Exhibit 10.25
LOAN, INVESTMENT AND SECURITY AGREEMENT
THIS LOAN, INVESTMENT AND SECURITY AGREEMENT (this "Agreement") is
made
and entered into as of
May 19, 2008,
by and among
Private Access, Inc., a
California corporation (the "Company"), and VirtualHealth
Technologies,
Inc. a
Delaware corporation
(the "Investor").
The Company and
Investor are sometimes
referred to herein
collectively as the
"Parties" and each
individually
as a
"Party".
RECITALS:
A. The Company is the
successor in interest
by way of conversion
to
Private Access, LLC, and all of the rights, assets, obligations and liabilities
of such predecessor entity.
B. The Company has requested that Investor provide certain loans and
other financial
accommodations
to the Company, and Investor has agreed to
provide such loans and
financial
accommodations to the
Company upon the terms
and conditions set forth in this Agreement.
AGREEMENT:
NOW, THEREFORE,
in consideration of the premises and the mutual
covenants and agreements set forth herein, the Parties agree as
follows:
ARTICLE 1
INTERPRETATION
1.1 Definitions. In
this Agreement,
including the recitals, except as
otherwise expressly provided or unless the context otherwise
requires:
"Affiliate" of any
Person means a Person
that directly or
indirectly, through one or more intermediaries, controls, is
controlled
by or is under common control with the first mentioned Person. A
Person
shall be deemed to control another Person if such first Person
possesses directly
or indirectly the power to direct, or cause the
direction of, the management and policies of the second Person,
whether
through the ownership of voting securities, by contract or
otherwise.
"Articles" means the Company's Articles of Incorporation,
as
filed with the Secretary of State of California on April 3,
2008.
"Business Day" means a
day that is not a Saturday or a Sunday
or any other day on which banks in Dallas, Texas, are required or
permitted by applicable law to close.
"Collateral" means all of Company's right, title, and interest
in and to all current and future patents and patent applications of
the
Company (which currently consist of U.S. Patent Numbers
7,028,049 and
6,345,260, and
U.S. Patent Application Numbers 11/231,561 and
12/031,987), and all continuations thereto and derivatives thereof,
and
all source codes
developed by or for the Company and
pertaining
or
relating to the above
patents and patent
applications
(the "Source
Codes").
<PAGE>
"Customer" means any
and all person or
entities that are
in
privity with the Company to purchase, lease, license or otherwise use
any of the Company's systems, devices, software, inventions,
components, products, services or processes.
"Governmental
Authority" means any nation or government, any
state, county, municipality or other political subdivision thereof,
any
entity exercising
executive,
legislative,
judicial, regulatory or
administrative functions of or pertaining to government,
including any
government authority,
agency,
department,
board,
commission
or
instrumentality of the United States, any State of the United
States or
any political subdivision thereof, any court, tribunal or
arbitrator(s)
of competent
jurisdiction, any
self-regulatory
organization
or any
Indian tribal authority.
"Loan Documents"
means, collectively, this Agreement, the
Promissory Note, and any other instruments, documents, or agreements
entered into, now or in the future by Company in connection
therewith.
"Obligations" means the Loan (as defined below), including all
principal and interest accrued thereon, and all related fees,
expenses,
costs and other
amounts, if any, owed to Investor by the Company
pursuant to this Agreement or any other Loan Documents.
"Person" means any individual, corporation, limited liability
company, partnership
(general or limited),
syndicate, joint
venture,
society,
association, trust, unincorporated organization or
Governmental
Authority, or any
trustee, executor,
administrator
or
other legal representative thereof.
"UCC" means the California Uniform Commercial Code, as amended
or supplemented
from time to time. Any and all terms used in the
Agreement which are
defined in the UCC shall be construed and defined
in accordance with the
meaning and definition
ascribed to such
terms
under the UCC, unless otherwise defined herein.
ARTICLE 2
LOAN AND INVESTMENT OPPORTUNITIES
2.1 Loan. Subject to the terms and conditions of this Agreement, on
the
Closing Date (as hereinafter defined), the Company hereby agrees to
borrow, and
Investor hereby agrees to loan to the Company, up to an aggregate
of One Million
Five Hundred and No/100 ($1,500,000) (the "Loan").
The Loan shall be
evidenced
by a Secured
Promissory Note, in
substantially the form
of Exhibit A attached
hereto (the
"Promissory Note").
The Parties
acknowledge
and agree that:
(i)
pursuant to that certain Promissory Note, dated March 1, 2008, of the
Company
payable to Investor, Investor previously loaned the Company
$150,000 (the "First
Previous Note");
(ii) the principal
amount of, and accrued but unpaid interest
of $2,035 on the First Previous Note were rolled-into that certain Amended and
Restated Promissory
Note, dated April 25, 2008, of the Company payable to
Investor (the "Second Previous Note"), with the interest being
rolled-into the
Second Previous
Note as accrued
but unpaid
interest, and Investor made an
additional advance of
$150,000 to the Company under the Second Previous Note;
(iii) the principal
amount of $300,000 and accrued but unpaid interest to date
of $3,823, including
the accrued but unpaid
interest under the
First Previous
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Note and an additional
$1,788 under the
Second Previous
Note (from April
25,
2008 to May 19, 2008,
are hereby rolled-into
this Promissory Note (with the
interest being
rolled-into the Promissory Note as accrued but unpaid
interest);
and (iv) at the Closing, Investor shall deliver the Second
Previous Note to the
Company for cancellation, and Investor shall make the first
$150,000 of Advance
(as defined in the Promissory Note) under the Promissory Note.
2.2 Closing. The
closing of the transactions contemplated hereby (the
"Closing") shall be
deemed to have
occurred on May 19, 2008 (the "Closing
Date").
2.3 Equity
Interest. In the event that Investor makes all timely
Advances (as defined in the Promissory Note) under the Promissory
Note for the
period from the Closing Date to the earlier of: (i) the last day of
the month in
which the Company
receives $10,000,000
or more of additional
funding (or such
lesser amount as determined by the Company in its sole and absolute
discretion)
("Adequate Third-Party Funding"); or (ii) December 10, 2008 (the
"Timely Payment
Condition"), then on
or prior to December 15, 2008, the Company shall issue and
deliver to Investor a certificate for 105,625 shares of common stock, no par
value per share, of
the Company (the "Common Stock"), which represents five
percent (5%) of the
Fully-Diluted
Capital Stock of the Company (as defined
below) as of the date of this Agreement except for the contingent
warrants being
held for C. Hoag as of the Closing Date.
2.4 Option to Purchase Shares of Common Stock.
(a)
In the event that
Investor has timely
made all Advances
under the Promissory
Note, and the Company has delivered the Repayment
Notice (as defined in the Promissory Note), then for a period of ten
(10) days following Investor's receipt of the Repayment Notice,
Investor shall have the option (the "Purchase Option"), in Investor's
sole discretion, to
purchase from the Company, the number of shares of
Common Stock
of the Company equal to five percent (5%) of the
Fully-Diluted Capital
Stock of the Company as of the date of Repayment
Notice (the "Investment Shares"), for an aggregate purchase price of
$1,500,000 (the "Option Price"). Investor's exercise of the Purchase
Option shall be in
writing and shall be
irrevocable
(the "Election
Notice").
(b) If Investor elects
to exercise the Purchase Option, the
delivery of the
Election Notice to the Company shall serve as an
instruction to the
Company to apply the
proceeds of the
repayment of
the Promissory Note (the "Repayment Proceeds"), first, to the accrued
but unpaid
interest on the Promissory Note, and second, to the
outstanding principal balance of the Note. If:
(i) the Repayment Proceeds are greater than
$1,500,000, then on
the Repayment
Date (as defined in the
Promissory
Note), the Company
shall: (1) retain
$1,500,000;
(2) issue to Investor a certificate evidencing the Investment
Shares; and
(3) pay to Investor, by wire transfer of
immediately available
funds, any Repayment Proceeds in excess
of $1,500,000; or
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(ii) in the event the
Repayment Proceeds are less
than or equal to $1,500,000, then on the Repayment Date, the
Company shall (1)
retain all of the Repayment Proceeds; (2)
issue to Investor that portion of the Investment Shares equal
to (5%) of the
Fully-Diluted Capital
Stock of the Company as
of the date of Repayment Notice multiplied by a fraction,
the
numerator of which is
the amount of the
Repayment
Proceeds,
and the denominator of which is $1,500,000; and (3) be deemed
to have granted to Investor an option (the "Second Option") to
purchase the
remainder of the
Investment
Shares not issued
pursuant to subsection
(2) above,
at an aggregate
purchase
price equal
to the difference between $1,500,000 and the
amount of the
Repayment Proceeds. [e.g., in the event the
Payoff Proceeds are $1,200,000, then on the Repayment Date the
Company will
retain $1,200,000 and, in return, issue to
Investor four percent (4%) of the Fully-Diluted Capital Stock
of in the Company,
together with an option to purchase
the
remaining one percent
(1%) of the Fully-Diluted Capital Stock
of the Company for
$300,000.] The term of
the Second Option
shall commence on the
date of the Election
Notice and shall
continue until the
earlier of: (1) ninety (90) days following
the Repayment Date; or (2) December 10, 2008.
2.5 Certain
Definitions. As used
herein, (i)
"Fully-Diluted
Capital
Stock of the Company"
means the then
outstanding capital
stock of the Company
(including shares of
preferred stock of the Company, and if such shares are
convertible, on an "as converted" basis) plus all shares of capital
stock of the
Company issuable,
whether at such time,
upon the passage of time or upon the
occurrence of some
future event, upon the
exercise, conversion
or exchange of
all then outstanding
Capital Stock Equivalents plus the number of shares of
Common Stock
issuable under the Section of this Agreement to which such
definition applies
(i.e., either
Section 2.3 or Section
2.4 above); and
(ii)
"Capital Stock
Equivalents" means all
rights, warrants,
options (including,
without limitation, any options or other securities issued under
any plan of the
Company), convertible
securities or
indebtedness,
exchangeable
securities or
indebtedness, or other
rights, exercisable for or convertible into, directly or
indirectly, capital
stock of the Company
and securities convertible for or
exchangeable into
equity interests of the Company, whether at the time of
issuance, upon the passage of time or upon the occurrence of some
future event.
2.6 Right of First Offer.
(a) Prior to the Repayment Date, the Company agrees that it
will not issue
any capital
stock of the
Company or any Common
Stock
Equivalents
(excluding: (i) any
sales of securities
pursuant to an
effective registration
statement under the
Securities Act of 1933, as
amended; (ii) any sale of securities to a non-profit entity or
industry
partner pursuant to a
debt funding,
grant funding or research and
development project by
any such non-profit entity or industry partner;
and (iii) a pool of up to fifteen percent (15%) of the then
currently
issued and outstanding
shares of Common
Stock and Preferred Stock,
which pool may be used only for the issuance of capital stock of the
Company and
Capital Stock Equivalents to employees, consultants,
directors and
advisory board members of the Company) (the "New
Securities"), without first offering to sell all of such New
Securities
to Investor on the terms and conditions specified by the Company (the
"Offering Terms"),
subject to subsection
(b) below. In the event that
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the Company
desires to issue or sell any New
Securities
(each, an
"Offering"), it shall
provide Investor with written notice of the
Offering, including the Offering Terms (the "Offer Notice").
(b) Investor shall have ten (10) days following its receipt of
the Offer Notice (the "Election Period") to elect in writing to
purchase all or any
portion of the New Securities offered in the
Offering (the
"Election Notice"). If Investor delivers an Election
Notice to the Company
within the Election Period, then: (a) such
purchase by Investor shall close and fund within thirty (30) days
after
delivery by Investor or the Election Notice; and (b) the purchase
price
paid by Investor
shall reflect a ten percent (10%) discount in the
price per share stated in the Offering Terms.
(c) If the offer set forth in the Offer Notice is not accepted
by Investor,
then the Company may sell such New Securities, or a
ratable portion thereof, to any third-party purchaser (the
"Purchaser")
at any time within one hundred eighty (180) days after the last
day of
the Election Period,
provided that such sale shall be made on terms no
more favorable to the Purchaser than the terms contained in the Offer
Notice. In the event that the New Securities are not sold in
accordance
with the terms of the
preceding sentence,
then they cannot be sold
without again going
through the procedures
set forth in this
Section
2.6
2.7 Events of Default.
The occurrence of any Event of Default (as
defined in the Promissory Note) shall constitute an Event of
Default under this
Agreement. Upon the
occurrence
of an Event of
Default, Investor
may, at its
option, accelerate
and make immediately payable all sums of principal and
interest outstanding
and unpaid under the
Promissory
Note, without demand,
presentment or notice, all of which are hereby expressly waived by
Company.
2.8 Investor's Rights and Remedies. Upon the occurrence and during
the
continuation of an Event of Default, Investor may, at its sole
election, without
notice of such
election and without
demand, exercise any one or more of the
rights or remedies
available to Investor
at law or in equity,
including the
rights of a secured party under the UCC.
2.9 Board Seat. So
long as there remains
any money owed by Company to
Investor under the
Obligations, Investor
shall have the right to designate one
member (the
"Investor Designee") to the Company's Advisory Board and the
Company's Board
of Directors, and in each case, all committees thereof
(collectively, the "Company Boards"), and the Company and
stockholders executing
the signature
page to this
Agreement hereby agree to cause such Investor
Designee to be elected to the Company Boards. The Investor Designee shall
serve
until the first to occur of his/her death, resignation or removal
from office by
Investor; it being
agreed and understood that only Investor may remove an
Investor Designee;
it being further agreed and understood that upon the
occurrence of any removal, Investor Designee shall have the right
to designate a
new Investor Designee
and the Company and stockholders executing the signature
page to this Agreement
hereby agree to cause such Investor Designee to be
elected to the Company Boards. The initial Investor Designee shall
be Deborah L.
Jenkins; it being agreed and understood that Ms. Jenkins shall be
elected to the
Company Boards at the
Closing. Each Investor Designee shall be entitled to
receive from
the Company for his/her services whatever compensation or
remuneration paid to
other directors
of the Company,
including the right to
receive warrants
commensurate with all
members of Company Boards. Any and all
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rights to designate
members to any of the Company Boards pursuant to the terms
of this Section 2.9 shall be extinguished upon repayment or satisfaction by
the
Company of the Obligations.
2.10 Strategic
and Technology Synergies. Investor and the Company
acknowledge that there
appears to be a number
of strategic and
technological
synergies in the products and services being offered and/or developed by each
Party and its Affiliates, including without limitation the Convoii and
Envoii
digital content management and security technology. The Parties agree to exert
reasonable commercial efforts to explore these mutually-beneficial
prospects and
synergies. Without limiting the foregoing, Investor agrees to make
(or cause its
Affiliates to make)
the Convoii
and Envoii
digital content management and
security technology
available for inclusion in the Company's products and
services under a cost
formula to be mutually
agreed to by the
Parties, which
cost formula shall be
subject to a favored
nations provision so
that the cost
paid by the Company for such technologies shall not exceed the
price paid by any
other client,
purchaser
or user of the Convoii and Envoii technology,
respectively.
2.11 Cancellation of Rights. If, for any reason other than the
Company
having received
Adequate Third-Party Funding (which in turn extinguishes
Investor's obligation
to fund any further
installments
under the Promissory
Note), Investor
does not timely fund
an Advance as provided in the Promissory
Note, Investor shall
forfeit the following rights: (a) the right of Investor to
receive securities
of the Company
pursuant to Sections
2.3; (b) the rights of
Investor to purchase securities of the Company pursuant to Sections
2.4 and 2.6;
and (c) the right of
Investor to designate a person to the Company Boards
pursuant to Section 2.9.
ARTICLE 3
SECURITY
3.1 Grant of Security Interest. In order to secure the Company's
prompt
repayment of any and all Obligations and its prompt performance of each of its
covenants and duties
under this Agreement
and the other Loan
Documents,
the
Company hereby
grants to Investor a continuing security interest in the
Collateral. Investor's
security interests in the Collateral shall attach to all
Collateral without
further action on the part of Investor or the Company. Such
security interest
constitutes
a valid security interest in the presently
existing Collateral,
and shall constitute a valid security interest in
Collateral acquired after the date hereof.
3.2 Relinquishment of Security Interest. Upon the Company's repayment
of the Obligations,
and without
further action on the part of the Company
or
Investor, any security
interest created pursuant to Section 3.1 hereof
shall
immediately be released and/or deemed released, including without limitation
Investor's interests in the Collateral.
3.3 License Created in the Event of Default. Upon the occurrence of
any
Event of Default that results in Company's loss of the Collateral pursuant to
any Security Interest granted under this Agreement, including but
not limited to
under Section 3.1 hereof, Investor hereby grants to Company
and its Customers a
non-exclusive, non-sublicensable, non-transferable, fully paid-up
license under
the patents and source codes comprising the Collateral to make,
have made, use,
offer for sale, sell, import, distribute, lease, service, or otherwise
dispose
of any product or process offered for sale, made, distributed,
sold, or used by
or on behalf of Company covered by a claim of any of the
patents or source code
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comprising the Collateral ("License"). The License shall run to the end
of the
life of the last to expire of the patents comprising the Collateral,
including
any extensions
thereto that may occur
during the life of any such patent. The
License shall be "AS IS, WHERE IS" and Investor shall have no
obligations to the
Company or
any of its Customers under the License (including, without
limitation, any obligation for patent infringement claims of
others).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company hereby
represents and warrants to Investor that, as of the
date of execution of this Agreement by both Parties
hereto (which shall occur
after the Closing Date) (the "Execution Date"):
4.1 Organization,
Qualification, and Corporate Power. The Company is a
duly organized and validly existing corporation and is in good standing under
the laws of the state of California and has all requisite corporate power and
corporate authority
for the ownership and operation of its properties and for
the carrying on of its
business as now conducted and as now proposed to be
conducted. The Company
is duly qualified
and is in good
standing as a foreign
corporation and
authorized
to do business in all jurisdictions wherein the
character of the
property owned or leased, or the nature of the activities
conducted by it, makes such qualification or authorization necessary, except
where the failure to
so qualify or be so
authorized would not
have a material
adverse effect on the Company's business, assets (including intangible
assets),
liabilities,
property, financial
condition,
or results of operations (a
"Material Adverse
Effect"). The Company has all requisite
power and corporate
authority to (i) execute and deliver the Loan Documents; (ii) to
perform all its
obligations under the Loan Documents; and (iii) to issue and deliver the
shares
of capital stock which may be issuable under this Agreement
("collectively,
the
"Shares").
4.2 Authorization
of Agreements. The execution and delivery by the
Company of the Loan Documents, the performance by the Company of
its obligations
thereunder and the
reservation
of and the issuance
and delivery of the Shares
have been duly
authorized by all requisite action and will not (i) violate
(A)
any provision of any
applicable law, or any
order of any court or other agency
of government applicable to the Company, (B) the Articles, (C) the
Bylaws of the
Company, or (D) any provision of any mortgage, lease, indenture, agreement, or
other instrument
to which the
Company or any of its
properties
or assets is
bound, or (ii)
conflict with,
result in a breach of,
or constitute (with
due
notice or lapse of time or both) a default under any such
indenture,
agreement,
or other instrument,
or result in the creation or imposition of any lien,
charge, or encumbrance
of any nature
whatsoever upon any of
the properties or
assets of the Company, except in the case of clauses (i)(D) and
(ii), where such
violation, conflict,
breach, default, or lien would not have a Material Adverse
Effect. The Shares
have been duly
reserved for issuance
under this
Agreement
and, when so issued,
will be duly authorized, validly issued, fully paid, and
nonassessable shares
with no personal
liability attaching to the ownership
thereof and will be free and clear of all liens, charges, and encumbrances of
any nature whatsoever
except for
restrictions
on transfer
under applicable
federal and state securities laws, and except for restrictions
imposed by that
certain Shareholders
Agreement of the Company, shown in Schedule 4.2, to be
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separately delivered
to Investor by Company in accordance with Section 7.1(b)
hereof. Neither
the issuance nor delivery of the Shares is subject to any
preemptive rights
of stockholders of the Company, or t
