independent investment banking firm selected by the American Arbitration
Association in accordance with its rules).
(vi) Whenever the Warrant Price shall be adjusted as provided in Section
5, the Company shall prepare a statement showing the facts requiring such
adjustment and the Warrant Price that shall be in effect after such adjustment.
The Company shall cause a copy of such statement to be sent by mail, first
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49
class postage prepaid, to each Holder of this Warrant at its, his or her address
appearing on the Company's records. Where appropriate, such copy may be given in
advance and may be included as part of the notice required to be mailed under
the provisions of subsection (viii) of this Section 5.
(vii) Adjustments made pursuant to clauses (i), (ii) and (iii) above
shall be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
(viii) In the event the Company shall propose to take any action of the
types described in clauses (i), (ii), or (iii) of this Section 5, the Company
shall forward, at the same time and in the same manner, to the Holder of this
Warrant such notice, if any, which the Company shall give to the holders of
capital stock of the Company.
(ix) In any case in which the provisions of this Section 5 shall require
that an adjustment shall become effective immediately after a record date for an
event, the Company may defer until the occurrence of such event issuing to the
Holder of all or any part of this Warrant which is exercised after such record
date and before the occurrence of such event the additional shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event over and above the shares of capital stock issuable upon such exercise
before giving effect to such adjustment exercise; provided, however, that the
Company shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
SECTION 6. OWNERSHIP.
6.1. OWNERSHIP OF THIS WARRANT. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2. TRANSFER AND REPLACEMENT. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees (and in the name of the Holder, if a partial transfer is
effected) shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 12
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such an
instrumentality or institutional holder an irrevocable agreement of indemnity by
such Holder shall be sufficient for all purposes of this Section 6, and no
evidence of loss or theft or destruction shall be necessary. This Warrant shall
be promptly cancelled by the Company upon the surrender hereof in connection
with any transfer or replacement. Except as otherwise provided above, in the
case of the loss, theft or destruction of a Warrant, the Company shall pay all
expenses, taxes and other charges payable in connection with
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50
any transfer or replacement of this Warrant, other than stock transfer taxes (if
any) payable in connection with a transfer of this Warrant, which shall be
payable by the Holder. ▇▇▇▇▇▇ will not transfer this Warrant and the rights
hereunder except in compliance with federal and state securities laws.
SECTION 7. MERGERS, CONSOLIDATION, SALES.
(i) In the case of any proposed reorganization or reclassification of
the capital stock of the Company, then, as a condition of such reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable hereunder, such
shares of stock, securities or assets as may (by virtue of such reorganization
or reclassification) be issued or payable with respect to or in exchange for the
number of shares of such Common Stock purchasable hereunder immediately before
such reorganization or reclassification. In any such case appropriate provision
shall be made with respect to the rights and interests of the Holder of this
Warrant to the end that the provisions hereof shall thereafter be applicable as
nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of this Warrant.
(ii) For the purpose of this Warrant, "Acquisition" means any sale,
license, or other disposition of all or substantially all of the assets of the
Company, or any reorganization, consolidation, or merger of the Company where
the holders of the Company's securities before the transaction beneficially own
less than 50% of the outstanding voting securities of the surviving entity after
the transaction.
(iii) If, on the closing date for any Acquisition, the Current Market
Price of the Warrant Shares (or other securities issuable upon exercise of this
Warrant) is greater than or equal to three (3) times the Warrant Price, then the
successor entity may, at its option, either assume the obligations of the
Company under this Warrant or not assume the obligations of the Company under
this Warrant. If, on the closing date for any Acquisition, the Current Market
Price of the Warrant Shares (or other securities issuable upon exercise of this
Warrant) is less than three (3) times the Warrant Price, then the successor
entity shall assume the obligations of the Company under this Warrant. If the
successor entity assumes the obligations of the Company under this Warrant
(whether voluntarily or involuntarily), then this Warrant shall be exercisable
for the same class and amount of securities, cash, and/or other property as
would be payable for the Warrant Shares issuable upon exercise of this Warrant
as if such Warrant Shares were outstanding on the closing date for the
Acquisition. If the successor entity does not assume the obligations of the
Company under this Warrant, then this Warrant shall be deemed to have been
automatically exercised pursuant to the Net Exercise described in Section 2.1
immediately prior to the closing of the Acquisition and thereafter the Holder
shall participate in the Acquisition as a holder of the Warrant Shares (or other
securities issuable upon exercise of this Warrant) on the same terms as other
holders of the same class of securities of the Company.
SECTION 8. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any distribution of
the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution to
shareholders until the expiration of thirty (30) days from the date of mailing
of the aforesaid notice and, in any case, the Holder hereof may exercise this
Warrant within thirty (30) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such thirty-day period shall
thereafter become null and void.
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51
SECTION 9. NOTICE OF EXTRAORDINARY DIVIDENDS. If the Board of Directors of the
Company shall declare any dividend or other distribution on its Common Stock
except out of earned surplus or by way of a stock dividend payable in shares of
its Common Stock, the Company shall mail notice thereof to the Holder hereof not
less than thirty (30) days prior to the record date fixed for determining
shareholders entitled to participate in such dividend or other distribution, and
the Holder hereof shall not participate in such dividend or other distribution
unless this Warrant is exercised prior to such record date. The provisions of
this Section 9 shall not apply to distributions made in connection with
transactions covered by Section 7.
SECTION 10. FRACTIONAL SHARES. Fractional shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 10, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company) over the Warrant Price for
such fractional share.
SECTION 11. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1. WILL RESERVE SHARES. The Company will reserve and set apart and
have available for issuance at all times, free from preemptive or other
preferential rights, the number of shares of authorized but unissued Common
Stock deliverable upon the exercise of this Warrant.
11.2. WILL NOT AMEND CERTIFICATE. The Company will not amend its
Certificate of Incorporation to eliminate as an authorized class of capital
stock that class denominated as "Common Stock" on the date hereof.
11.3. WILL BIND SUCCESSORS. This Warrant shall be binding upon any
corporation or other person or entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets.
SECTION 12. NOTICES. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail to, the Holder at Transamerica Technology Finance Division, ▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Assistant Vice
President, Lease Administration, with a copy to the Lender at Riverway II, West
Office Tower, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Legal
Department or to such other address as shall have been furnished to the Company
in writing by the Holder. Any notice or other document required or permitted to
be given or delivered to the Company shall be delivered at, or sent by certified
or registered mail to, the Company at ▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ #▇▇▇▇, , ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, Attention: Controller or to such other address as shall
have been furnished in writing to the Holder by the Company. Any notice so
addressed and mailed by registered or certified mail shall be deemed to be given
when so mailed. Any notice so addressed and otherwise delivered shall be deemed
to be given when actually received by the addressee.
SECTION 13. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company except upon exercise in accordance with the
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terms hereof. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of the
Holder for the Warrant Price hereunder or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
SECTION 14. LAW GOVERNING. THE VALIDITY, INTERPRETATION, AND ENFORCEMENT OF THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
SECTION 15. "MARKET STAND-OFF" AGREEMENT. The Holder hereby agrees that it will
not, without the prior written consent of the managing underwriter, during the
period commencing on the date of the final prospectus relating to an
underwritten initial public offering of the Company's securities (an "Initial
Offering") and ending on the date specified by the Company and the managing
underwriter (such period not to exceed one hundred eighty (180) days) (i) lend,
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (whether such shares or any such securities are
then owned by the Holder or are thereafter acquired), or (ii) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
provisions of this Section 15 shall apply only to the Company's Initial
Offering, shall not apply to the sale of any shares to an underwriter pursuant
to an underwriting agreement, and shall only be applicable to the Holder if all
officers and directors and greater than one percent (1%) shareholders of the
Company enter into similar agreements. The underwriters in connection with the
Company's Initial Offering are intended third party beneficiaries of this
Section 15 and shall have the right, power and authority to enforce the
provisions hereof as though they were a party hereto.
In order to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Registrable Securities of each Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
SECTION 16. MISCELLANEOUS. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by both
parties (or any respective predecessor in interest thereof). The headings in
this Warrant are for purposes of reference only and shall not affect the meaning
or construction of any of the provisions hereof
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this _______ day of _________, 199__.
ABOVENET COMMUNICATIONS, INC.
[CORPORATE SEAL]
By: _______________________________
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53
Title: ____________________________
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54
FORM OF NOTICE OF EXERCISE
[TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _________ shares
of Common Stock which the undersigned is entitled to purchase by the terms of
the within Warrant according to the conditions thereof, and herewith
[check one]
[ ] makes payment of $__________ therefor; or
[ ] directs the Company to issue ______
shares, and to withhold ____ shares in
lieu of payment of the Warrant Price, as
described in Section 2.1 of the Warrant.
All shares to be issued pursuant hereto shall be issued in the name of and the
initial address of such person to be entered on the books of the Company shall
be:
The shares are to be issued in certificates of the following denominations:
___________________________________
[Type Name of Holder]
By: _______________________________
Title: ____________________________
Dated:______________________
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55
FORM OF ASSIGNMENT
(ENTIRE)
[TO BE SIGNED ONLY UPON TRANSFER OF ENTIRE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto _______________________________ all rights of the undersigned
under and pursuant to the within Warrant, and the undersigned does hereby
irrevocably constitute and appoint _______________________________ Attorney to
transfer the said Warrant on the books of the Company, with full power of
substitution.
___________________________________
[Type Name of Holder]
By: _______________________________
Title: ____________________________
Dated:______________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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FORM OF ASSIGNMENT
(PARTIAL)
[TO BE SIGNED ONLY UPON PARTIAL TRANSFER OF WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto _______________________________ (i) the rights of the undersigned
to purchase ___ shares of Common Stock under and pursuant to the within Warrant,
and (ii) on a non-exclusive basis, all other rights of the undersigned under and
pursuant to the within Warrant, it being understood that the undersigned shall
retain, severally (and not jointly) with the transferee(s) named herein, all
rights assigned on such non-exclusive basis. The undersigned does hereby
irrevocably constitute and appoint __________________________ Attorney to
transfer the said Warrant on the books of the Company, with full power of
substitution.
___________________________________
[Type Name of Holder]
By: _______________________________
Title: ____________________________
Dated:______________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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