Exhibit 99.2
AGREEMENT TO ISSUE WARRANT AND GRANT OF SECURITY INTEREST
This Agreement (the "Agreement") is made as of March 9, 2001 by and
between SCIENTIFIC LEARNING CORPORATION, a Delaware corporation (the "Company"),
and WPV, INC., a Delaware corporation (the "Investor"). The parties hereby agree
as follows:
1. ISSUANCE OF WARRANTS.
In consideration of the Investor's delivery of a guaranty (the "Guaranty")
of a $15,000,000.00 revolving line of credit extended by Fleet National Bank
(the "Bank") to the Company (the "Credit Line"), and the Investor's causing the
issuance by the Chase Manhattan Bank USA, N.A. (the "Letter of Credit Bank") of
an irrevocable and unconditional letter of credit in favor of the Bank for
drawings up to but not exceeding $15,000,000.00 to secure the Investor's
obligations under the Guaranty (the "Letter of Credit"), each contemporaneous
with entering into this Agreement, the Company agrees to issue to the Investor a
warrant or warrants to purchase 1,375,000 shares of the Company's common stock,
par value $0.001 per share (the "Common Stock"), with an exercise price of $8.00
per share, in all material respects equivalent to the form of warrant attached
to this Agreement as Exhibit I (such warrant or warrants, the "Warrants").
2. THE CLOSING.
2.1. CLOSING DATE. The closing of the delivery of the Guaranty and the
purchase and sale of the Warrant (the "Closing") shall take place on the date
hereof contemporaneously with the execution of this Agreement.
2.2. DELIVERY. At the Closing (a) the Company shall execute and deliver to
the Investor the Warrant; (b) the Investor shall deliver to the Bank the
Guaranty; and (c) the Investor shall cause the Letter of Credit Bank to issue
the Letter of Credit.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
The Company hereby represents and warrants to the Investor and agrees as
follows:
3.1. CORPORATE POWER. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation and is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the failure to so qualify
would have a material adverse effect on its business, properties, prospects or
financial condition. The Company has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as now
conducted and as presently proposed to be conducted, to execute and deliver this
Agreement, the agreements related to the Credit Line and the Warrants and to
carry out and perform its obligations hereunder and thereunder, and to issue and
deliver the shares of Common Stock issuable upon exercise of the Warrants.
3.2. AUTHORIZATION. All corporate action on the part of the Company, its
directors and its stockholders necessary for the authorization, execution and
delivery of this Agreement, the agreements related to the Credit Line and the
Warrants by the Company and the performance of the Company's obligations
hereunder and thereunder, including the issuance and delivery of the
Warrants, the reservation of the shares of Common Stock issuable upon exercise
of the Warrants (the "Warrant Shares") and the issuance of the Warrant Shares
upon exercise of the Warrant, has been duly and properly taken. This Agreement
and the Warrants, when executed and delivered by the Company, shall constitute
valid and binding obligations of the Company enforceable in accordance with
their terms, subject only to laws of general application relating to bankruptcy,
insolvency, the relief of debtors and, with respect to rights to indemnity,
subject to federal and state securities laws. The Warrant Shares, when issued in
compliance with the provisions of the Warrants, will be validly issued, fully
paid and nonassessable and free of any liens or encumbrances or restrictions on
transfer other than restrictions under applicable state and federal securities
laws.
3.3. GOVERNMENTAL CONSENTS. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with, any governmental authority, required on the part of the Company
in connection with the valid execution and delivery of this Agreement, the
offer, sale and issuance of the Warrants and the Warrant Shares have been
obtained and will be effective at the Closing, except for notices required or
permitted to be filed thereafter with certain state and federal securities
commissions, which notices shall be filed on a timely basis.
3.4. OFFERING. Assuming the accuracy of the representations and warranties
of the Investor contained in Section 4, the offer, sale and issuance of the
Warrants is exempt from the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended (the "1933 Act"), and has been registered
or qualified (or is exempt from registration and qualification) under the
registration, permit, or qualification requirements of all applicable state
securities laws.
3.5. CAPITALIZATION. The authorized capital of the Company consists of
40,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock. As of
December 31, 2000, 11,335,867 shares of Common Stock and no shares of Preferred
Stock were issued and outstanding. All of the issued and outstanding shares of
capital stock of the Company have been duly authorized and validly issued, are
fully paid and non-assessable, and were issued in accordance with the
registration or qualification provisions of the 1933 Act and any relevant state
securities laws or pursuant to valid exemptions therefrom.
3.6. REGISTRATION RIGHTS. The Company shall use its best efforts to obtain
the approvals necessary (other than the approval of Warburg, ▇▇▇▇▇▇ Ventures,
L.P. ("WP Ventures")) to amend the Amended and Restated Registration Rights
Agreement dated as of December 30, 1998 (the "Registration Rights Agreement"),
to add the Investor as a party to the Registration Rights Agreement, and to
include as "Registrable Securities", in addition to the shares of Common Stock
already included in such definition in the Registration Rights Agreement, (i)
the Warrant Shares, (ii) all the shares of Common Stock issuable upon exercise
of the warrants issued to WP Ventures on June 4, 1998 and October 23, 1998 and
(iii) up to 1,000,000 additional shares of Common Stock that the Investor or WP
Ventures now holds or may hereafter acquire (which 1,000,000 additional shares
shall be in addition to the shares described in clauses (i) and (ii) of this
Section 3.6).
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3.7. COMPLIANCE WITH OTHER INSTRUMENTS; CONSENTS. The Company is not in
violation or default of any provision of its Certificate of Incorporation or
Bylaws, or in violation in any material respect of any provision of any
mortgage, indenture, agreement, instrument or contract to which it is a party or
by which it is bound, or to the best of its knowledge, any federal or state
judgment, order, writ, decree, statute, rule, regulation or restriction
applicable to the Company. The execution, delivery and performance by the
Company of this Agreement, the agreements related to the Credit Line and the
Warrant, and the consummation of the transactions contemplated hereby and
thereby, will not result in any such violation or the suspension, revocation,
impairment, forfeiture or nonrenewal of any material permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties or be in material conflict with or
constitute, with or without the passage of time or giving of notice, either a
material default under any such provision or (with the exception of the security
interest granted by the Company under this Agreement only) an event that results
in the creation of any material lien, charge or encumbrance upon any assets of
the Company. The execution, delivery and performance by the Company of this
Agreement, the agreements related to the Credit Line and the Warrant, and the
consummation of the transactions contemplated hereby and thereby, do not require
the Company to obtain any consent or approval of or make any filing with or give
any notice to, any person, entity, governmental or judicial authority, except
such as have been duly obtained or made.
3.8. ABSENCE OF CERTAIN DEVELOPMENTS. Since November 13, 2000, the date of
the Company's most recent Form 10-Q or as otherwise disclosed to the Investor in
a writing from the Company, there has been no: (i) declaration, setting aside or
payment of any dividend or other distribution with respect to the capital stock
of the Company; (ii) issuance of capital stock, options, warrants, securities
convertible or exchangeable for capital stock or rights to acquire capital
stock, other than as approved by the Board of Directors of the Company
(including the affirmative vote of a representative of Investor); (iii) material
litigation or loss, destruction or damage to any property of the Company,
whether or not insured; (iv) acceleration or prepayment of any indebtedness for
borrowed money or the refunding of any such indebtedness; or (v) acquisition or
disposition of any material assets (or any contract or arrangement therefor), or
any other material transaction by the Company otherwise than for fair value in
the ordinary course of business.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR.
The Investor hereby represents and warrants to the Company and agrees as
follows:
4.1. PURCHASE FOR OWN ACCOUNT. The Investor is acquiring the Warrants and
the Warrant Shares (collectively, the "Securities") solely for its own account
for investment and not for sale or with a view to distribution of the Securities
or any part thereof, has no present intention of selling, granting any
participation in, or otherwise distributing the same, and does not presently
have reason to anticipate a change in such intention.
4.2. INFORMATION AND SOPHISTICATION. The Investor has received all the
information it has requested from the Company that it considers necessary or
appropriate for deciding whether to acquire the Warrants. The Investor has had
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the Warrants and to obtain any
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additional information necessary to verify the accuracy of the information given
to the Investor. The Investor further represents that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risk of the investment in the Securities.
4.3. ABILITY TO BEAR ECONOMIC RISK. The Investor acknowledges that
investment in the Securities involves a high degree of risk. The Investor is
able, without materially impairing its financial condition, to hold the
Securities for an indefinite period of time and to suffer a complete loss of its
investment.
4.4. LIMITATION ON DISPOSITION. The Investor will not make any disposition
of all or any portion of the Securities unless and until:
(a) There is then in effect a registration statement under the 1933 Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
(b) (i) The Investor has notified the Company of the proposed disposition
and has furnished the Company with a statement of the circumstances surrounding
the proposed disposition, and (ii) if reasonably requested by the Company, the
Investor has furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
under the 1933 Act.
4.5. EXPERIENCE. The Investor is an "accredited investor" as such term is
defined in Rule 501 of the 1933 Act.
4.6. CONTINUATION OF GUARANTY. Notwithstanding any language to the
contrary in the Guaranty, the Investor shall not revoke or discontinue the
Guaranty for the term of the Credit Line; PROVIDED, HOWEVER that the Investor
may revoke or discontinue the Guaranty at any time after March 9, 2004. After
the term of the Credit Line and until March 9, 2004, the Investor shall use its
reasonable best efforts to deliver a guaranty for a replacement revolving line
of credit to be obtained by the Company, PROVIDED, HOWEVER, that: (i) the
Investor's liability under such replacement guaranty shall not exceed
$15,000,000.00; (ii) such replacement credit line shall have terms no less
favorable to the Company and the Investor, as guarantor thereof, than the Credit
Line; and (iii) the Company shall agree to reimburse the Investor for payments
made pursuant to such replacement guaranty and shall grant the Investor security
with respect to such obligation of an amount and type equivalent to that granted
pursuant to Section 5.2 hereof.
5. REIMBURSEMENT OF PAYMENTS MADE UNDER GUARANTY AND LETTER OF CREDIT.
5.1. OBLIGATION TO REIMBURSE INVESTOR FOR PAYMENTS UNDER GUARANTY AND
LETTER OF CREDIT.
(a) The Company hereby agrees to pay to the Investor the full amount of:
(i) all payments made under or in respect of the Guaranty (each, a
"Payment"); (ii) all drawings made under or in respect of the Letter of
Credit (each, a "Drawing"); and (iii) all costs and expenses (including
court costs and reasonable legal
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expenses) incurred or expended by the Investor in connection with the
making of any Payments or Drawings or their collection from the Company.
Each such payment shall be due (x) in the case of amounts due under
clauses (i) and (ii) of this Section 5.1(a), on the date of the Payment or
Drawing, as the case may be, and (y) in the case of amounts due under
clause (iii) of this Section 5.1(a), upon demand. All payments payable by
the Company hereunder shall be made in immediately available funds to the
account of the Investor at such account as the Investor shall designate
from time to time in writing to the Company. Payments due shall be made
with interest thereon from the time due or demanded, as applicable, until
payment therefor by the Company, at the rate per annum equal to the rate
of interest announced by the Bank at its head office in Boston,
Massachusetts as its Base Rate, plus 5%; PROVIDED, HOWEVER, that if such
interest exceeds the maximum amount permitted to be paid under
applicable law, then such interest shall be reduced to such maximum
permitted amount. Each change in the Base Rate shall take effect on the
date of announcement of any such change. The Company's obligation to make
payments pursuant to this Section 5.1(a) shall be absolute and
unconditional, and the Company shall make all such payments free of setoff
and counterclaim. Payments by the Company pursuant to this Section 5.1(a)
may be required by the Investor on any number of occasions. The Company
shall make the payments specified above even if there is a dispute about
whether the Bank is or was entitled to demand payment under the Guaranty
or to make drawings under the Letter of Credit. All such risks of improper
or untimely payment under the Guaranty and the Letter of Credit are to be
borne by the Company. Nothing in this Section 5.1(a) shall entitle the
Investor to receive more than the aggregate of all amounts included in
clauses (i), (ii) and (iii) of this Section 5.1(a) in connection with
payments under the Guaranty or drawings on the Letter of Credit.
(b) Notwithstanding anything otherwise to the contrary in Section 5.1(a)
hereof, if: (i) a Payment or Drawing has been made because the Maturity
Date of the Credit Line was not extended beyond the original expiration
date of October 18, 2002 thereof because the Warburg, ▇▇▇▇▇▇ Revolving
Credit Agreement (as hereinafter defined) has not been renewed or replaced
with Fleet as a participant and the Company has not repaid the Credit Line
together with accrued interest as required on the Maturity Date; or (ii) a
Drawing has been made solely because of the occurrence of the condition
specified in Item 2 of the drawing certificate delivered under the Letter
of Credit, then the Investor shall not demand repayment from the Company
of any amounts payable with respect to Sections 5.1(a)(i), (ii) or (iii)
hereof in connection with such Payment or Drawing until the earlier of
March 9, 2004 or the occurrence of an Event of Default under the Credit
Line resulting in whole or in part from the Company's act or failure to
act. As used herein, "Warburg, ▇▇▇▇▇▇ Revolving Credit Agreement" shall
mean that certain Amended and Restated Revolving Credit Agreement, dated
as of October 18, 1999, among Warburg, ▇▇▇▇▇▇ Ventures, L.P., the Investor
and certain affiliates thereof as borrowers and The Chase Manhattan Bank
as Administrative Agent for certain banks as lenders thereunder (the "WP
Credit Facility Banks") and the WP Credit Facility Banks as lenders.
Payments due with respect to a Payment or
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Drawing under this Section 5(b)(i) or 5(b)(ii) shall be made with interest
thereon from the time due or demanded, as applicable, until payment
therefor by the Company, at the rate per annum equal to the rate of
interest payable by the Company under the Credit Line with respect to such
amounts prior to the occurrence of an Event of Default; PROVIDED, HOWEVER
that on the occurrence of an Event of Default under the Credit Line, all
amounts due from the Company shall be payable at the rate announced by the
Bank at its head office in Boston, Massachusetts as its Base Rate, plus
5%; PROVIDED, FURTHER, that if such interest exceeds the maximum amount
permitted to be paid under applicable law, then such interest shall be
reduced to such maximum permitted amount. Each change in the Base Rate
shall take effect on the date of announcement of any such change.
5.2. GRANT OF SECURITY INTEREST TO SECURE REIMBURSEMENT OF GUARANTY AND
LETTER OF CREDIT. As collateral for the repayment in full of the Secured
Obligations (such term and other capitalized terms used in this Article 5 but
not defined in this Article 5 or otherwise in this Agreement having the meanings
set forth on Exhibit II hereto), the Company does hereby grant to the Investor a
security interest in the Collateral. Upon the occurrence and continuance of an
Event of Default under the Credit Line (other than an Event of Default under the
Credit Line that relates solely to the Investor) (such event, an "Event of
Default"), the Investor shall have all the rights and remedies of a secured
party under the Uniform Commercial Code of the State of New York (as in effect
from time to time, the "UCC"). To the extent the UCC requires the Investor to
provide notice of any sale or disposition of Collateral to the Company, the
Company agrees that any such sale or disposition may be made after twenty
business days' notice thereof shall have been given to the Company. The Company
represents and warrants that the security interest created hereby shall
constitute at all times a first priority security interest in the Collateral to
secure the repayment in full of the Obligations under applicable law, including
the UCC, PROVIDED, HOWEVER that the Company may grant the following security
interests with a higher priority in the Collateral than the security interest
granted to the Investor hereby: (i) purchase money security interests in
specific items of equipment; (ii) operating or capital leases of specific items
of equipment; (iii) liens for taxes not yet payable; (iv) monies the Company may
have on deposit with the Bank (excluding, however, any proceeds of the
Collateral); (v) liens (other than any lien imposed by ERISA and other than on
the Collateral) consisting of pledges or deposits required in the ordinary
course of the Company's business in connection with workers' compensation,
unemployment insurance and other social security legislation; (vi) carriers',
warehousemen's, mechanics', landlords', materialmen's, repairmen's or other
similiar liens (whether arising by operation of law, contract or otherwise)
arising in the ordinary course of the Company's business; (vii) liens arising
out of conditional sale, title retention, consignment or similiar arrangements
for the sale of goods entered into by the Company (or any subsidiary of the
Company, as the case may be) in the ordinary course of the Company's business
not materially interfering with the conduct of the Company and any subsidiaries
thereof as a whole; and (viii) security interests and liens consented to in
writing by the Investor in its reasonable discretion, which consent shall not be
unreasonably withheld. The name of the Company as included in its certificate of
incorporation is Scientific Learning Corporation. The Company is organized under
the laws of the state of Delaware and the principal place of business of the
Company is California. The Company shall give the Investor written notice within
ten business days of any change in the company's name, state of organization or
principal place of business.
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5.3. OBLIGATIONS OF COMPANY WITH RESPECT TO COLLATERAL. The Company shall
warrant and defend the right and title herein granted to the Investor in and to
the Collateral (and all right, title, and interest represented by the
Collateral) against the claims and demands of all persons whomsoever. The
Company agrees that at any time, and from time to time, at the expense of the
Company, the Company shall promptly execute and deliver all further instruments,
and take all further action, that may be necessary or that the Investor may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Investor to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
The Company authorizes the Investor (and irrevocably appoints the Investor as
its attorney in fact) to execute, amend, file and continue in the name and on
behalf of the Company UCC financing statements as may be necessary or desirable
in the judgment of the Investor to perfect the security interest intended to be
granted hereunder. Such appointment is coupled with an interest.
5.4. INVESTOR FREE OF OBLIGATIONS RELATING TO COLLATERAL. The security
interest granted by the Company pursuant to Section 5.2 hereof is granted as
security only and shall not subject the Investor to, or in any way alter or
modify, any obligation or liability of the Company with respect to or arising
out of the Collateral.
5.5. COMPANY'S OBLIGATIONS WITH RESPECT TO INTELLECTUAL PROPERTY GRANTED
AS COLLATERAL. The Company shall comply with the provisions set forth on Exhibit
III hereto.
6. MISCELLANEOUS.
6.1. BINDING AGREEMENT; ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and the respective successors
and assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any third party any rights, remedies, obligations, or
liabilities under or by reason of this Agreement except as expressly otherwise
provided in this Agreement.
6.2. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York as applied to agreements among New York
residents, made and to be performed entirely within the State of New York,
irrespective of any contrary result otherwise required under the conflict or
choice of law rules of New York.
6.3. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but both of which together shall constitute
one and the same instrument.
6.4. TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
6.5. NOTICES. Any notice required or permitted under this Agreement must
be given in writing and shall be deemed effectively given upon personal delivery
or upon deposit with the United States Post Office, postage prepaid, addressed
to the Company at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
or to the Investor at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such
other address as a party may designate by ten days' advance written notice to
the other party.
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6.6. MODIFICATION; WAIVER. No modification or waiver of any provision of
this Agreement or consent to departure therefrom shall be effective unless in
writing and approved by the Company and the Investor.
6.7. FURTHER ASSURANCES. The parties shall take such further actions, and
execute, deliver and file such documents, as may be necessary or appropriate to
effectuate the intent of this Agreement.
6.8. CONSTRUCTION. The language used in this Agreement shall be deemed to
be the language chosen by the parties to express their mutual intent, and no
rule of strict construction shall be applied against any party. Any references
to any federal, state, local or foreign statute or law shall also refer to all
rules and regulations promulgated thereunder, unless the context otherwise
requires. Unless the context otherwise requires: (a) a term has the meaning
assigned to it by this Agreement; (b) forms of the word "include" mean that the
inclusion is not limited to the items listed; (c) "or" is disjunctive but not
exclusive; (d) words in the singular include the plural, and in the plural
include the singular; (e) provisions apply to successive events and
transactions; (f) "hereof", "hereunder", "herein" and "hereto" refer to the
entire Agreement and not any section or subsection; and (g) "$" means the
currency of the United States.
6.9. SEVERABILITY. If any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein, shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, then to the
maximum extent permitted by law, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement or any such instrument.
Furthermore, in lieu of any such invalid or unenforceable term or provision, the
parties hereto intend that there shall be added as a part of this Agreement a
provision as similar in terms and commercial effect to such invalid or
unenforceable provision as may be possible and be valid and enforceable.
6.10. ENTIRE AGREEMENT. This Agreement and the Exhibits hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and no party will be liable or bound to the other in any
manner by any representations, warranties, covenants and agreements other than
those specifically set forth herein.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SCIENTIFIC LEARNING CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Financial Officer
WPV, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Vice President
[SIGNATURE PAGE TO AGREEMENT TO ISSUE WARRANT]
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EXHIBIT I
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES OR BLUE
SKY LAWS OF ANY STATE AND MAY NOT BE SOLD, OR OTHERWISE TRANSFERRED, IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER
ANY SUCH APPLICABLE STATE LAWS, OR IN VIOLATION OF THE RESTRICTION ON TRANSFER
CONTAINED IN SECTIONS 7.1 AND 7.2 OF THIS WARRANT.
WARRANT TO PURCHASE 1,375,000 SHARES
OF COMMON STOCK OF
SCIENTIFIC LEARNING CORPORATION
This certifies that WPV, INC., a Delaware corporation, and its successors and
assigns (collectively, the "Holder"), for value received, is entitled to
purchase from SCIENTIFIC LEARNING CORPORATION, a Delaware corporation (the
"Company"), having a place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, a maximum of 1,375,000 fully paid and nonassessable
shares of the Company's common stock, par value $0.001 per share ("Common
Stock") for cash at a price of $8.00 per share (the "Stock Purchase Price") at
any time or from time to time up to and including 5:00 p.m. (Pacific time) on
March 9, 2008 (the "Expiration Date"), upon satisfaction by the Holder of the
conditions set forth in Section 1.1 hereof. The Stock Purchase Price and the
number of shares purchasable hereunder are subject to adjustment as provided in
Section 3 of this Warrant.
This Warrant is made on the following terms and subject to the following
conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1. GENERAL. This Warrant is exercisable at the option of the Holder, at
any time or from time to time up to and including 5:00 p.m. (Pacific time) on
the Expiration Date, for all or any part of the shares of Common Stock (but not
for a fraction of a share) that may be purchased hereunder. The shares of Common
Stock purchased under this Warrant will be and are deemed to be issued to the
Holder as the record owner of such shares as of the close of business on the
date on which the following are delivered to the Company's principal office (or
such other location as the Company may advise the Holder in writing): (a) this
Warrant properly endorsed; (b) a completed, executed Form of Subscription, in a
form substantially equivalent to Exhibit A hereto and a completed, executed
letter of Investment Representations, in a form substantially equivalent to
Exhibit B hereto; and (c) if applicable, cash, a certified check, or delivery of
funds via wire transfer, in an amount equal to the aggregate exercise price for
the number of shares for which this Warrant is being exercised (determined as
the number of shares to be issued upon exercise multiplied by the Stock Purchase
Price) unless the Holder elects to conduct a net issue exercise pursuant to
Section 1.2 hereof. Certificates for the shares of Common Stock so purchased,
together with any other securities or property to which the Holder is entitled
upon such exercise, shall be delivered to the Holder by the Company at the
Company's expense within a reasonable time after the rights represented by this
Warrant have been so exercised. In case of a purchase of
less than all the shares that may be purchased under this Warrant, the Company
shall cancel this Warrant and execute and deliver a new Warrant or Warrants of
like tenor for the balance of the shares purchasable under the Warrant
surrendered upon such purchase to the Holder within a reasonable time. Each
stock certificate so delivered shall be in such denomination of Common Stock as
may be requested by the Holder and shall be registered in the name of the
Holder.
1.2. NET ISSUE EXERCISE. Notwithstanding anything otherwise to the
contrary, if the fair market value of one share of the Common Stock is greater
than the Stock Purchase Price (at the date of calculation as set forth below),
in lieu of payment by the Holder of cash for the shares of Common Stock to be
purchased upon an exercise of this Warrant, the Holder may elect to receive
shares equal to the value (as determined below) of this Warrant (or the portion
thereof being canceled) by notice of such election to the Company and
satisfaction only of the conditions set forth in Sections 1.1(a) and 1.1(b)
hereof, in which event the Company will issue to the Holder a number of shares
of Common Stock computed using the following formula:
X = Y (A-B)
---------
A
Where X = the number of shares of Common Stock to be issued to the
Holder
Y = 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 canceled (at the
date of such calculation)
A = the fair market value of one share of the Company's Common
Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value of one share of Common
Stock shall be the average of the bid and ask (or, if not available, the closing
price) of the Company's Common Stock on the Nasdaq National Market or such other
domestic market or exchange on which the shares of Common Stock are traded on
the day prior to the exercise of this Warrant, as reported in the Wall Street
Journal.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES.
All shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, free from all preemptive rights of any
stockholder and free of all taxes, liens and charges with respect to the issue
thereof. During the period within which the rights represented by this Warrant
may be exercised, the Company shall at all times have authorized and reserved,
for the purpose of issue upon exercise of the subscription rights evidenced by
this Warrant, a sufficient number of shares of authorized but unissued Common
Stock, or other securities and property, when and as required to provide for the
exercise of the rights represented by this Warrant. The Company shall take all
such actions as may be necessary to assure that such shares of Common Stock may
be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any domestic securities exchange upon
which the Common
-2-
Stock may be listed; PROVIDED, HOWEVER, that the Company will not be required to
effect a registration under Federal or state securities laws with respect to
such exercise. The Company shall not take any action that would result in any
adjustment of the Stock Purchase Price if the total number of shares of Common
Stock issuable after such action upon exercise of all outstanding warrants,
together with all shares of Common Stock then issuable upon exercise of all
options and upon the conversion of all outstanding shares of Preferred Stock and
shares of Preferred Stock issuable upon the exercise of all outstanding options
and warrants, together with all shares of Common Stock then outstanding and all
shares of Common Stock then issuable upon exercise of all outstanding options,
would exceed the total number of shares of Common Stock then authorized by the
Company's Restated Certificate of Incorporation.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES.
The Stock Purchase Price and the number of shares purchasable upon the exercise
of this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events described in this Section 3. Upon each adjustment
of the Stock Purchase Price, the Holder of this Warrant shall thereafter be
entitled to purchase, at the Stock Purchase Price resulting from such
adjustment, the number of shares obtained by multiplying the Stock Purchase
Price in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment, and dividing
the product thereof by the Stock Purchase Price resulting from such adjustment.
3.1. SUBDIVISION OR COMBINATION OF STOCK. If the Company at any time
subdivides its outstanding shares of Common Stock into a greater number of
shares, the Stock Purchase Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, if the outstanding shares of
Common Stock of the Company are combined into a smaller number of shares, the
Stock Purchase Price in effect immediately prior to such combination shall be
proportionately increased.
3.2. DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY, RECLASSIFICATION.
If at any time or from time to time the holders of Common Stock (or any shares
of stock or other securities at the time receivable upon the exercise of this
Warrant) receive or become entitled to receive, without payment therefor:
(a) Common Stock or any shares of stock or other securities that are at
any time directly or indirectly convertible into or exchangeable for Common
Stock, or any rights or options to subscribe for, purchase or otherwise acquire
any of the foregoing by way of dividend or other distribution;
(b) any cash paid or payable otherwise than as a cash dividend; or
(c) Common Stock or additional stock or other securities or property
(including cash) by way of spinoff, split-up, reclassification, combination of
shares or similar corporate rearrangement (other than shares of Common Stock
issued as a stock split or adjustments, which are covered by the terms of
Section 3.1),
then, and in each such case, the Holder shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Common
Stock receivable thereupon, and without
-3-
payment of any additional consideration therefor, the amount of stock and other
securities and property (including cash in the cases referred to in clauses (b)
and (c) above) that the Holder would hold on the date of such exercise had it
been the holder of record of such Common Stock as of the date on which holders
of Common Stock received or became entitled to receive such shares or all other
additional stock and other securities and property.
3.3. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If
any recapitalization, reclassification or reorganization of the capital stock of
the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction, is effected in such a way that holders of Common Stock are entitled
to receive stock, securities, or other assets or property (an "Organic Change"),
then, as a condition of such Organic Change, lawful and adequate provisions
shall be made by the Company whereby the Holder shall thereafter have the right
to purchase and receive (in lieu of the shares of the Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby) such shares of stock, securities or other assets
or property as may be issued or payable with respect to or in exchange for a
number of outstanding shares of such Common Stock equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby. In the event of any Organic Change,
appropriate provision shall be made by the Company with respect to the rights
and interests of the Holder of this Warrant to the end that the provisions
hereof (including, without limitation, provisions for adjustments of the Stock
Purchase Price and of the number of shares purchasable and receivable upon the
exercise of this Warrant) shall thereafter be applicable, in relation to any
shares of stock, securities or assets thereafter deliverable upon the exercise
hereof. The Company shall not effect any such consolidation, merger or sale
unless, prior to the consummation thereof, the successor corporation (if other
than the Company) resulting from such consolidation or the corporation
purchasing such assets shall assume by written instrument delivered to the
Company and to the Holder the obligation to deliver to the Holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions, the
Holder may be entitled to purchase.
3.4. CERTAIN EVENTS. If any change in the outstanding Common Stock of the
Company or any other event occurs as to which the other provisions of this
Section 3 are not strictly applicable or if strictly applicable would not fairly
protect the purchase rights of the Holder in accordance with such provisions,
then the Board of Directors of the Company shall make an adjustment in the
number and class of shares available under the Warrant, the Stock Purchase Price
or the application of such provisions, so as to give the Holder upon exercise of
the Warrant for the same aggregate Stock Purchase Price the total number, class
and kind of shares as it would have owned had the Warrant been exercised prior
to the event and had it continued to hold such shares until after the event
requiring adjustment.
3.5. NOTICES OF CHANGE.
(a) Immediately upon any adjustment in the number or class of shares
subject to this Warrant or the Stock Purchase Price, the Company shall give
written notice thereof to the Holder, setting forth in reasonable detail and
certifying the calculation of such adjustment.
-4-
(b) The Company shall give written notice to the Holder at least ten
Business Days prior to the date on which the Company closes its books or takes a
record for determining rights to receive any dividends or distributions. For
purposes of this Warrant, "Business Day" shall mean any day (except Saturday or
Sunday) on which banks are scheduled to be open to conduct business in the City
of New York.
(c) The Company shall also give written notice to the Holder at least
twenty Business Days prior to the date on which an Organic Change is scheduled
to take place.
4. ISSUE TAX.
The issuance of certificates for shares of Common Stock upon the exercise of the
Warrant shall be made without charge to the Holder for any issue tax (other than
any applicable income taxes) in respect thereof; PROVIDED, HOWEVER, that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of the Holder.
5. CLOSING OF BOOKS.
The Company shall at no time close its transfer books against the transfer of
any warrant or of any shares of Common Stock issued or issuable upon the
exercise of any warrant in any manner that interferes with the timely exercise
of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder solely in its capacity as holder of this Warrant the right to vote or to
consent or to receive notice as a stockholder of the Company on any matters or
any rights whatsoever as a stockholder of the Company prior to the purchase by
the Holder of shares of Common Stock pursuant to an exercise of this Warrant. No
dividends or interest shall be payable or accrued in respect of this Warrant or
the interest represented hereby or the shares purchasable hereunder until, and
only to the extent that, this Warrant is exercised. No provisions 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 hereof,
shall give rise to any liability of the Holder for the Stock Purchase Price or
as a stockholder of the Company, whether such liability is asserted by the
Company or by its creditors.
7. DISPOSITION.
7.1. UNREGISTERED SECURITY. Subject to compliance with applicable federal
and state securities laws and the transfer restriction set forth in Section 7.2
of this Warrant, this Warrant and all rights hereunder are transferable in whole
or in part upon surrender of this Warrant properly endorsed. Each holder of this
Warrant acknowledges that this Warrant, and the shares of Common Stock
purchasable upon exercise of this Warrant (the "Warrant Shares") have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"), and
agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise
dispose of this Warrant and any Warrant Shares issued upon its exercise until
one of the following events shall have occurred:
-5-
(a) the Company shall have received an opinion of counsel, in form and
substance reasonably acceptable to the Company and its counsel, or other
evidence reasonably acceptable to the Company, stating that the contemplated
transfer is exempt from registration under the 1933 Act as then in effect, and
the rules and regulations of the Securities and Exchange Commission (the
"Commission") thereunder. Within five Business Days after delivery to the
Company and its counsel of such opinion or evidence, the Company either shall
deliver to the proposed transferor a statement to the effect that such opinion
or evidence is not satisfactory in the reasonable opinion of its counsel (and
shall specify in detail the legal analysis supporting any such conclusion) or
shall authorize the Company's transfer agent to make the requested transfer; or
(b) the Company shall have been furnished with a letter from the
Commission in response to a written request in form and substance acceptable to
counsel for the Company setting forth all of the facts and circumstances
surrounding the contemplated transfer, stating that the Commission will take no
action with regard to the contemplated transfer; or
(c) the Warrant and any Warrant Shares, as applicable, are transferred
pursuant to a registration statement which has been filed with the Commission
and has become effective; or
(d) the Warrant and any Warrant Shares, as applicable, are transferred
pursuant to and in accordance with Rule 144 or Rule 144A promulgated by the
Commission under the 1933 Act accompanied, upon reasonable request, by an
opinion of counsel reasonably satisfactory to the Company that such transfer
complies with Rule 144 or 144A.
Each certificate or other instrument for Warrant Shares issued upon the exercise
of this Warrant shall bear a legend substantially to the foregoing effect.
7.2. TRANSFERS. To the extent the Holder transfers this Warrant in part,
the Holder shall either: (i) make such transfer to an affiliate (as such term is
defined in the rules promulgated under the Securities Exchange Act of 1934, as
amended); or (ii) transfer at a minimum Warrants representing the right to
purchase 200,000 shares of Common Stock (appropriately adjusted for any stock
split, dividend, combination or other recapitalization). Each taker and holder
of this Warrant, by taking or holding the same, consents and agrees that this
Warrant, when endorsed in blank, shall be deemed negotiable, and that the holder
hereof, when this Warrant shall have been so endorsed, may be treated by the
Company, at the Company's option, and all other persons dealing with this
Warrant, as the absolute owner hereof for any purpose and as the person entitled
to exercise the rights represented by this Warrant, or to the transfer hereof on
the books of the Company any notice to the contrary notwithstanding; but until
such transfer on such books, the Company may treat the registered owner hereof
as the owner for all purposes.
8. LOST WARRANTS.
Upon receipt of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant and, in the case of any such
loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory
to the Company, or in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company, at its expense, shall make and
deliver
-6-
a new Warrant of like tenor to the Holder in lieu of the lost, stolen, destroyed
or mutilated Warrant.
9. FRACTIONAL SHARES.
No fractional shares shall be issued upon exercise of this Warrant. The Company
shall, in lieu of issuing any fractional share, pay the holder entitled to such
fraction a sum in cash equal to such fraction multiplied by the fair market
value of a share of Common Stock at the time of such exercise. For such
purposes, fair market value of one share of Common Stock shall be the average of
the bid and ask (or, if not available, the closing price) of the Company's
Common Stock on the Nasdaq National Market or such other domestic market or
exchange on which the shares of Common Stock are traded on the day prior to the
exercise of this Warrant as reported in the Wall Street Journal.
10. MISCELLANEOUS.
10.1. BINDING UPON SUCCESSORS. This Warrant shall inure to the benefit of
and be binding upon the respective successors and assigns of the Company and the
Holder. Nothing in this Warrant, express or implied, is intended to confer upon
any third party any rights, remedies, obligations or liabilities under or by
reason of this Warrant.
10.2. GOVERNING LAW. This Warrant shall be governed by and construed under
the laws of the State of Delaware as applied to agreements among Delaware
residents, made and to be performed entirely within the State of Delaware,
irrespective of any contrary result otherwise required under the conflict or
choice of law rules of Delaware.
10.3. NOTICES. Any notice required or permitted under this Warrant shall
be given in writing and shall be deemed effectively given upon personal delivery
or upon deposit with the United States Post Office, postage prepaid, addressed
to the Company at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
or to the Holder at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such
other address as may be designated by ten Business Days' advance written notice
to the Company or the Holder, as applicable.
10.4. MODIFICATION; WAIVER. No modification or waiver of any provision of
this Warrant or consent to departure therefrom shall be effective unless in
writing and approved by the Company and the Holder.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its officer, thereunto duly authorized, this ___ day of March 2001.
SCIENTIFIC LEARNING CORPORATION
By:
---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Financial Officer
[SIGNATURE PAGE TO WARRANT TO PURCHASE 1,375,000 SHARES
OF COMMON STOCK OF SCIENTIFIC LEARNING CORPORATION]
EXHIBIT A
SUBSCRIPTION FORM
Date: ______________________
Scientific Learning Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Ladies and Gentlemen:
(PLEASE CHECK ONE)
/_/ The undersigned hereby elects to exercise the warrant issued to it by
Scientific Learning Corporation (the "Company") and dated March 9, 2001
(the "Warrant") and to purchase thereunder _________________________
shares of the Common Stock of the Company (the "Shares") at a purchase
price of _____________________ Dollars ($________) per Share or an
aggregate purchase price of ___________________________ Dollars
($_________) (the "Purchase Price"). Pursuant to the terms of the Warrant
the undersigned has delivered the Purchase Price herewith in full in cash
or by certified check or wire transfer.
/_/ The undersigned hereby elects to convert ____________________________
percent (____%) of the value of the Warrant pursuant to the provisions of
Section 1.2 of the Warrant allowing a "Net Issue Exercise" in exchange for
___________ shares of the Common Stock of the Company.
The undersigned also makes the representations set forth on the attached
Exhibit B of the Warrant.
Very truly yours,
WPV, INC.
By:
--------------------------------
Name:
--------------------------
Title:
-------------------------
EXHIBIT B
INVESTMENT REPRESENTATIONS
THESE INVESTMENT REPRESENTATIONS MUST BE COMPLETED, SIGNED AND RETURNED TO
SCIENTIFIC LEARNING CORPORATION ALONG WITH THE SUBSCRIPTION FORM BEFORE THE
COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANT DATED JANUARY __, 2001 WILL
BE ISSUED.
Date: _________________
Scientific Learning Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Ladies and Gentlemen:
The undersigned, WPV, Inc. ("Purchaser"), intends to acquire up to _______
shares of the Common Stock (the "Common Stock") of Scientific Learning
Corporation (the "Company") from the Company pursuant to the exercise or
conversion of certain Warrants to purchase Common Stock held by Purchaser. The
Common Stock will be issued to Purchaser in a transaction not involving a public
offering and pursuant to an exemption from registration under the Securities Act
of 1933, as amended (the "1933 Act"), and applicable state securities laws. In
connection with such purchase and in order to comply with the exemptions from
registration relied upon by the Company, Purchaser represents, warrants and
agrees as follows:
Purchaser is acquiring the Common Stock for its own account, to hold for
investment, and Purchaser will not make any sale, transfer or other disposition
of the Common Stock in violation of the 1933 Act or the General Rules and
Regulations promulgated thereunder by the Securities and Exchange Commission
(the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock has not been registered under
the 1933 Act or state securities laws on the ground that this transaction is
exempt from registration, and that reliance by the Company on such exemptions is
predicated in part on Purchaser's representations set forth in this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock must be
held indefinitely unless it is subsequently registered under the 1933 Act or
unless an exemption from such registration (such as Rule 144) is available with
respect to any proposed transfer or disposition by Purchaser of the Common
Stock. Purchaser further agrees that the Company may refuse to permit Purchaser
to sell, transfer or dispose of the Common Stock (except as permitted under Rule
144) unless there is in effect a registration statement under the 1933 Act and
any applicable state securities laws covering such transfer, or unless Purchaser
furnishes an opinion
of counsel reasonably satisfactory to counsel for the Company, to the effect
that such registration is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Common Stock, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"),
or any state securities laws. These shares have been acquired for
investment and may not be sold or otherwise transferred in the
absence of an effective registration statement for these shares
under the Securities Act and applicable state securities laws, or an
opinion of counsel satisfactory to the Company that registration is
not required and that an applicable exemption is available."
Purchaser has carefully read this letter and has discussed its requirements and
other applicable limitations upon Purchaser's resale of the Common Stock with
Purchaser's counsel.
Very truly yours,
WPV, INC.
By:
--------------------------------
Name:
--------------------------
Title:
-------------------------
EXHIBIT II
"ACCOUNT DEBTOR" shall mean any person who is or who may become obligated
to the Company under, with respect to or on account of an Account.
"ACCOUNTS" shall mean any and all right, title and interest of the Company
to payment for goods and services sold or leased, including any such right
evidenced by chattel paper, whether due or to become due, whether or not it has
been earned by performance, and whether now or hereafter acquired or arising in
the future, including accounts receivable from Affiliates of the Grantors.
"ACCOUNTS RECEIVABLE" shall mean all Accounts and all right, title and
interest in any returned goods, together with all rights, titles, securities and
guarantees with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales, and all related security interests, liens and
pledges, whether voluntary or involuntary, in each case whether now existing or
owned or hereafter arising or acquired, including the Liens and security
interests granted pursuant to the Agreement to Issue Warrant to which this
Exhibit II is attached.
"COLLATERAL" shall mean all (a) Accounts Receivable, (b) Documents, (c)
Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash accounts,
(g) Investment Property and (h) Proceeds.
"COPYRIGHT LICENSE" shall mean any written agreement, now or hereafter in
effect, granting any right to any third party under any Copyright now or
hereafter owned by the Company or which such Grantor otherwise has the right to
license, or granting to the Company the right to use any Copyright now or
hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"COPYRIGHTS" shall mean all of the following now owned or hereafter
acquired by the Company: (a) all copyright rights in any work subject to the
copyright laws of the United States or any other country, whether as author,
assignee, transferee or otherwise, and (b) all registrations and applications
for registration of any such copyright in the United States or any other
country, including registrations, recordings, supplemental registrations and
pending applications for registration in the United States Copyright Office,
including those listed on Schedule II.
"DOCUMENTS" shall mean all instruments, files, records, ledger sheets and
documents covering or relating to any of the Collateral.
"ENTITLEMENT HOLDER" shall mean a person identified in the records of a
Securities Intermediary as the person having a Security Entitlement against the
Securities Intermediary. If a person acquires a Security Entitlement by virtue
of Section 8-501(b)(2) or (3) of the Uniform Commercial Code, such person is the
Entitlement Holder.
"EQUIPMENT" shall mean all equipment, furniture and furnishings, and all
tangible personal property similar to any of the foregoing, including tools,
parts and supplies of every kind and description, and all improvements,
accessions or appurtenances thereto, that are now or hereafter owned by the
Company. The term Equipment shall include Fixtures.
"FINANCIAL ASSET" shall mean (a) a Security, (b) an obligation of a person
or a share, participation or other interest in a person or in property or an
enterprise of a person, which is, or is of a type, dealt with in or traded on
financial markets, or which is recognized in any area in which it is issued or
dealt in as a medium for investment or (c) any property that is held by a
Securities Intermediary for another person in a Securities Account if the
Securities Intermediary has expressly agreed with the other person that the
property is to be treated as a Financial Asset under Article 8 of the Uniform
Commercial Code. As the context requires, the term Financial Asset shall mean
either the interest itself or the means by which a person's claim to it is
evidenced, including a certificated or uncertificated Security, a certificate
representing a Security or a Security Entitlement.
"FIXTURES" shall mean all items of Equipment, whether now owned or
hereafter acquired, of the Company that become so related to particular real
estate owned by the Company that an interest in them arises under any real
estate law applicable thereto; PROVIDED, HOWEVER that such term shall not
include any fixtures that may be found in property leased by the Company.
"GUARANTY" means the Guaranty, dated March 9, 2001, of the Investor in
favor of Fleet National Bank, as the same may be modified, supplemented or
amended from time to time.
"GENERAL INTANGIBLES" shall mean all choses in action and causes of action
and all other assignable intangible personal property of the Company of every
kind and nature (other than Accounts Receivable) now owned or hereafter acquired
by the Company, including all rights and interests in partnerships, limited
partnerships, limited liability companies and other unincorporated entities,
corporate or other business records, indemnification claims, contract rights
(including rights under leases, whether entered into as lessor or lessee,
Hedging Agreements and other agreements), Intellectual Property, goodwill,
registrations, franchises, tax refund claims and any letter of credit,
guarantee, claim, security interest or other security held by or granted to the
Company to secure payment by an Account Debtor of any of the Accounts
Receivable.
"INTELLECTUAL PROPERTY" shall mean all intellectual and similar property
of the Company of every kind and nature now owned or hereafter acquired by the
Company, including inventions, designs, Patents, Copyrights, Licenses,
Trademarks, trade secrets, confidential or proprietary technical and business
information, know-how or other data or information, software and databases and
all embodiments or fixations thereof and related documentation, registrations
and franchises, and all additions, improvements and accessions to, and books and
records describing or used in connection with, any of the foregoing.
"INVENTORY" shall mean all goods of the Company, whether now owned or
hereafter acquired, held for sale or lease, or furnished or to be furnished by
the Company under contracts of service, or consumed in the Company's business,
including raw materials, work in process and finished goods.
"INVESTMENT PROPERTY" shall mean all Securities (whether certificated or
uncertificated), Security Entitlements and Securities Accounts of the Company,
whether now owned or hereafter acquired by the Company.
"LICENSE" shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense relating to Intellectual Property to
which the Company is a party (other than those license agreements which by their
terms prohibit assignment or a grant of a security interest).
"PATENT LICENSE" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to make, use or sell any invention
on which a Patent, now or hereafter owned by the Company or which the Company
otherwise has the right to license, is in existence, or granting to the Company
any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any third party, is in existence, and all rights of the Company under
any such agreement.
"PATENTS" shall mean all of the following now owned or hereafter acquired
by the Company: (a) all letters patent of the United States or any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including
registrations, recordings and pending applications in the United States Patent
and Trademark Office or any similar offices in any other country, including
those listed on Exhibit IV attached hereto, and (b) all reissues, continuations,
divisions, continuations-in-part, renewals or extensions thereof, and the
inventions disclosed or claimed therein, including the right to make, use and/or
sell the inventions disclosed or claimed therein.
"PROCEEDS" shall mean any consideration received from the sale, exchange,
license, lease or other disposition of any asset or property that constitutes
Collateral, any value received as a consequence of the possession of any
Collateral and any payment received from any insurer or other person or entity
as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property which constitutes
Collateral, and shall include any claim of the Company against any third party
for (and the right to ▇▇▇ and recover for and the rights to damages or profits
due or accrued arising out of or in connection with) (i) past, present or future
infringement of any Patent now or hereafter owned by the Company, or licensed
under a Patent License, (ii) past, present or future infringement or dilution of
any Trademark now or hereafter owned by the Company or licensed under a
Trademark License or injury to the goodwill associated with or symbolized by any
Trademark now or hereafter owned by the Company, (iii) past, present or future
breach of any License and (iv) past, present or future infringement of any
Copyright now or hereafter owned by the Company or licensed under a Copyright
License and (c) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"SECURED OBLIGATIONS" shall mean the due and punctual payment by the
Company of: (A) the principal of and premium, if any, and interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the obligation of the Company pursuant to
Section 5.1 of this Agreement to reimburse the Investor for amounts paid by the
Investor under or in respect of its Guaranty, dated March 9, 2001, in favor of
Fleet National Bank, when due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise; (B) the principal of and premium, if
any, and interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on the obligation of the
Company pursuant to
Section 5.1 of this Agreement to reimburse the Investor for amounts paid by the
Investor in respect of the reimbursement of drawings under the Letter of Credit,
issued by the Chase Manhattan Bank USA, N.A., dated March 9, 2001, in favor of
Fleet National Bank, when due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise; and (C) all other monetary
obligations, including fees, indemnities, costs, and reasonable expenses,
whether primary, secondary, direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Company to the Investor under this
Agreement.
"SECURITIES" shall mean any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an enterprise
of an issuer which (a) are represented by a certificate representing a security
in bearer or registered form, or the transfer of which may be registered upon
books maintained for that purpose by or on behalf of the issuer, (b) are one of
a class or series or by its terms is divisible into a class or series of shares,
participations, interests or obligations and (c)(i) are, or are of a type, dealt
with or traded on securities exchanges or securities markets or (ii) are a
medium for investment and by their terms expressly provide that they are a
security governed by Article 8 of the Uniform Commercial Code.
"SECURITIES ACCOUNT" shall mean an account to which a Financial Asset is
or may be credited in accordance with an agreement under which the person
maintaining the account undertakes to treat the person for whom the account is
maintained as entitled to exercise rights that comprise the Financial Asset.
"SECURITY ENTITLEMENTS" shall mean the rights and property interests of an
Entitlement Holder with respect to a Financial Asset.
"SECURITIES INTERMEDIARY" shall mean (a) a clearing corporation or (b) a
person, including a bank or broker, that in the ordinary course of its business
maintains securities accounts for others and is acting in that capacity.
"TRADEMARK LICENSE" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to use any Trademark now or
hereafter owned by the Company or which the Company otherwise has the right to
license, or granting to the Company any right to use any Trademark now or
hereafter owned by any third party, and all rights of the Company under any such
agreement.
"TRADEMARKS" shall mean all of the following now owned or hereafter
acquired by the Company: (a) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, trade dress, logos, other source or business identifiers, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all registration and
recording applications filed in connection therewith, including registrations
and pending applications in the United States Patent and Trademark Office, any
State of the United States or any similar offices in any other country or any
political subdivision thereof, and all extensions or renewals thereof, including
those listed on Exhibit V attached hereto except for "Intent to Use"
applications for Trademark or Service ▇▇▇▇ registrations filed pursuant to
Section 1(b) of the ▇▇▇▇▇▇ Act,
unless and until an Amendment to Allege Use or a Statement of Use under Section
1(c) and 1(d) of said Act has been filed, (b) all goodwill associated therewith
or symbolized thereby and (c) all other assets, rights and interests that
uniquely reflect or embody such goodwill.
"Uniform Commercial Code" means the Uniform Commercial Code of the State
of New York, as in effect from time to time.
EXHIBIT III
SPECIAL PROVISIONS RELATING TO INTELLECTUAL PROPERTY PLEDGED AS SECURITY
(a) The Company hereby agrees that it will not, nor will it permit
any of its licensees to, do any act, or omit to do any act, whereby any Patent
which is material to the conduct of the business of the Company may become
invalidated or dedicated to the public, where such invalidation or dedication to
the public could have a material adverse effect on the Company, as determined by
the Company in the exercise of its reasonable business judgment,.
(b) The Company (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of the business
of the Company, take all steps that the Company in the exercise of its
reasonable business judgment determines is in the Company's best interest, to
(i) maintain such Trademark in full force free from any claim of abandonment or
invalidity for non-use, (ii) maintain the quality of products and services
offered under such Trademark, (iii) display such Trademark with notice of
Federal or foreign registration to the extent necessary and sufficient to
establish and preserve its maximum rights under applicable law and (iv) not
knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.
(c) The Company (either itself or through licensees) will, for each
work covered by a Copyright material to the conduct of the business of the
Company continue to publish, reproduce, display, adopt and distribute the work
with appropriate copyright notice as necessary and sufficient to establish and
preserve its rights under applicable copyright laws in all material respects.
(d) The Company shall notify the Investor immediately if it knows
that any Patent, Trademark or Copyright material to the conduct of the business
of the Company may become abandoned, lost or dedicated to the public, where such
abandonment, loss or dedication to the public could have a material adverse
effect on the Company, as determined by the Company in the exercise of its
reasonable business judgment, or of any material adverse determination or
development (including the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office,
United States Copyright Office) regarding the Grantor's ownership of any such
Patent, Trademark or Copyright, its right to register the same, or to keep and
maintain the same.
(e) Within ten business days of the filing by the Company, either
itself or through any agent, employee, licensee or designee, of an application
for any Patent, Trademark or Copyright material to the conduct of the business
of the Company, as determined by the Company in the exercise of its reasonable
business judgment (or for the registration of any such Trademark or Copyright)
with the United States Patent and Trademark Office, United States Copyright
Office or any office or agency in any political subdivision of the United
States, the Company shall inform the Investor of such filing or registration,
and, upon request of the Investor, execute and deliver any and all agreements,
instruments, documents and papers as the Investor may request to evidence the
Investor's security interest in such Patent, Trademark or Copyright, and the
Company hereby appoints the Investor as its attorney-in-fact to execute and
file such writings for the foregoing purposes, all acts of such attorney being
hereby ratified and confirmed; such power, being coupled with an interest, is
irrevocable.
(f) The Company will take all steps that the Company in the exercise
of its reasonable business judgment determines are in the Company's best
interest and that are consistent with the practice in any proceeding before the
United States Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States, to maintain
and pursue each material application relating to the Patents, Trademarks and/or
Copyrights (and to obtain the relevant grant or registration) and to maintain
each issued Patent and each registration of the Trademarks and Copyrights that
is material to the conduct of the business of the Company, including timely
filings of applications for renewal, affidavits of use, affidavits of
incontestability and payment of maintenance fees, and, if consistent with good
business judgment, to initiate opposition, interference and cancellation
proceedings against third parties.
(g) In the event that the Company has reason to believe that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of the business of the Company, has been or is about to be infringed,
misappropriated or diluted by a third party in any manner that the Company
determines in the exercise of its reasonable business judgment to be reasonably
likely to have a material adverse effect on the Company, the Company promptly
shall notify the Investor and shall, if consistent with good business judgment,
promptly ▇▇▇ for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions as are appropriate under the circumstances to protect such
Collateral.
EXHIBIT IV
PATENTS OF THE COMPANY GRANTED AS COLLATERAL
[not included with public filing]
EXHIBIT V
TRADEMARKS OF THE COMPANY GRANTED AS COLLATERAL
[not included with public filing]