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EXHIBIT 10.28
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of September 23, 1999, among INTERNAP
NETWORK SERVICES CORPORATION ("Borrower"), whose address is Two Union, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, and whose facsimile number
is (206) 264- 1832, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇ ▇▇▇▇▇▇ AND ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇. (collectively,
"Lenders"; individually, a "Lender") and S. L. PARTNERS, INC., as agent for the
Lenders ("Agent"), whose address is: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, and whose facsimile number is (▇▇▇) ▇▇▇-▇▇▇▇.
RECITALS
WHEREAS, Lenders have agreed to make available to Borrower a credit
facility upon the terms and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein the parties agree as follows:
1. TERMS AND DUTY TO ACT REASONABLY
The terms "including" and "includes" always mean "including (or
includes) without limitation," in this or any Loan Document. This Agreement
shall be construed to impart upon Lenders and Agent a duty to act reasonably at
all times.
2. LOAN AND TERMS OF PAYMENT
2.1 LOANS.
Borrower will pay to Agent on account of Lenders the unpaid principal
amount of all Loans and interest on the unpaid principal amount of the Loans
when due.
2.1.1 MAKING OF LOANS.
(a) Subject to the terms and conditions set forth in
this Agreement, from the date hereof through December 31, 1999, each Lender
agrees to make loans (the "Loans") to Borrower in an aggregate principal amount
up to the amount of such Lender's Commitment. Within each Lender's Commitment,
such Lender will fund his Pro Rata Share of each funding request, as described
in Section 2.1.1(c) below. No Lender shall be obligated to fund more than his
Pro Rata Share of any funding request or to make Loans in an aggregate principal
amount in excess of his Commitment.
(b) Borrower may draw or make multiple draws at any
time before December 31, 1999, upon ten (10) Business Days' written notice to
the Agent in the form of Exhibit A hereto signed by a Responsible Officer. Each
funding request shall specify the amount to be borrowed (which shall not be less
than $1,000,000; provided, however, that if the then available funding under the
Committed Line is less than $1,000,000, then the funding request may be for such
lesser amount) and the date of the requested funding (which shall be no earlier
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than the tenth (10th) Business Day following the date on which such notice is
received by the Agent).
(c) Each Lender will severally fund his Pro Rata
Share of each funding request made by Borrower by depositing, no later than five
(5) Business Days prior to the proposed funding date, his Pro Rata Share in
immediately available funds into an account maintained by the Agent. Upon
satisfaction of all conditions to funding set forth in Sections 3.1 and 3.2, as
applicable, the Agent will make available to the Borrower the amount of the draw
no later than the close of business on the funding date.
(d) In the event any Lender (a "Defaulting Lender")
fails to fund his Pro Rata Share of a borrowing (the "Unfunded Amount") five (5)
Business Days prior to the funding date, the Agent shall on the next Business
Day notify by telephone each other Lender (a "Non-Defaulting Lender") of such
failure and offer such Non-Defaulting Lenders the opportunity to fund the
Unfunded Amount, pro rata based on the ratio of the outstanding principal amount
of each such Non-Defaulting Lender's Loans to the aggregate outstanding
principal amount of all Loans made by Non-Defaulting Lenders (or, if no Loans
are at the time outstanding the ratio of each Non-Defaulting Lender's Commitment
to the Commitments of all Non-Defaulting Lenders). If, by the close of business
on the second (2nd) Business Day following such telephonic notice, less than all
of the Non-Defaulting Lenders notify the Agent that they desire to fund pro rata
the Unfunded Amount, the Agent shall offer to any one or more Non-Defaulting
Lenders the opportunity to fund on the funding date all or a portion of the
Unfunded Amount.
(e) The principal amount of the Loans, and all other
Obligations, if not prepaid in advance, are payable on the Maturity Date,
together with accrued interest thereon.
(f) Each Lender's Loans shall be evidenced by a
convertible promissory note in substantially the form of Exhibit B hereto, dated
the date hereof and in the principal amount of such Lender's Commitment.
(g) The Loans shall be used for ordinary working
capital requirements of Borrower.
2.2 OVERADVANCES.
If Borrower's Obligations under Section 2.1.1 exceed the Committed Line,
Borrower must pay Agent the excess within five (5) Business Days after written
notice thereof, together with accrued interest on the amount so prepaid.
2.3 INTEREST RATE, PAYMENTS.
(a) Interest Rate. Each Loan will accrue interest on
the outstanding principal balance at a per annum rate of two percent (2%) above
the Prime Rate in effect on the date such Loan was made, provided, however, that
if Borrower fails to pay all Obligations upon the Maturity Date, each Loan will
accrue interest thereafter on the outstanding principal balance at a per annum
rate of seven percent (7%) above the Prime Rate in effect on the date such Loan
was made. Interest is computed on a 360-day year for the actual number of days
elapsed.
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(b) Payments. Interest due on the outstanding
principal of each Loan is payable on the Maturity Date or on any date on which
all or any portion thereof is prepaid.
(c) Interest Rate Limitation. Anything herein to the
contrary notwithstanding, the obligations of the Borrower to any Lender
hereunder shall be subject to the limitation that payments of interest shall not
be required for any period for which interest is computed hereunder, to the
extent (but only to the extent) that contracting for or receiving such payment
by such Lender would be contrary to the provisions of any law applicable to such
Lender limiting the highest rate of interest that may be lawfully contracted
for, charged or received by such Lender, and in such event the Borrower shall
pay such Lender interest at the highest rate permitted by applicable law.
2.4 FEES.
Borrower will pay all reasonable out-of-pocket expenses of Agent
(including reasonable fees and expenses of one counsel to Agent and Lenders)
incurred in connection with preparation of the Loan Documents. Borrower will
reimburse Agent for all reasonable out-of-pocket expenses incurred by Agent in
connection with the administration of the Loans and the Committed Line or the
enforcement, on behalf of the Lenders, of the Lenders' rights thereunder
(including reasonable legal fees). No commitment fee will be payable by
Borrower.
2.5 PREPAYMENT.
(a) Optional Prepayment. Borrower may prepay all or
part of the Obligations at any time without penalty or premium, together with
accrued interest thereon. Amounts prepaid may not be reborrowed.
(b) Mandatory Prepayment.
(i) The entire principal amount of all Loans
outstanding, together with all accrued interest thereon and any other
Obligations owing hereunder, shall be subject to mandatory prepayment by
Borrower within five (5) Business Days after (1) the closing of the Borrower's
initial public offering, (2) the closing of any Private Equity Financing that,
together with the gross proceeds of any previous Private Equity Financing,
results in cumulative gross proceeds to Borrower of $20,000,000 or more or (3)
the occurrence of a Change of Control.
(ii) The principal amount of the Loans
outstanding, together with all accrued interest on the amount so prepaid, shall
be subject to mandatory prepayment by Borrower, in part, within five (5)
Business Days after the closing of any Private Equity Financing (other than any
Private Equity Financing described in clause (2) of Section 2.5(b)(i), in which
case Section 2.5(b)(i) shall apply) in an amount equal to 25% of the gross
proceeds of such Private Equity Financing.
(iii) Amounts prepaid may not be reborrowed.
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2.6 TERMINATION OF CREDIT AGREEMENT.
This Agreement, the Committed Line and the Commitments of the Lenders
shall terminate (a) if no Loans are made hereunder, on the first to occur of
December 31, 1999 and the closing of the Borrower's initial public offering or
(b) if Loans are made hereunder, upon irrevocable payment in full of all of the
Obligations.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE.
The funding of the first Loans is subject to fulfillment of the
following conditions to the reasonable satisfaction of the Agent and the
Lenders:
(a) Borrower, Lenders and Agent have entered into
the Loan Documents in form and substance reasonably satisfactory to Lenders and
Agent;
(b) All representations and warranties in the Loan
Documents are true and correct in all material respects (except to the extent
such representations and warranties expressly refer to an earlier date, in which
case they shall be true and correct as of such earlier date);
(c) No Default or Event of Default has occurred and
is continuing;
(d) All governmental consents required for the
borrowing of the Loans or the performance of Borrower's obligations under the
Loan Documents have been obtained and are in full force and effect;
(e) The consent of Silicon Valley Bank to the
execution and delivery of the Loan Documents and to the payment of all
outstanding Loans, upon completion of any debt or equity funding (excluding
equipment financing transactions), prior to the paydown of Borrower's existing
debt facilities with Silicon Valley Bank has been obtained and is in full force
and effect;
(f) All other consents or approvals of third parties
required for the borrowing of the Loans or the performance of Borrower's
obligations under the Loan Documents have been obtained and are in full force
and effect;
(g) The 1999 Warrants have been executed by Borrower
and delivered to the Agent;
(h) Borrower shall have delivered to the Agent (x) a
certificate executed by Borrower's chief financial officer (1) to the effect
that the borrowing of the Loans and the expenditure of the proceeds thereof for
the purposes described in Section 2.1.1(g), after giving effect to any other
borrowings hereunder, will not result in a breach of any provision of the
Amended and Restated Loan and Security Agreement dated June 30, 1999 between
Silicon Valley Bank and Borrower and, in the case of the financial covenants in
Section 6.7 thereof, accompanied by calculations demonstrating Borrower's
continuing compliance therewith or (2) if such borrowing and expenditure would
result in such a breach, describing such breach, and (y) in the case of any
certificate referred to in the foregoing clause (x)(2), a letter from Silicon
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Valley Bank in form and substance reasonably satisfactory to the Agent waiving
all defaults arising from such breach; and
(i) Borrower shall have delivered such certificates
and other documents as the Agent may reasonably request to confirm or evidence
the foregoing.
3.2 CONDITIONS PRECEDENT TO ALL SUBSEQUENT ADVANCES.
The funding of any subsequent draw request is subject to fulfillment to
the reasonable satisfaction of the Agent of the conditions identified in clauses
(b), (c) and (h) of Section 3.1 above.
4. ISSUANCE OF WARRANTS.
4.1 ISSUANCE OF WARRANTS.
(a) Borrower shall issue to Agent, on the Closing
Date, a warrant to purchase 100,000 shares of Borrower's stock (subject to the
adjustments, terms and conditions set forth in such Warrant) in substantially
the form attached hereto as EXHIBIT C (the "1999 Warrants").
(b) If and only if Borrower extends the Maturity
Date for six (6) months from the otherwise applicable date in accordance with
the definition of "Maturity Date" set forth in Section 17 hereof, which decision
shall be at Borrower's sole discretion, and as a condition precedent to such
six-month extension, Borrower shall issue to Agent a warrant to purchase an
additional 100,000 shares of Borrower's stock in substantially the form attached
hereto as EXHIBIT C (the "2000 Warrants"; and together with the 1999 Warrants,
the "Warrants").
(c) The 1999 Warrants will expire on December 31,
2004 and the 2000 Warrants will expire on the fifth anniversary of their date of
issuance.
(d) The Warrants will be initially issued to Agent.
Agent will be entitled to 5% of the Warrants as an agency fee. Promptly
following the earliest of (i) the termination of this Agreement pursuant to
Section 2.6(a), (ii) December 31, 1999 or (iii) such other date as Agent
reasonably determines, Agent (after deducting Warrants representing the agency
fee) will transfer to each Lender (other than any Defaulting Lender) each
Lender's Pro Rata Share of the remaining 1999 Warrants. If the 2000 Warrants are
issued, Agent (after deducting Warrants representing the agency fee) will
transfer to each Lender (other than any Defaulting Lender) each Lender's Pro
Rata Share of the remaining 2000 Warrants.
(e) Borrower and Lenders agree that (i) neither any
Lender nor any company affiliated with any Lender has rendered any services to
Borrower in connection with this Agreement and (ii) the Warrants are not being
issued as compensation for services rendered.
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5. CONVERSION OPTION.
(a) In the event of a sale of Series D Preferred
Stock, each Lender (other than any Defaulting Lender) will have the right to
convert up to his Pro Rata Share of $2,000,000 (or the outstanding aggregate
principal balance of the Loans if less than $2,000,000 is outstanding) into
shares of Series D Preferred Stock (such rights are referred to as the
"Conversion Option"). Any Defaulting Lender's Conversion Option shall be
allocated pro rata among the Non-Defaulting Lenders. The Conversion Option of
any Lender who elects not to convert his Pro Rata Share shall be allocated among
the other Lenders pro rata based upon their outstanding Loans or as otherwise
agreed among those Lenders who desire to convert a portion of their Loans into
Series D Preferred Stock. Agent shall notify Borrower of the manner in which the
Conversion Option is to be allocated among the Lenders.
(b) The share price used to determine the conversion
will be the price to be paid by other purchasers of the Series D Preferred
Stock. To the extent that any Lender is an existing shareholder of Borrower, any
Loans converted into Series D Preferred Stock will not impact the rights of
participation such shareholders may currently have as holders of Series B or
Series C Preferred Stock. In other words, Series D Preferred Stock issueable
upon conversion of Loans will be in addition to shares of Series D Preferred
Stock that any Lender may otherwise be entitled to purchase individually in a
Series D Preferred Stock sale.
6. THE AGENT.
6.1 APPOINTMENT.
Agent shall have authority to act on behalf of Lenders and shall act as
the sole contact with Borrower with respect to the administration of the Loans,
including, without limitation, for purposes of receiving payments and notices
under the Loan Documents. No Lender shall contact Borrower with respect to the
administration of the Loans. Each Lender hereby appoints the Agent as the agent
of such Lender under this Agreement and the other Loan Documents, and each such
Lender authorizes the Agent, in such capacity, to take such action on his behalf
under the provisions of this Agreement and the other Loan Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Agent by the terms of this Agreement and the other Loan Documents, together with
such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Agreement, the Agent shall not have
any duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
6.2 EXCULPATORY PROVISIONS.
Neither the Agent nor any of its shareholders, officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any
action lawfully taken or omitted to be taken by it or such person under or in
connection with this Agreement or any other Loan Document (except for its or
such person's own fraud or willful misconduct) or (ii) responsible in any manner
to any of the Lenders for any recitals, statements, representations or
warranties made by Borrower or any representative thereof contained in this
Agreement or any other Loan
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Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of Borrower to perform its obligations hereunder or
thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of Borrower.
6.3 RELIANCE BY AGENT.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent, certificate, affidavit,
letter, telecopy, telex or teletype message, statement, order or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper person or persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower). The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Majority Lenders (or such other
requisite Lenders as may be expressly required by any Loan Document) as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
and the other Loan Documents in accordance with a request of the Majority
Lenders (or such other requisite Lenders as may be expressly required by any
Loan Document), and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Obligations.
6.4 NOTICE OF DEFAULT.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received notice from a Lender or Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". In the event that the Agent receives such a notice, the
Agent shall give notice thereof to the Lenders. The Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Majority Lenders; provided that unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the
Lenders.
6.5 NON-RELIANCE ON AGENT AND OTHER LENDERS.
Each Lender expressly acknowledges that neither the Agent nor any of its
shareholders, officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to such Lender and that no
act by the Agent previously or hereafter taken shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents to
the Agent that he has, independently and without reliance upon the Agent or any
other Lender, and based on such documents and information as he has deemed
appropriate, made his own appraisal of and investigation into the business,
operations, property, financial and other
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condition and creditworthiness of Borrower and made his own decision to make
Loans hereunder and enter into this Agreement. Each Lender also represents that
he will, independently and without reliance upon the Agent or any other Lender,
and based on such documents and information as he shall deem appropriate at the
time, continue to make his own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as he deems necessary to inform himself as to the
business, operations, property, financial and other condition and
creditworthiness of Borrower. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations, property,
condition (financial or otherwise), prospects or creditworthiness of Borrower
which may come into the possession of the Agent or any of its shareholders,
officers, directors, employees, agents, attorneys-in-fact or affiliates.
6.6 INDEMNIFICATION.
The Lenders agree to indemnify the Agent in its capacity as such (to the
extent not reimbursed by Borrower and without limiting the obligation of
Borrower to do so), ratably according to their respective Pro Rata Shares in
effect on the date on which indemnification is sought (or, if indemnification is
sought after the date upon which the Committed Line has terminated and all
outstanding Loans have been repaid, ratably in accordance with such Pro Rata
Shares immediately prior to such date), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the amounts
owing hereunder) be imposed on, incurred by or asserted against the Agent in any
way relating to or arising out of, the Commitments, this Agreement, any of the
other Loan Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by the Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent's fraud or willful
misconduct. The agreements in this Section 6.6 shall survive the payment of the
Obligations.
6.7 SUCCESSOR AGENT.
The Agent may resign as Agent upon 30 days' notice to the Lenders and
Borrower. If the Agent shall resign as Agent under this Agreement and the other
Loan Documents, then the Majority Lenders shall appoint from among the Lenders a
successor agent for the Lenders, which successor agent shall be approved by the
Borrower, whereupon such successor agent shall succeed to the rights, powers and
duties of the Agent, and the term "Agent" shall mean such successor agent
effective upon such appointment and approval, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or further act
on the part of such former Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Agent's resignation as Agent, the
provisions of this Section 6 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement and the
other Loan Documents.
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6.8 AGENT'S SHAREHOLDER IN HIS INDIVIDUAL CAPACITY.
The Lenders acknowledge that:
(a) The Agent's sole shareholder, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇. ("RDS"), is also a shareholder and director of Borrower.
(b) In the event there is a conflict between RDS'
fiduciary duties as a director and Agent's responsibilities hereunder, RDS shall
be entitled to take or omit to take such actions as may be required to fulfill
his fiduciary duties, including, if appropriate, causing Agent to resign
hereunder.
(c) In his capacity as a director of Borrower, RDS
may gain access to information about Borrower that is not otherwise available to
the Lenders and, except as otherwise specifically provided in Sections 6.4 or
6.5, Agent is under no obligation to provide such information to any Lender.
6.9 AGENCY FEES.
All earnings on the account maintained by the Agent pursuant to Section
2.1.1(c) shall be for the account of Agent. In addition, as compensation for its
agreement to serve in such capacity, Agent shall be entitled to five percent
(5%) of all Warrants issued to Agent pursuant to Section 4.1(d) of this
Agreement. Agent may transfer any Warrants so received to its sole shareholder,
RDS. Any such Warrants will be in addition to Warrants to which RDS may be
entitled as a Lender.
7. REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower represents and warrants as follows:
7.1 DUE ORGANIZATION AND AUTHORIZATION.
Borrower and each Subsidiary is duly existing and in good standing in
its state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified except where failure to so qualify would
reasonably be expected to cause a Material Adverse Change.
The execution, delivery and performance of the Loan Documents have been
duly authorized by all necessary corporate and shareholder action, and do not
conflict with Borrower's formation documents or any agreement with Borrower's
shareholders, nor conflict with or constitute an event of default under any
financing agreement or other material agreement by which Borrower is bound.
Borrower is not in default under any agreement to which or by which it is bound
in which the default would reasonably be expected to cause a Material Adverse
Change.
As of the Closing Date, Borrower has no Subsidiaries.
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7.2 LITIGATION.
Except as shown in Schedule 7.2 attached hereto, there are no actions or
proceedings pending or, to Borrower's knowledge, threatened by or against
Borrower or any Subsidiary.
7.3 SOLVENCY.
As of the Closing Date, (a) the fair salable value of Borrower's assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; and (b) Borrower is able to pay its debts (including trade debts)
as they mature.
7.4 REGULATORY COMPLIANCE.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
would reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each Subsidiary have timely filed all required
tax returns and paid, or made adequate provision to pay, all material taxes,
except those being contested in good faith with adequate reserves on its books
under generally accepted accounting principles. Borrower and each Subsidiary
have obtained all consents, approvals and authorizations of, made all
declarations or filings with, and given all notices to, all government
authorities that are necessary (a) to continue its business as currently
conducted except where the failure to do so would not reasonably be expected to
cause a Material Adverse Change and (b) to the execution, delivery and
performance of the Loan Documents by Borrower.
7.5 FULL DISCLOSURE.
No representation, warranty or other statement of Borrower in any
certificate or written statement given to Agent contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements contained in such certificates or written statements not misleading
in any material respect. It being understood by Lenders that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that the actual results during the
period or periods covered by such projections and forecasts may differ from the
projected and forecasted results.
7.6 OFFERING.
Assuming the accuracy of the representations and warranties of the
Lenders contained in Section 10 hereof, the offer, issue, and sale of the Notes
and Warrants are and will be exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933, as amended (the "1933
ACT"), and have been registered or qualified (or are exempt from registration
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and qualification) under the registration, permit, or qualification requirements
of all applicable state securities laws.
8. AFFIRMATIVE COVENANTS
Borrower will do all of the following:
8.1 COMPLIANCE.
Borrower will maintain its and each Subsidiaries' legal existence and
good standing in its jurisdiction of formation and maintain qualification in
each jurisdiction in which the failure to so qualify would have a material
adverse effect on Borrower's business or operations. Borrower will comply, and
have each Subsidiary comply, with all laws, ordinances and regulations to which
it is subject, noncompliance with which would reasonably be expected to (a) have
a material adverse effect on Borrower's business or operations or (b) cause a
Material Adverse Change.
8.2 TAXES.
Borrower will make, and cause each Subsidiary to make, timely payment of
all material federal, state, and local taxes or assessments, unless contested in
good faith with adequate reserves on its books under generally accepted
accounting principles, and will deliver to Agent, on demand, appropriate
certificates attesting to the payment.
8.3 INSURANCE.
Borrower will keep its business insured with companies, for risks and in
amounts, as the officers of Borrower, in the exercise of their reasonable
judgment, deem to be adequate. At Agent's request, Borrower will deliver
certified copies of policies and evidence of all premium payments.
8.4 FURTHER ASSURANCES.
Borrower will promptly execute and deliver to Agent any further
instruments and documents and take further action as Agent reasonably requests
to effect the purposes of this Agreement.
8.5 FINANCIAL STATEMENTS; COMPLIANCE CERTIFICATES.
(a) Borrower will, within thirty (30) days' of the
end of each fiscal quarter, deliver to Agent (with sufficient copies for each
Lender) (a) unless publicly available the unaudited consolidated balance sheet
and unaudited consolidated statement of income and cash flows of Borrower and
its Subsidiaries as of the end of such fiscal quarter, and (b) a Compliance
Certificate in the form of Exhibit D signed by a Responsible Officer.
(b) Borrower will, within ninety (90) days' of the
end of each fiscal year, deliver to Agent (with sufficient copies for each
Lender) the audited consolidated balance sheet and statement of income and cash
flows of Borrower and its Subsidiaries as of the end of such
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fiscal year, unless such balance sheet and statement of income and cash flows is
publicly available.
(c) Borrower will, promptly deliver to Agent, such
other information regarding Borrower and its Subsidiaries as Agent may
reasonably request.
9. NEGATIVE COVENANTS
Borrower will not do any of the following:
9.1 COMPLIANCE.
Become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Loan for that purpose; fail to meet the minimum funding
requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as
defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards
Act or violate any other law or regulation, if the violation would reasonably be
expected to (a) have a material adverse effect on Borrower's business or
operations or (b) cause a Material Adverse Change, or permit any of its
Subsidiaries to do so.
9.2 LIENS; INDEBTEDNESS; INVESTMENTS.
(a) Borrower will not, nor permit any of its
Subsidiaries to, create or suffer to exist against any of its assets or
properties any Lien, except Permitted Liens.
(b) Borrower will not, nor permit any of its
Subsidiaries to, incur any Indebtedness, except Permitted Indebtedness.
(c) Borrower will not, nor permit any of its
Subsidiaries to, make any loan or capital contribution to, acquire any security
of, or otherwise make any investment in any person, except for Permitted
Investments.
9.3 LIMITATION ON ACTIVITIES OF BORROWER AND SUBSIDIARIES.
Borrower will not, nor permit any of its Subsidiaries to, engage in any
business or activity of any kind other than the lines of business engaged in or
proposed to be engaged in by Borrower as of the Closing Date.
10. REPRESENTATIONS AND WARRANTIES OF LENDERS.
10.1 PURCHASE FOR OWN ACCOUNT.
Each Lender represents that he is acquiring the Notes, the equity
securities issuable upon conversion of the Notes, the Warrants and the equity
securities issuable upon exercise of the Warrants (collectively, the
"Securities") solely for his own account and beneficial interest 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 (in connection with a distribution
or otherwise), granting any
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participation in, or otherwise distributing the same, and does not presently
have reason to anticipate a change in such intention.
10.2 INFORMATION AND SOPHISTICATION.
Each Lender acknowledges that he has received all the information he has
requested from Borrower and he considers necessary or appropriate for deciding
whether to acquire the Securities. Each Lender represents that he has had an
opportunity to ask questions and receive answers from Borrower regarding the
terms and conditions of the offering of the Securities and to obtain any
additional information necessary to verify the accuracy of the information given
the Lender. Each Lender further represents that he has such knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risk of this investment.
10.3 ABILITY TO BEAR ECONOMIC RISK.
Each Lender acknowledges that investment in the Securities involves a
high degree of risk, and represents that he is able, without materially
impairing his financial condition, to hold the Securities for an indefinite
period of time and to suffer a complete loss of his investment.
10.4 FURTHER LIMITATIONS ON DISPOSITION.
Without in any way limiting the representations set forth above, each
Lender further agrees not to 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) The Lender shall have notified Borrower of the
proposed disposition and shall have furnished Borrower with a detailed statement
of the circumstances surrounding the proposed disposition, and if reasonably
requested by Borrower, such Lender shall have furnished Borrower with an opinion
of counsel, reasonably satisfactory to Borrower, that such disposition will not
require registration under the 1933 Act or any applicable state securities laws.
(c) Notwithstanding the provisions of paragraphs (a)
and (b) above, no such registration statement or opinion of counsel shall be
necessary (i) to the extent a disposition is permitted pursuant to the terms of
the Securities without a registration statement or opinion or (ii) for transfers
by gift, will or intestate succession to any spouse or lineal descendants or
ancestors, if all transferees agree in writing to be subject to the terms hereof
to the same extent as if they were Lenders hereunder.
Nothing in this Section 10.4 or any other provision of this Agreement
shall limit or restrict the right of the Agent to transfer the Warrants as
contemplated in Section 4.1(d) or Section 6.9 or the right to reallocate the
Conversion Option as provided in Section 5(a), and no registration statement or
opinion shall be required in connection with any such transfer or reallocation.
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10.5 ACCREDITED INVESTOR STATUS.
Each Lender is an "accredited investor" as such term is defined in Rule
501 under the Securities Act.
10.6 FURTHER ASSURANCES.
Each Lender agrees and covenants that he will promptly execute and
deliver to Borrower such further instruments and documents and take such further
action as Borrower may reasonably require in order to carry out the full intent
and purpose of this Agreement.
10.7 DISCLOSURE OF FINANCIAL INFORMATION
Lenders will provide such statements, documents and other information to
Borrower, as Borrower shall reasonably request to establish the liquidity of
Lenders. This information shall be kept confidential by Borrower, provided that
Borrower may disclose such information to Silicon Valley Bank or, with the
consent of Lenders, to any other third parties inquiring about the liquidity of
Borrower, or as otherwise required by law, regulation or governmental order.
11. EVENTS OF DEFAULT
Any one of the following is an Event of Default:
(a) Borrower fails to pay when and as required under
the Loan Documents any amounts owed to Lenders by Borrower under the Loan
Documents;
(b) Any representation or warranty by Borrower made
in any Loan Document, or which is contained in any certificate, document or
financial or other statement by Borrower, furnished at any time under the Loan
Documents, is incorrect in any material respect on or as of the date made or
deemed made; provided, however, that Borrower shall have 30 days after written
notice thereof is given to Borrower by Agent to remedy the circumstances that
caused the representation or warranty to be incorrect;
(c) Borrower fails to perform or observe any
covenant contained in the Loan Documents, and such default shall continue
unremedied for a period of 30 days;
(d) Borrower begins an Insolvency Proceeding or an
Insolvency Proceeding is begun against Borrower and not dismissed or stayed
within 30 days; or
(e) Borrower defaults in the payment of any
Indebtedness owed to Silicon Valley Bank or defaults in the performance of any
other covenant under such Indebtedness and, in either case, Silicon Valley Bank
accelerates the maturity of such Indebtedness.
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12. LENDERS' RIGHTS AND REMEDIES
12.1 RIGHTS AND REMEDIES.
When an Event of Default occurs and continues the Agent may, with the
written consent of the Majority Lenders, do any or all of the following:
(a) Declare all Obligations immediately due and
payable; and
(b) Stop advancing money or extending credit for
Borrower's benefit under this Agreement and/or declare the Committed Line to be
terminated.
12.2 REMEDIES CUMULATIVE.
Lenders' and the Agent's rights and remedies under this Agreement, the
Loan Documents, and all other agreements are cumulative. Lenders and the Agent
have all rights and remedies provided by law, or in equity. Lenders' or the
Agent's exercise of one right or remedy is not an election, and Lenders' or the
Agent's waiver of any Event of Default is not a continuing waiver. Lenders' or
the Agent's delay in exercising any right or remedy is not a waiver, election,
or acquiescence. No waiver is effective unless made in accordance with Section
16.4 and then is only effective for the specific instance and purpose for which
it was given.
12.3 DEMAND WAIVER.
Borrower waives demand, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Lenders or the Agent on which
Borrower is liable.
13. INDEMNIFICATION OF AGENT AND LENDERS.
Borrower will pay, indemnify and hold the Agent, the Lenders and their
affiliates and their respective directors, officers, employees and agents, and
each other person controlling any of the foregoing (within the meaning of either
Section 15 of the Securities Act of 1933, as amended, or Section 20 of the
Securities Exchange Act of 1934, as amended) (collectively, the "Indemnified
Parties") harmless from and against any and all claims made by any person which
give rise to liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of any kind whatsoever
against any of the Indemnified Parties with respect to or arising out of or in
connection with the Loan Documents, the Loans or any investigation, litigation
or proceeding otherwise related to the transactions contemplated hereby or
thereby (all of the foregoing, collectively, the "Indemnified Matters");
provided that Borrower shall have no liability hereunder with respect to
Indemnified Matters arising solely from the grossly negligent acts or willful
misconduct of any person seeking indemnification.
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14. NOTICES
All notices or demands by any party about this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile to the addresses set forth next to the name of such party on
the signature pages of this Agreement. A party hereto may change its notice
address by giving the other parties hereto written notice.
15. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Washington law governs the Loan Documents without regard to principles
of conflicts of law. Borrower, Agent and each Lender submit to the exclusive
jurisdiction of the State and Federal courts in King County, Washington.
BORROWER, AGENT AND EACH LENDER WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR ALL PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HERETO HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
EACH PARTY HERETO AGREES THAT IN NO EVENT SHALL ANY PARTY TO THIS
AGREEMENT SEEK FROM ANOTHER PARTY OR BE LIABLE TO ANOTHER PARTY FOR
CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES UNDER CONTRACT, TORT OR OTHER THEORY
OF LAW.
16. GENERAL PROVISIONS
16.1 SUCCESSORS AND ASSIGNS.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without the prior written consent of all Lenders. Lenders have
the right, with the prior written consent of Borrower, which shall not be
unreasonably withheld, to sell, transfer, negotiate, or grant participation in
all or any part of, or any interest in, Lenders' obligations, rights and
benefits under this Agreement.
16.2 TIME OF ESSENCE.
Time is of the essence for the performance of all obligations in this
Agreement.
16.3 SEVERABILITY OF PROVISION.
Each provision of this Agreement is severable from every other provision
in determining the enforceability of any provision.
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16.4 AMENDMENTS IN WRITING; INTEGRATION.
(a) All amendments to, or any waiver of any term or
condition of, this Agreement must be in writing and signed by Borrower and
either the Majority Lenders or the Agent, with the written consent of the
Majority Lenders, provided that (i) no amendment or waiver shall reduce the
amount or extend the scheduled date of maturity of the Obligations, reduce the
stated interest rate, increase the amount or extend the expiration date of any
Lender's Commitment under the Committed Line, affect the right of any Lender to
Warrants or the Conversion Option, amend this Section 16.4 or reduce the
percentage specified in the definition of "Majority Lenders", in each case
without the written consent of all Lenders, and (ii) no amendment that would
affect the rights or duties of Agent shall be effective without the written
consent of Agent.
(b) This Agreement represents the entire agreement
about this subject matter, and supersedes prior negotiations or agreements. All
prior agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement merge into this
Agreement and the Loan Documents.
16.5 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
16.5 SURVIVAL.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The provisions
of Section 6.6 and Section 13 of this Agreement shall survive the payment in
full of the Obligations.
16.6. CONFIDENTIALITY.
In handling any confidential information, Lenders and Agent will
exercise the same degree of care that they exercise for their own proprietary
information, but disclosure of information may be made (i) with the prior
written consent of Borrower, not unreasonably withheld, to prospective
transferees or purchasers of any interest in the Loans, (ii) as required by law,
regulation, subpoena, or other order, and (iii) as necessary for Lenders to
exercise their rights under this Agreement. Confidential information does not
include information that either: (a) is in the public domain or in Lenders' or
Agent's possession when disclosed to a Lender or Agent, or becomes part of the
public domain after disclosure to a Lender or Agent; or (b) is disclosed to a
Lender or Agent by a third party, if such Lender or Agent does not know that the
third party is prohibited from disclosing the information.
16.7 ATTORNEYS' FEES, COSTS AND EXPENSES.
In any action or proceeding between Borrower and Agent or any Lender
arising out of the Loan Documents, the prevailing party will be entitled to
recover its reasonable attorneys' fees and other costs and expenses incurred, in
addition to any other relief to which it may be entitled.
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17. DEFINITIONS
17.1 DEFINITIONS.
In this Agreement:
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"AGENT" has the meaning set forth in the preamble of this Agreement.
"BORROWER" has the meaning set forth in the preamble of this Agreement.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which banks in Seattle, Washington are required or permitted to close.
"CHANGE OF CONTROL" is a material change in Borrower's ownership of
greater that 49%.
"CLOSING DATE" is the date of this Agreement.
"COMMENCEMENT DATE" is the date the first Loans are made to Borrower
hereunder.
"COMMITMENT" means the commitment of each Lender to provide a portion of
the Committed Line as set forth opposite their names on the attached Schedule
16-A (provided, however, that upon written notice to Borrower, Lenders are
entitled to change the pro rata amounts set forth in Schedule 16-A as Lenders
may decide among themselves.
"COMMITTED LINE" is $10,000,000.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreements, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangements.
"CONVERSION OPTION" has the meaning set forth in Section 5(a).
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"DEFAULT" is an event which, with the giving of notice or the lapse or
time or both, would constitute an Event of Default.
"DEFAULTING LENDER" has the meaning set forth in Section 2.1.1(d).
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
"EVENT OF DEFAULT" has the meaning set forth in Section 11.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, (b) reimbursement and other obligations for
surety bonds and letters of credit, (c) obligations evidenced by notes, bonds,
debentures or similar instruments, (d) capital lease obligations and (e)
Contingent Obligations.
"INDEMNIFIED MATTERS" has the meaning set forth in Section 13
"INDEMNIFIED PARTIES" has the meaning set forth in Section 13.
"INSOLVENCY PROCEEDING" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INVESTMENT" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"LENDERS" has the meaning set forth in the preamble of this Agreement.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, the Notes, the
Warrants, any guaranties executed by any guarantor of the Borrower's
Obligations, and any other present or future agreement between Borrower and/or
for the benefit of any Lender in connection with this Agreement, all as amended,
extended or restated.
"LOANS" has the meaning set forth in Section 2.1.1.
"MAJORITY LENDERS" is Lenders holding in the aggregate Pro Rata Shares
of more than 50%.
"MATERIAL ADVERSE CHANGE" is a material impairment of the prospect of
repayment of any of the Obligations.
"MATURITY DATE" is the earlier to occur of (a) the date six (6) months
after the Commencement Date; provided, however, that if the closing of the
Borrower's initial public offering or the closing of the Borrower's first
Private Equity Financing has not occurred prior to
19.
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the date six (6) months after the Commencement Date, and subject to the
condition precedent set forth in Section 4.1 (b) hereof and delivery by a
Responsible Officer of a certification to the effect that no Default or Event of
Default has occurred and is continuing, Borrower may, at its option, extend the
maturity date for an additional six (6) month period and (b) the date on which
the Obligations are declared to be immediately due and payable pursuant to
Section 12.1.
"1933 ACT" has the meaning set forth in Section 7.6.
"1999 WARRANTS" has the meaning set forth in Section 4.1(a).
"NON-DEFAULTING LENDER" has the meaning set forth in Section 2.1.1(d).
"OBLIGATIONS" are debts, principal, interest, fees, costs and expenses
and other amounts Borrower owes the Agent and the Lenders now or later under
this Agreement or any other Loan Document, including interest accruing after
Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower
assigned to the Agent or the Lenders.
"PERMITTED INDEBTEDNESS" is: (a) Indebtedness of Borrower to any Lender
or the Agent; (b) Indebtedness of Borrower secured by Permitted Liens; (c)
Indebtedness arising from the endorsement of instruments in the ordinary course
of business; (d) Indebtedness existing on the date hereof and set forth on the
Schedule attached hereto as Schedule 16-B; (e) Subordinated Debt; (f)
Indebtedness with respect to capital lease obligations; (g) Indebtedness with
respect to trade credit; and (h) extensions, renewals, refundings, refinancings,
modifications, amendments and restatements of any of the items of Permitted
Indebtedness (a), (d) and (e) above, provided that the principal amount thereof
is not increased or the terms thereof are not modified to impose more burdensome
terms upon Borrower.
"PERMITTED INVESTMENTS" are:
(a) Deposits with commercial banks organized under
the laws of the United States or a state thereof to the extent such deposits are
fully insured by the Federal Deposit Insurance Corporation;
(b) Investments in marketable obligations issued or
fully guaranteed by the United States and maturing not more than one (1) year
from the date of issuance;
(c) Investments in certificates of deposit and money
market funds;
(d) Auction rate preferred Investments;
(e) Investments in open market commercial paper
rated at least "A1" or "P1" or higher by a national credit rating agency and
maturing not more than one (1) year from the creation thereof;
(f) Investments pursuant to or arising under
currency agreements or interest rate agreements entered into in the ordinary
course of business;
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(g) Other Investments aggregating not in excess of
Two Hundred Fifty Thousand Dollars ($250,000) at any time;
(h) Extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of goods or
services in the ordinary course of business;
(i) Investments consisting of the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business;
(j) Investments (including debt obligations)
received in connection with the bankruptcy or reorganization of customers or
suppliers and in settlement of delinquent obligations of, and other disputes
with, customers or suppliers arising in the ordinary course of business; and
(k) Investments consisting of (i) compensation of
employees, officers and directors of Borrower so long as the Board of Directors
of Borrower determines that such compensation is in the best interests of
Borrower, (ii) travel advances, employee relocation loans and other employee
loans and advances in the ordinary course of business, (iii) loans to employees,
officers or directors relating to the purchase of equity securities of Borrower,
(iv) other loans to officers and employees approved by the Board of Directors.
"PERMITTED LIENS" are: (a) Liens for fees, taxes, levies, imposts,
duties or other governmental charges of any kind which are not yet delinquent or
which are being contested in good faith by appropriate proceedings which suspend
the collection thereof (provided, however, that such proceedings do not involve
any substantial danger of the sale, forfeiture or loss of any item of equipment
and that Borrower has adequately bonded such Lien or reserves sufficient to
discharge such Lien have been provided on the books of Borrower), (b) Liens
identified on the schedule attached hereto as Schedule 16-C, (c) Liens to secure
payment of worker's compensation, employment insurance, old age pensions or
other social security obligations of Borrower in the ordinary course of business
of Borrower, (d) Liens upon any equipment or other personal property acquired by
Borrower after the date hereof to secure (i) the purchase price of such
equipment or other personal property or (ii) lease obligations or indebtedness
incurred solely for the purpose of financing the acquisition of such equipment
or other personal property; provided that such Liens are confined solely to the
equipment or other personal property so acquired and the amount secured does not
exceed the acquisition price thereof; (e) carriers', warehousemen's, mechanics',
landlords', materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business which are not delinquent or remain payable without
penalty or which are being contested in good faith and by appropriate
proceedings (provided, however, that such proceedings do not involve any
substantial danger of the sale, forfeiture or loss of any item of equipment and
that Borrower has adequately bonded such Lien or reserves sufficient to
discharge such Lien have been provided on the books of Borrower); (f)
non-exclusive licenses of intellectual property entered into in the ordinary
course of business and licenses, Liens or similar arrangements entered into in
connection with joint ventures and corporate collaborations; (g) Liens securing
capital lease obligations on assets subject to such capital leases; (h) Liens
arising from judgments, decrees or attachments to the extent and only so long as
such judgment, decree or attachment has not caused or resulted in an Event of
Default; (i) easements, reservations, rights-of-way, restrictions, minor defects
or irregularities in title and
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other similar Liens affecting real property not interfering in any material
respect with the ordinary conduct of the business of Borrower; (j) Liens in
favor of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods; and (k)
Liens arising solely by virtue of any statutory or common law provision relating
to banker's liens, rights of setoff or similar rights and remedies as to deposit
accounts or other funds maintained with a creditor depository institution.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"PRIME RATE" is, for any day, the Prime Rate published from time to time
in The Wall Street Journal in its general guide to money rates as the base rate
on corporate loans at large United States money center commercial banks (or if
said Prime Rate is reported as a range of rates, the highest of such rates).
Changes in the Prime Rate shall be effective, for purposes of calculating
interest hereunder, or the same date such changes are reported in The Wall
Street Journal.
"PRIVATE EQUITY FINANCING" is any sale of equity securities of Borrower
that closes after September 1, 1999 other than a sale of common stock to the
public in an initial public offering.
"PRO RATA SHARE" of any Lender is (a) the ratio (expressed as a
percentage) of the aggregate outstanding principal amount of Loans made by such
Lender to the aggregate principal amount of all Loans outstanding under this
Agreement or (b) if no such Loans are outstanding, the ratio (expressed as a
percentage) of such Lender's Commitment to the Committed Line.
"RDS" has the meaning set forth in Section 6.8(a).
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower or other
such person specifically authorized by Borrower and who is identified by written
notice from Borrower to the Agent.
"SCHEDULE" is any attached schedule.
"SECURITIES" has the meaning set forth in Section 10.1.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to the Lenders pursuant to a subordination agreement in form and
substance reasonably satisfactory to the Agent and the Lenders.
"SUBSIDIARY" is, for any Person, any other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.
"2000 WARRANTS" has the meaning set forth in Section 4.1(b).
"UNFUNDED AMOUNT" has the meaning set forth in Section 2.1.1(c).
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"WARRANTS" has the meaning set forth in Section 4.1(b).
18. NOTICE UNDER WASHINGTON LAW.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
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BORROWER:
INTERNAP NETWORK SERVICES CORPORATION
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Print Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Financial Officer and
Vice President of Finance
LENDERS:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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AGENT:
S. L. PARTNERS, INC.
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TITLE: MANAGING PARTNER
24.
25
EXHIBIT B
FORM OF CONVERTIBLE PROMISSORY NOTE
26
EXHIBIT B
FORM OF CONVERTIBLE PROMISSORY NOTE
THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN
COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A
NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.
CONVERTIBLE PROMISSORY NOTE
$_______________ September ___, 1999
____________, Washington
For value received InterNAP Network Services Corporation, a Washington
corporation ("PAYOR") promises to pay to ____________________ or its assigns
("HOLDER") the principal sum of $___________, or if less, the aggregate unpaid
principal amount of all Advances (as defined in the Credit Agreement referred to
below) made by Holder to Borrower under the Credit Agreement, with interest on
the unpaid principal balance at the rates and payable at the times provided in
the Credit Agreement.
1. CREDIT AGREEMENT PROVISIONS. This Convertible Promissory Note
(this "NOTE") is issued pursuant to, is entitled to the benefits of, and is
subject to the provisions of a certain Credit Agreement among Payor, Holder,
other Lenders thereto and Agent, dated of even date herewith (the "CREDIT
AGREEMENT"). Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Credit Agreement.
2. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. This Note does not by
itself entitle the Holder to any voting rights or other rights as a shareholder
of the Company. In the absence of conversion of this Note, no provisions of this
Note, and no enumeration herein of the rights or privileges of the Holder, shall
cause such Holder to be a shareholder of the Company for any purpose.
3. PRIORITY OF NOTE. This Note is one of a series of Convertible
Promissory Notes (the "NOTES") aggregating up to $10,000,000 in face amount. The
Notes shall rank equally without preference or priority of any kind over one
another, and all payments on account of principal and interest with respect to
any of the Notes shall be applied ratably and proportionately on all outstanding
Notes on the basis of the original principal amount of outstanding indebtedness
represented thereby
4. CONVERSION. In the event that Payor issues and sells shares of
its Series D Preferred Stock (the "SERIES D STOCK") to investors, then Holder
(unless Holder is a Defaulting
1.
27
Lender) and each other Lender (other than Defaulting Lenders) will have the
right, in accordance with and subject to the terms and conditions contained in
the Credit Agreement and the Notes, to convert up to his Pro Rata Share of
$2,000,000 (or the outstanding aggregate principal balance of the Loans of all
Lenders if less than $2,000,000) into Series D Stock.
5. WAIVER OF NOTICE. Payor hereby waives demand, notice,
presentment, protest and notice of dishonor.
6. LAW GOVERNING. The terms of this Note shall be construed in
accordance with the laws of the State of Washington, as applied to contracts
entered into by Washington residents within the State of Washington, which
contracts are to be performed entirely within the State of Washington.
7. AMENDMENT. Any term of this Note may be amended or waived only
in accordance with Section 16.4 of the Credit Agreement.
8. PREPAYMENT. The Company may at any time, without penalty, prepay
in whole or in part the unpaid principal sum of this Note, plus any unpaid
accrued interest under this Note.
9. RESTRICTIONS ON TRANSFER. This Note and the Conversion Stock
issuable upon its conversion have not been registered or qualified under federal
or state securities laws. Accordingly, the representations, warranties and
agreements made by Holder in Section 10 of the Credit Agreement, including
limitations on transfer, shall be deemed included herein and shall pertain to
this Note and the Series D Stock issuable hereunder as though fully set forth
herein.
10. HEADINGS. The headings in this Note are for purposes of
convenience in reference only, and shall not be deemed to constitute a part
hereof.
11. NOTICE. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
INTERNAP NETWORK SERVICES CORPORATION
By: ___________________________________
Print Name: ___________________________
Title: ________________________________
2.
28
EXHIBIT C
FORM OF WARRANT
29
EXHIBIT C
FORM OF WARRANT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
INTERNAP NETWORK SERVICES CORPORATION
WARRANT FOR THE PURCHASE OF STOCK
No. [1999-C__/2000-C]* 100,000 Shares
FOR VALUE RECEIVED, INTERNAP NETWORK SERVICES CORPORATION, a Washington
corporation (the "Company"), with its principal office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, hereby certifies that S.L. PARTNERS, INC., as
agent (the "Agent") under the Credit Agreement dated as of September 23, 1999
(the "Credit Agreement") among the Company, the lenders party thereto and the
Agent, as agent for such lenders ("Holder"), or its assigns, in consideration
for a loan and other financial accommodations, is entitled, subject to the
provisions of this Warrant, to purchase from the Company, at any time on or
before 5:00 p.m. (Washington Time) [December 31, 2004/Insert date 5 years from
date of issuance of 2000 Warrants]* (the "Expiration Date"), the number set
forth above of fully paid and nonassessable shares of common stock of the
Company (the "Common Stock") or Preferred Stock (as defined below), subject to
adjustment as hereinafter provided. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Credit Agreement.
In the event that the closing of the initial public offering of the
Common Stock (the "Initial Public Offering") occurs prior to the Company's next
private equity financing (the "Next Round"), Holder may purchase such number of
shares of Common Stock at a purchase price (the "Offering Price") per share (as
adjusted pursuant to Section 5 hereof) equal to the offering price of the
Company's Common Stock in the Initial Public Offering. In the event that the
Next Round occurs prior to the Initial Public Offering, Holder may purchase such
number of shares of
--------
* Insert, as appropriate
1.
30
the same series and class and bearing the same rights, preferences, and
privileges, of such shares of preferred stock issued in connection with the Next
Round (the "Preferred Stock") at a purchase price (the "Preferred Price") per
share (as adjusted pursuant to Section 5 hereof) equal to the price to be paid
by the purchasers of Preferred Stock in the Next Round.
The shares of Common Stock or Preferred Stock deliverable upon the
exercise of this Warrant, as adjusted from time to time, are hereinafter
sometimes referred to as "Warrant Shares." The applicable purchase price of the
Warrant Shares is sometimes hereinafter referred to as the "Exercise Price."
The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for a share of Common Stock are subject to
adjustment from time to time as hereinafter set forth. The terms "Common Stock"
and "Preferred Stock" shall mean the aforementioned Common Stock and Preferred
Stock of the Company, respectively, together with any other equity securities
that may be issued by the Company in addition thereto or in substitution
therefor as provided herein.
SECTION 1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised in whole or in part on any
business day on or prior to the Expiration Date. This Warrant shall be
exercised, if at all, by presentation and surrender hereof to the Company at its
principal office at the address set forth in the initial paragraph hereof (or at
such other address as the Company may hereafter notify Holder in writing) with
the Purchase Form annexed hereto duly executed and accompanied by proper payment
of the Exercise Price in lawful money of the United States of America in the
form of a check, subject to collection, for the number of Warrant Shares
specified in the Purchase Form. If this Warrant should be exercised in part
only, the Company shall, upon surrender of this Warrant, execute and deliver a
new Warrant evidencing the rights of Holder thereof to purchase the balance of
the Warrant Shares purchasable hereunder. Upon receipt by the Company of this
Warrant and such Purchase Form, together with proper payment of the Exercise
Price, at such office, Holder shall be deemed to be the holder of record of the
Warrant Shares, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Warrant Shares shall
not then be actually delivered to Holder. The Company shall pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of the Warrant Shares.
(b) In addition to and without limiting the rights of Holder
under any other terms set forth herein, Holder shall have the right, upon
written request by Holder delivered or transmitted to the Company together with
this Warrant, to exchange this Warrant, in whole or in part on or before the
Expiration Date, for the number of Warrant Shares having an aggregate current
market price on the date of such exchange (determined as provided in Section
5(b) below) equal to the difference between (a) the aggregate current market
price on the date of such exchange (determined as aforesaid) of a number of
Warrant Shares designated by Holder, and (b) the aggregate Exercise Price Holder
would have paid to the Company to purchase such designated number of Warrant
Shares upon exercise of this Warrant. Upon such exchange, the number of Warrant
Shares purchasable upon exercise of this Warrant shall be reduced by such
designated number of Warrant Shares and, if a balance of purchasable Warrant
Shares remains
2.
31
after such exchange, the Company shall execute and deliver to Holder a new
Warrant evidencing the right to purchase such balance of Warrant Shares;
provided, that no fractional shares shall be issuable upon such exchange, and if
the number of Warrant Shares determined in accordance with the foregoing formula
is other than a whole number, the Company shall pay Holder an amount by check,
determined in accordance with the provisions of Section 3.
SECTION 2. RESERVATION OF SHARES. The Company hereby agrees that at all
times there shall be reserved for issuance and delivery upon exercise of this
Warrant all shares of its Common Stock or Preferred Stock of the Company from
time to time issuable upon exercise of this Warrant. All such shares shall be
duly authorized and, when issued upon such exercise in accordance with the terms
of this Warrant, shall be validly issued, fully paid and nonassessable, free and
clear of all liens, security interests, charges and other encumbrances or
restrictions on sale (other than as provided in the Company's Articles of
Incorporation and any restrictions on sale set forth herein or pursuant to
applicable federal and state securities laws) and free and clear of all
preemptive rights.
SECTION 3. FRACTIONAL INTEREST. The Company will not issue a fractional
share of a Warrant Share upon exercise of a Warrant. Instead, the Company will
deliver its check for the current market value of the fractional share. The
current market value of a fraction of a share is determined as follows: multiply
the current market price of a full share by the fraction of a share and round
the result to the nearest cent.
The current market price of a Warrant Share for purposes of this
Section 3 is determined as provided in Section 5(c) below.
SECTION 4. ASSIGNMENT OR LOSS OF WARRANT
(a) Except as provided in Section 8, Holder shall be
entitled, without obtaining the consent of the Company, to assign its interest
in this Warrant in whole or in part to any person or persons. Subject to the
provisions of Section 8, upon surrender of this Warrant to the Company or at the
office of its stock transfer agent or warrant agent, with the Assignment Form
annexed hereto duly executed and funds sufficient to pay any transfer tax, the
Company shall, without charge, execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees named in such instrument of assignment
(any such assignee will then be a "Holder" for purposes of this Warrant) and, if
Holder's entire interest is not being assigned, in the name of Holder, and this
Warrant shall promptly be canceled.
(b) Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of indemnification satisfactory to the Company, and
upon surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date.
SECTION 5. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number
and kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
beginning of certain events, as follows:
3.
32
(a) Adjustment for Failure to Fund Loan Requests. In the
event that Lenders fail to fund all or any portion of any Loan request made by
Borrower in accordance with the Credit Agreement, and provided that the
conditions set forth in Section 3.1 of the Credit Agreement as to the initial
Loan and Section 3.2 of the Credit Agreement as to all subsequent Loans have
been met, then the number of shares that may be purchased pursuant to this
Warrant (other than the 5% portion allocated to the Agent pursuant to the Credit
Agreement as compensation for its agreement to serve in such capacity, which 5%
portion shall not be affected by this Section 5(a)) shall be reduced by a
percentage calculated by dividing (1) the portion of all Loan requests not
funded by (2) the aggregate of all Loan requests made by Borrower. For example,
if the aggregate of all Loan requests made by Borrower was $4,000,000, and
Lenders failed to fund $1,000,000 of that amount, then the number of shares that
could be purchased pursuant to this Warrant would be reduced to 71,250 ((100,000
- 5,000) x .75).
(b) Adjustment for Change in Capital Stock. If at any time
after the date of this Warrant, the Company:
(1) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of Common
Stock into a greater number of shares;
(3) combines its outstanding shares of Common Stock
into a smaller number of shares;
(4) makes a distribution on its Common Stock in
shares of its capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock
any shares of its capital stock;
then the Exercise Price in effect immediately prior to such action shall be
adjusted so that Holder may receive upon exercise of this Warrant and payment of
the same aggregate consideration the number of shares of capital stock of the
Company which Holder would have owned immediately following such action if
Holder had exercised this Warrant immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
(c) Current Market Price. The current market price per share
of Common Stock on any date is the average of the Quoted Prices of the Common
Stock for the thirty (30) consecutive trading days commencing forty-five (45)
trading days before the date in question or, if the Common Stock shall not have
been traded for such thirty (30) consecutive trading days, such period of time
up to thirty (30) trading days. The "Quoted Price" of the Common Stock is the
last reported sales price of the Common Stock as reported by the Nasdaq National
Market, or the primary national securities exchange on which the Common Stock is
then quoted; provided, however, that if the Common Stock is neither traded on
the Nasdaq National Market nor on a
4.
33
national securities exchange, the price referred to above shall be the price
reflected on the Nasdaq National Market, or if the Common Stock is not then
traded on the Nasdaq National Market, the price reflected in the
over-the-counter market as reported by the National Quotation Bureau, Inc. or
any organization performing a similar function or, if the Common Stock is not
then traded on the over the counter market as reported by the National Quotation
Bureau, Inc. or any organization performing a similar function, the price
referred to above shall be the fair market value as determined by the Company's
Board of Directors. The current market price per share of Preferred Stock on any
date shall be the fair market value as determined by the Company's Board of
Directors.
(d) Minimum Adjustment. No adjustment in the Exercise Price
of this Section 5 shall be required unless such adjustment would require an
increase or decrease of at least twenty-five cents ($.25) in such Exercise
Price; provided, however, that any adjustments which by reason of this
subsection are not required to be made, shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 5
shall be made to the nearest cent or to the nearest share, as the case may be.
(e) Deferral of Issuance or Payment. In any case in which an
event covered by this Section 5 shall require that an adjustment in the Exercise
Price be made effective as of a record date, the Company may elect to defer
until the occurrence of such event (i) issuing to Holder, if this Warrant is
exercised after such record date, the Warrant Shares and other capital stock of
the Company, if any, issuable upon such exercise over and above the Warrant
Shares or other capital stock of the Company, if any, issuable upon such
exercise on the basis of the Exercise Price in effect prior to such adjustment,
and (ii) paying to Holder by check any amount in lieu of the issuance of
fractional shares pursuant to Section 3.
(f) When No Adjustment Required. No adjustment need be made
for a change in the par value or no par value of the Common Stock. To the extent
this Warrant becomes exercisable into cash, no adjustment need be made
thereafter as to the cash, and interest will not accrue on the cash.
(g) Notice of Certain Actions. In the event that:
(1) the Company shall authorize the issuance to all
holders of its Common Stock or Preferred Stock of rights, warrants, options or
convertible securities to subscribe for or purchase shares of its capital stock
or of any other subscription rights, warrants, options or convertible
securities; or
(2) the Company shall authorize the distribution to
all holders of its Common Stock or Preferred Stock of evidences of its
indebtedness or assets (other than dividends paid in or distributions of the
Company's capital stock for which the Exercise Price shall have been adjusted
pursuant to subsection (b) of this Section 5 or cash dividends or cash
distributions payable out of consolidated current or retained earnings as shown
on the books of the Company and paid in the ordinary course of business); or
(3) the Company shall authorize any capital
reorganization or reclassification of the Common Stock or Preferred Stock (other
than a subdivision or
5.
34
combination of the outstanding Common Stock or Preferred Stock and other than a
change in par value of the Common Stock) or of any consolidation or merger to
which the Company is a party and for which approval of any stockholders of the
Company is required (other than a consolidation or merger in which the Company
is the continuing corporation and that does not result in any reclassification
or change of the Common Stock or Preferred Stock outstanding), or of the
conveyance or transfer of the properties and assets of the Company as an
entirety or substantially as an entirety; or
(4) the Company is the subject of a voluntary or
involuntary dissolution, liquidation or winding-up procedure; or
(5) the Company proposes to take any action (other
than actions of the character described in subsection (b) of this Section 5)
that would require an adjustment of the Exercise Price pursuant to this Section
5;
then the Company shall cause to be mailed by first-class mail to Holder at least
ten (10) days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date as of which the holders of Common Stock
or Preferred Stock of record to be entitled to receive any such rights, warrants
or distributions are to be determined, or (y) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding-up is expected to become effective, and the date as of which it is
expected that holders of Common Stock or Preferred Stock of record shall be
entitled to exchange their shares of Common Stock or Preferred Stock for
securities or other property, if any, deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding-up.
(h) No Adjustment Upon Exercise of Warrant. No adjustments
shall be made under any Section herein in connection with the issuance of
Warrant Shares upon exercise of this Warrant.
SECTION 6. OFFICERS' CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section 5, the Company shall forthwith
file in the custody of its Secretary or an Assistant Secretary at its principal
office an officers' certificate showing the adjusted Exercise Price determined
as herein provided, setting forth in reasonable detail the facts requiring such
adjustment and the manner of computing such adjustment. Each such officers'
certificate shall be signed by the chairperson, president or chief financial
officer of the Company and by the secretary or any assistant secretary of the
Company. Each such officers' certificate shall be made available at all
reasonable times for inspection by Holder.
SECTION 7. MERGER, CONSOLIDATION, SALE, REORGANIZATION OR LIQUIDATION.
Upon a merger, consolidation, acquisition of all or substantially all of the
property or stock, reorganization or liquidation of the Company (collectively, a
"Reorganization") prior to the Expiration Date, as a result of which the
shareholders of the Company receive cash, stock or other property in exchange
for their shares of Common Stock or Preferred Stock, this Warrant shall be
canceled and all rights granted hereunder shall terminate; provided, however,
that the Company shall have delivered to the Holder notice of the Reorganization
in accordance with
6.
35
Section 5 above and that the Holder shall have the right immediately prior to
the Reorganization to exercise this Warrant.
SECTION 8. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. This
Warrant may not be exercised and neither this Warrant nor any of the Warrant
Shares, nor any interest in either, may be offered, sold, assigned, pledged,
hypothecated, encumbered or in any other manner transferred or disposed of, in
whole or in part, except in compliance with applicable United States federal and
state securities and blue sky laws and the terms and conditions hereof. Each
Warrant shall bear a legend in substantially the same form as the legend set
forth on the first page of this Warrant. Each certificate for Warrant Shares
issued upon exercise of this Warrant, unless at the time of exercise such
Warrant Shares are acquired pursuant to a registration statement that has been
declared effective under the Act and applicable blue sky laws, shall bear a
legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
Any certificate for any Warrant Shares issued at any time in exchange or
substitution for any certificate for any Warrant Shares bearing such legend
(except a new certificate for any Warrant Shares issued after the acquisition of
such Warrant Shares pursuant to a registration statement that has been declared
effective under the Act) shall also bear such legend unless, in the opinion of
counsel for the Company, the Warrant Shares represented thereby need no longer
be subject to the restriction contained herein. The provision of this Section 8
shall be binding upon all subsequent holders of certificates for Warrant Shares
bearing the above legend and all subsequent holders of this Warrant, if any.
Notwithstanding the foregoing no registration statement or opinion of
counsel shall be required in connection with (i) the transfer by the Agent of
this Warrant as provided in Section 4.1(d) or Section 6.9 of the Credit
Agreement, all such transfers being permitted without obtaining the consent of
the Company or (ii) the transfer by a Holder of this Warrant or the Warrant
Shares to any family member or any trust for the benefit of such Holder or any
family member of such Holder.
7.
36
SECTION 9. REGISTRATION RIGHTS.
(a) Registrable Securities. If at any time prior to the
Expiration Date, the Company shall determine to register any of its Common
Stock, for its own account or for the account of others on a Registration
Statement on Form S-1 or Form S-3, the Company will:
(1) promptly give Holder written notice thereof
(which shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other state
securities); and
(2) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all shares of Common Stock of the Company obtained upon
exercise of this Warrant (the "Registrable Securities") specified in a written
request or requests by Holder, received by the Company within twenty (20) days
after such written notice is given, requesting inclusions in such registration;
provided that if the Holder decides not to include all the Registrable
Securities in any such registration statement, the Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company, upon the terms and conditions set forth herein .
(b) Underwriting. (1) If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise Holder as a part of the written notice
given pursuant to Section 9(a)(1). In such event, the right of Holder to
registration pursuant to this Section 9 shall be conditioned upon Holder's
participation in such underwriting and the inclusion of Holder's Registrable
Securities in the underwriting to the extent provided herein.
(2) Holder shall (together with the Company and the
other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this Section 9, if the underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten, the
underwriter may exclude some or all the Registrable Securities from such
registration and underwriting. If the underwriter makes a determination to
exclude some or all of the Registrable Securities from a registration and
underwriting, the Holder's registration rights under this Section 9 shall be
subject to the priority given to the registration rights set forth in Section 2
of that certain Amended and Restated Investor Rights Agreement, dated January
28, 1999, by and among the Company and the investor parties named therein, as
amended (the "Investor Rights Agreement"). However, the Holder's registration
rights under this Section 9 shall have priority over any registration rights
given to purchasers of capital stock of the Company in the Next Round or any
equity financing subsequent to the Next Round. If this Warrant is assigned in
whole or in part to more than one person and less than all of the Registrable
Securities are included in the registration and underwriting, the number of
Registrable Shares to be included shall be allocated among the holders of
Warrants based on the total number of shares of Common Stock subject to the
Warrants.
8.
37
(3) If Holder disapproves of the terms of any such
underwriting, Holder may elect to withdraw therefrom by written notice to the
Company and the underwriter. Any Registrable Securities so withdrawn from such
underwriting shall also be withdrawn from such registration.
(c) Registration Expenses. The Company shall bear
registration expenses (exclusive of underwriting discounts and commissions) for
the Form S-1 or Form S-3 registration.
(d) Limitations on Transfer. If requested by the
underwriters, Holder, or any assignee of Holder, will not sell or otherwise
transfer or dispose of any securities of the Company held by Holder for a period
of up to one hundred eighty (180) days following a public offering by the
Company of its capital stock.
(e) Amendments and Supplements; Prospectus. Whenever
required to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(1) Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(2) Furnish to Holder such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(f) Indemnification. (1)The Company will indemnify Holder,
each of Holder's officers, directors, partners and agents, and each person
controlling Holder, with respect to which registration, qualification or
compliance has been effected pursuant to this Section 9, and each underwriter,
if any, and each person who controls any underwriter against all claims, losses,
damages and liabilities (or actions in respect thereof) including any of the
foregoing incurred in settlement of any litigation commenced or threatened
arising out of or based on (i) any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other similar document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, or (ii) any violation (or alleged violation) by the Company of any
federal, state or common law rule or regulation applicable to the Company in
connection with any such registration, qualification or compliance, and will
reimburse Holder, each of its officers, directors, partners and agents, and each
person controlling Holder, each such underwriter and each person who controls
any such underwriter, for any legal and any other expenses reasonably incurred
in connection with investigating or defending any such claim, loss, damage,
liability or action, as incurred, provided that the Company will not be liable
in any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue
9.
38
statement (or alleged untrue statement) or omission (or alleged omission) based
upon written information furnished to the Company by an instrument duly executed
by Holder or such underwriter and stated to be specifically for use therein.
(2) Holder will, if Registrable Securities held by
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each legal counsel and independent accountant of the
Company, each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of the Securities Act, and each other such holder, each of
its directors, officers, and partners and agents and each person controlling
such other holder, against all claims, losses, damages and liabilities (or
actions in respect thereof) including any of the foregoing incurred in
settlement of any litigation commenced or threatened arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus, offering circular or other
similar document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and will reimburse the
Company, its directors, officers, legal counsel, accountants, underwriters,
control persons and such other holders and each such holder's directors,
officers, partners, agents and control persons for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, as incurred, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by Holder and stated to be specifically for use therein; provided,
however, that the obligations of Holder hereunder shall be limited to an amount
equal to the proceeds to Holder for Registrable Securities sold as contemplated
herein.
(3) Each party entitled to indemnification under
this Section 9(f) (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has received written notice of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or litigation, shall be approved by the Indemnified Party (whose approval shall
not unreasonably be withheld). The Indemnified Party may participate in such
defense at the Indemnified Party's expense; provided, however, that the
Indemnifying Party shall bear the expense of such defense of the Indemnified
Party if representation of both parties by the same counsel would be
inappropriate due to actual or potential conflicts of interest. The failure of
any Indemnified Party to give notice as provided herein shall relieve the
Indemnifying Party of its obligations under this Section 9(f) only to the extent
that such failure to give notice shall materially adversely prejudice the
Indemnifying Party in the defense of any such claim or any such litigation. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
10.
39
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
(4) If the indemnification provided for in this
Section 9 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the violation(s) that resulted
in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission; provided, that in no event shall any contribution by
a Holder hereunder exceed the proceeds from the offering received by such
Holder.
(5) No indemnifying party, in the defense of any
such claim or litigation, shall, except with the consent of each indemnified
party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
(g) Survival. The obligations of the Company and the Holders
under this Section 9(f) shall survive the completion of any offering of
Registrable Securities in a registration statement and the termination of this
Agreement.
(h) Assignment Of Registration Rights. The rights to cause
the Company to register Registrable Securities pursuant to this Section 9 may be
assigned by Holder to a transferee or assignee of Registrable Securities which
(a) previously holds Registrable Securities, or (b) is Holder's family member or
a trust for the benefit of Holder or a family member of such Holder; provided,
however, (i) the transferor shall, within ten (10) days after such transfer,
furnish to the Company written notice of the name and address of such transferee
or assignee and the securities with respect to which such registration rights
are being assigned and (ii) such transferee shall agree to be subject to all
restrictions set forth in this Warrant.
(i) Investor Rights Agreement. The Company and Holder hereby
agree to use their best efforts to amend the Investor Rights Agreement or to
supersede the Investor Rights Agreement with another agreement containing
substantially the same terms and conditions, to include Holder as a party
thereto and to thereby cause Holder to have the rights and be subject to the
terms and conditions set forth therein in respect of the Warrant Shares;
provided, however, that Holder's registration rights shall continue to be
limited in the manner described in Section 9(b)(2) of this Warrant. Upon the
Holder being a party to the Investor Rights Agreement or such other agreement as
shall supersede it, this Section 9 shall be rendered inoperative and shall be of
no further force or effect.
11.
40
SECTION 10. MODIFICATION AND WAIVER. Neither this Warrant nor any term
hereof may be changed, waived, discharged or terminated other than by an
instrument in writing signed by the Company and by Holder.
SECTION 11. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to Holder or the Company shall be delivered
or shall be sent by certified mail, postage prepaid, to Holder at its address as
shown on the books of the Company or to the Company at the address indicated
therefor in the first paragraph of this Warrant.
SECTION 12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description
headings of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of Washington, without
regard to its conflicts of laws principles.
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be
signed by its duly authorized officer and to be dated as of September ___, 1999.
INTERNAP NETWORK SERVICES CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Print Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Chief Financial Officer and
Vice President of Finance
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12.
