▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
COMPUTER CORPORATION
SERIES B PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
JULY 20, 1998
TABLE OF CONTENTS
Page
1. AGREEMENT TO PURCHASE AND SELL STOCK......................................1
(a) Authorization.........................................................1
(b) Agreement to Purchase and Sell Securities.............................1
(c) Per Share Purchase Price..............................................1
(d) Agreement to Purchase and Sell Warrant................................1
(e) Total Consideration...................................................2
2. CLOSING...................................................................2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................2
(a) Organization Good Standing and Qualification..........................2
(b) Capitalization........................................................2
(c) Due Authorization.....................................................3
(d) Valid Issuance of Stock...............................................3
(i) Valid Issuance.....................................................3
(ii) Compliance with Securities Laws...................................4
(e) Governmental Consents.................................................4
(f) Non-Contravention.....................................................4
(g) Litigation............................................................5
(h) Compliance with Law and Charter Documents.............................5
(i) SEC Documents.........................................................5
(i) Reports............................................................5
(ii) Financial Statements..............................................5
(j) Absence of Certain Changes Since Balance Sheet Date...................6
(k) Invention Assignment and Confidentiality Agreement....................6
(l) Intellectual Property.................................................7
(i) Ownership or Right to Use..........................................7
(ii) Licenses; Other Agreements........................................7
(iii) No Infringement..................................................7
(iv) Employees and Consultants.........................................7
(m) Registration Rights...................................................8
(n) Title to Property and Assets..........................................8
(o) Tax Matters...........................................................8
(p) Subsidiaries..........................................................8
(q) Environmental Matters.................................................8
(r) Brokers and Finders...................................................9
(s) Shareholder Rights Plan...............................................9
(t) Full Disclosure.......................................................9
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE INVESTOR.......10
(a) Organization, Good Standing and Qualification........................10
(b) Authorization........................................................10
(c) Governmental Consents................................................10
(d) Non-Contravention....................................................10
(e) Litigation...........................................................11
(f) Purchase for Own Account.............................................11
(g) Investment Experience................................................11
(h) Accredited Investor Status...........................................11
(i) Restricted Securities................................................11
(j) Legends..............................................................11
(j) Review of Information................................................12
(j) Acknowledgment of Risks..............................................12
5. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT CLOSING......................12
(a) Representations and Warranties True..................................12
(b) Performance..........................................................12
(c) Securities Exemptions................................................12
(d) Proceedings and Documents............................................12
(i) Certified Charter Documents.......................................12
(ii) Board Resolutions................................................13
(e) Opinion of Company Counsel...........................................13
(f) No Material Adverse Effect...........................................13
(g) Other Actions........................................................13
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING.......................13
(a) Representations and Warranties True..................................13
(b) Performance..........................................................13
(c) Payment of Purchase Price............................................13
(d) Securities Exemptions................................................13
(e) Proceedings and Documents............................................13
7. COVENANTS OF COMPANY.....................................................14
(a) Information Rights...................................................14
(i) Financial Information.............................................14
(A) Annual Reports.................................................14
(B) Quarterly Reports..............................................14
(ii) SEC Filings......................................................14
(b) Registration Rights..................................................14
(i) Definitions.......................................................14
(A) Registration...................................................14
(B) Registrable Securities.........................................14
(C) Registrable Securities Then Outstanding........................15
(D) Holder.........................................................15
(E) Forms ▇-▇, ▇-▇ and S-3.........................................15
(ii) Shelf Registration...............................................15
(A) Undertaking to Register........................................15
(B) Selling Procedures; Suspension.................................15
(C) Expenses.......................................................17
(D) Obligations of the Company.....................................17
(iii) Demand Registration.............................................17
(A) Request by Holders.............................................17
(B) Underwriting...................................................18
(C) Number of Demand Registrations.................................18
(D) Deferral.......................................................18
(E) Expenses.......................................................18
(F) Obligations of the Company.....................................19
(iv) Piggyback Registrations..........................................19
(A) Underwriting...................................................19
(B) Expenses.......................................................20
(C) Not Demand Registration........................................20
(D) Obligations of the Company.....................................20
(v) General Registration Obligations of the Company...................20
(A) Registration Statement.........................................21
(B) Amendments and Supplements.....................................21
(C) Prospectuses...................................................21
(D) Blue Sky.......................................................21
(E) Underwriting...................................................21
(F) Notification...................................................21
(G) Opinion and Comfort Letter.....................................21
(vi) Furnish Information..............................................22
(vii) Indemnification.................................................22
(A) By the Company.................................................22
(B) By Selling Holders.............................................23
(C) Notice.........................................................23
(D) Defects Eliminated in Final Prospectus.........................23
(E) Contribution...................................................24
(F) Survival.......................................................24
(viii) Termination of the Company's Obligations.......................24
(ix) No Registration Rights to Third Parties..........................24
(c) Obligations Regarding Confidential Information.......................25
(i) Obligations.......................................................25
(ii) Certain Definitions..............................................25
(iii) Non-Disclosure of Confidential Information......................25
(iv) Public Announcements.............................................26
(v) Third Party Information...........................................26
(vi) Other Disclosures................................................26
(d) Board and Committee Observer.........................................26
(e) Rights in the event of a Corporate Event.............................27
(i) Corporate Events..................................................27
(ii) Notice of Corporate Events and Ten Percent (10%) Acquisitions....28
(iii) Right of First Refusal..........................................28
(iv) Right of Resale..................................................28
(v) Right of Notification and Negotiation.............................29
(vi) Right to Consent.................................................29
(vii) Spin-Off of Graphics Business...................................30
(f) Rights of Participation..............................................30
(i) General...........................................................30
(ii) Pro Rata Share...................................................30
(iii) New Securities..................................................30
(iv) Procedures.......................................................31
(v) Failure to Exercise...............................................31
(vi) Termination......................................................32
(g) Right of Maintenance.................................................32
(i) General...........................................................32
(ii) Dilutive Securities..............................................32
(iii) Purchase Price..................................................33
(A) Employee Stock.................................................33
(B) Other Dilutive Securities......................................33
(C) Market Price...................................................33
(D) Alternative Purchase Price.....................................33
(E) Consideration Other than Cash..................................34
(F) Appraiser......................................................34
(iv) Prior Percentage Interest........................................34
(v) Maintenance Amount................................................34
(vi) Maintenance Notice...............................................34
(vii) Purchase of Maintenance Securities..............................35
(vi) Termination......................................................35
(h) Standstill Agreement.................................................35
8. INDEMNIFICATION..........................................................37
(a) Agreement to Indemnify...............................................37
(i) Company Indemnity.................................................37
(ii) Investor Indemnity...............................................37
(iii) Equitable Relief................................................37
(b) Survival.............................................................38
(c) Claims for Indemnification...........................................38
(d) Defense of Claims....................................................38
(e) Certain Definitions..................................................39
9. ASSIGNMENT AND DELEGATION. Notwithstanding anything herein to the
contrary:.............................................................40
9. ASSIGNMENT AND DELEGATION................................................40
(a) Information Rights...................................................40
(b) Registration Rights..................................................40
(c) Confidential Information.............................................40
(d) Board Observer.......................................................40
(e) Rights On Corporate Events...........................................41
(f) Rights of Participation and Maintenance..............................41
10. TRANSFERABILITY OF PURCHASED AND WARRANT SHARES.........................41
11. MISCELLANEOUS...........................................................41
(a) Successors and Assigns...............................................41
(b) Governing Law........................................................41
(c) Counterparts.........................................................41
(d) Headings.............................................................42
(e) Notices..............................................................42
(f) Amendments and Waivers...............................................42
(g) Severability.........................................................42
(h) Entire Agreement.....................................................42
(i) Further Assurances...................................................42
(j) Construction.........................................................43
(k) Fees, Costs and Expenses.............................................43
(l) Competition..........................................................43
(m) Cooperation in HSR Act Filings.......................................43
(n) Adjustments for Stock Splits, Etc....................................44
(o) Index of Defined Terms...............................................44
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
COMPUTER CORPORATION
SERIES B PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT
This Series B Preferred Stock and Warrant Purchase Agreement (this
"Agreement") is made and entered into as of July 20, 1998 by and between ▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇▇ Computer Corporation, a Utah corporation (the "Company"), and Intel
Corporation, a Delaware corporation (the "Investor").
RECITAL
In consideration for twenty-three million nine hundred ninety-nine
thousand nine hundred eighty-eight dollars ($23,999,988) in cash, the Company
shall issue (i) a number of shares of Class B-1 Preferred Stock, no par value,
of the Company (the "Series B Preferred Stock") and (ii) a warrant to purchase
three hundred seventy-eight thousand four hundred sixty-two (378,462) shares of
Series B Preferred Stock, all on the terms and conditions set forth in this
Agreement.
AGREEMENT
In consideration of the foregoing recitals, the mutual promises
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1........AGREEMENT TO PURCHASE AND SELL STOCK.
(a) Authorization. As of the Closing, the Company's Board of
Directors (the "Board") shall have authorized the issuance, pursuant to the
terms and conditions of this Agreement, of up to one million five hundred
thousand (1,500,000) shares of Series B Preferred Stock, having the rights,
preferences privileges and restrictions set forth in the Certificate of
Designation, Preferences and Other Rights of the Class B-1 Preferred Stock in
the form attached hereto as Exhibit A (the "Certificate of Designation") and up
to one million two hundred seventy-nine thousand eight hundred seventy
(1,279,870) shares of the Company's common stock, par value $.20 (the "Common
Stock"), for issuance upon conversion of Series B Preferred Stock.
(b) Agreement to Purchase and Sell Securities. The Company
hereby agrees to issue to the Investor at the Closing, and the Investor agrees
to acquire from the Company at the Closing, nine hundred one thousand four
hundred eight (901,408) shares of Series B Preferred Stock (collectively, the
"Purchased Shares").
(c) Per Share Purchase Price. The per share purchase price of
the Series B Preferred Stock shall be twenty six and six hundred twenty-five one
thousandths dollars ($26.625) (the "Per Share Purchase Price").
(d) Agreement to Purchase and Sell Warrant. The Company hereby
agrees to issue to the Investor at the Closing a Warrant in the form attached
hereto as Exhibit B (the "Warrant") to purchase three hundred seventy-eight
thousand four hundred sixty-two (378,462) shares of Series B Preferred Stock
(the "Warrant Shares").
(e) Total Consideration. The total consideration for the
Purchased Shares and the Warrant shall consist of twenty-three million nine
hundred ninety-nine thousand nine hundred eighty-eight dollars ($23,999,988) in
cash.
2........CLOSING. The purchase and sale of the Purchased Shares and the
Warrant (the "Closing") shall take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, at 10:00 a.m.
California time, within three (3) business days after the conditions set forth
in Sections 5 and 6 have been satisfied or waived by the party entitled to waive
any such condition, or at such other time and place as the Company and the
Investor mutually agree upon (which time and place are referred to in this
Agreement as the "Closing Date"). At the Closing, the Company shall deliver to
the Investor certificates representing the Purchased Shares and the Warrant, all
against delivery to the Company by the Investor of the consideration set forth
in Section 1(e), with the cash portion of the purchase price paid by wire
transfer of funds to the Company. The Company and the Investor expect that
Closing documents shall be delivered by facsimile with original signature pages
sent by overnight courier.
3........REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Investor that the statements in this
Section 3 are true and correct, except as set forth in the Disclosure Letter
from the Company to the Investor dated as of the date of this Agreement (the
"Disclosure Letter") or disclosed in an SEC Document:
(a) Organization, Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Utah and has all corporate power and authority required to
(i) carry on its business as presently conducted and (ii) enter into this
Agreement and the Warrant, and to consummate the transactions contemplated
hereby and thereby. Each of the Company and its subsidiaries is qualified to do
business and is in good standing in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect on the Company. As used in this
Agreement, "Material Adverse Effect" means a material adverse effect on, or a
material adverse change in, or a group of such effects on or changes in, the
business, operations, financial condition, results of operations, prospects,
assets or liabilities of the applicable party and its subsidiaries, taken as a
whole.
(b) Capitalization. Immediately prior to and without giving
effect to the transactions contemplated by this Agreement, the capitalization of
the Company is as follows:
(i) The authorized capital stock of the Company
consists of: (x) 30,000,000 shares of Common Stock, of which 10,055,184
shares were issued and outstanding as of June 30, 1998; (y) 5,000,000 shares
of Class A Preferred Stock, no par value (the "Series A Preferred
Stock"), none of which were issued and
outstanding as of June 30, 1998; and (z) 5,000,000 shares of Class B Preferred
Stock, no par value, none of which were issued and outstanding as of June 30,
1998 (the Series A Preferred Stock and the Series B Preferred Stock together,
the "Preferred Stock"). All such shares have been duly authorized, have been
validly issued, are fully paid and nonassessable and are free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon the
holders thereof. As of June 30, 1998, the Company has reserved: (1) 3,679,999
shares of Common Stock for issuance to officers, directors, employees or
independent contractors or affiliates of the Company under the Company's 1998
Stock Option Plan; 1989 Stock Option Plan for Non-Employee Directors; 1995 Long
Term Incentive Equity Plan; 1985 Stock Option Plan for Key Employees; and
AccelGraphics, Inc. 1995 Stock Plan; (2) 28,300 shares of Common Stock for
issuance to certain employees of the Company in connection with the Company's
acquisition of substantially all of the assets of Silicon Reality, Inc. on June
26, 1998; and (3) 18,015,000 shares of Common Stock for issuance upon conversion
of its outstanding 6% Convertible Subordinated Debentures due 2012. As of June
30, 1998, of the 3,708,299 shares of Common Stock reserved for issuance upon
exercise of options, 2,341,850 shares remained subject to outstanding options
with a weighted average exercise price of approximately $20.5235 and 290,870
shares were reserved for future grant. All shares of Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no other equity
securities, options, warrants, calls, rights, commitments or agreements of any
character to which the Company is a party or by which it is bound obligating the
Company to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of the
Company or obligating the Company to grant, extend or enter into any such equity
security, option, warrant, call, right, commitment or agreement. No such
outstanding shares were issued in violation of any preemptive right (whether any
such right is created in the Articles or by contract).
(ii) The shares of Series B Preferred Stock and
Common Stock to be issued pursuant
to the transactions contemplated hereby will, upon issuance in accordance with
this Agreement, be duly authorized, validly issued, fully paid and
non-assessable.
(c) Due Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution, delivery of, and the performance of all obligations of
the Company under this Agreement and the Warrant and for the authorization,
issuance, reservation for issuance and delivery of all of the Purchased Shares
and the Warrant Shares, has been taken prior to the Closing, and this Agreement
constitutes, and the Warrant when executed and delivered will constitute, valid
and legally binding obligations of the Company, enforceable against the Company
in accordance with their respective terms, except (i) as may be limited by (A)
applicable bankruptcy, insolvency, reorganization or others laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (B) the effect of rules of law governing the availability of
equitable remedies and (ii) as rights to indemnity or contribution may be
limited under federal or state securities laws or by principles of public policy
thereunder.
(d) Valid Issuance of Stock.
(i) Valid Issuance. The Purchased Shares, when issued,
sold and delivered in accordance with the terms of this
Agreement, will be duly and validly issued, fully paid and
nonassessable. The Warrant Shares and the Common Stock to be
issued upon conversion of Purchased Shares and Warrant
Shares (the "Conversion Shares") have been duly and validly
reserved for issuance and, upon issuance, sale and delivery
in accordance with the terms of the Warrant, will be duly
and validly issued, fully paid and nonassessable.
(ii) Compliance with Securities Laws. Assuming the
correctness of the representations made by the Investor in
Section 4, the Purchased Shares, the Warrant, the Warrant
Shares and the Conversion Shares (assuming no change in
applicable law and no unlawful distribution of Purchased
Shares or the Warrant by the Investor or other Persons) will
be issued to the Investor in compliance with applicable
exemptions from (A) the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and (B) the registration and
qualification requirements of all applicable securities laws
of the states of the United States.
(e) Governmental Consents. No consent, approval, order or
authorization of, or registration qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company or any of its subsidiaries is required in connection with the
consummation of the transactions contemplated by this Agreement and the Warrant,
except for: (i) compliance with HSR Requirements that may be required for the
voluntary conversion of Series B Preferred Stock into Common Stock; (ii) the
filing of a Form 8-K with the Securities and Exchange Commission (the "SEC")
following the Closing; (iii) the filing of such qualifications or filings under
the Securities Act and the regulations thereunder and all applicable state
securities laws as may be required in connection with the transactions
contemplated by this Agreement; (iv) the listing of the Conversion Shares for
quotation on the Nasdaq National Market; and (v) the filing of the Certificate
of Designation with the Secretary of State of the State of Utah. All such
qualifications and filings will, in the case of qualifications, be effective on
the Closing Date and will, in the case of filings, be made within the time
prescribed by law. As used herein, the term "HSR Requirements" means compliance
with the filing and other requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act").
(f) Non-Contravention. The execution, delivery and performance
of this Agreement and the Warrant by the Company, and the consummation by the
Company of the transactions contemplated hereby and thereby, do not and will
not: (i) contravene or conflict with the Company's Articles of Incorporation, as
amended as of the Closing Date (the "Articles") or the Company's bylaws, as
amended as of the Closing Date (the "Bylaws"); (ii) constitute a violation of
any provision of any federal, state, local or foreign law binding upon or
applicable to the Company or any of its subsidiaries; or (iii) constitute a
default or require any consent under, give rise to any right of termination,
cancellation or acceleration of, or to a loss of any benefit to which the
Company or any of its subsidiaries is entitled under, or result in the creation
or imposition of any lien, claim or encumbrance on any assets of the Company or
any such subsidiary under, any contract to which the Company or such subsidiary
is a party or any permit, license or similar right relating to the Company or
such subsidiary or by which the Company or such subsidiary may be bound or
affected in such a manner as, together with all other such matters, would have
Material Adverse Effect on the Company.
(g) Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation (each, an "Action") pending or, to the Company's
best knowledge, threatened: (i) against the Company or any of its subsidiaries,
or any of their respective activities, properties or assets, or any officer,
director or employee of the Company or any of its subsidiaries in connection
with such officer's, director's or employee's relationship with, or actions
taken on behalf of, the Company or such subsidiary, that is reasonably likely to
have a Material Adverse Effect on the Company; or (ii) that seeks to prevent,
enjoin, alter or delay any of the transactions contemplated by this Agreement or
the Warrant. None of the Company and its subsidiaries is a party to or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. No Action by the Company or any
of its subsidiaries is currently pending, nor does the Company or any of its
subsidiaries intend to initiate any Action, that is reasonably likely to have a
Material Adverse Effect on the Company.
(h) Compliance with Law and Charter Documents. The Company is
not in violation or default of any provision of the Articles or Bylaws. Each of
the Company and its subsidiaries has complied and is in compliance with all
applicable statutes, laws, regulations and executive orders of the United States
of America and all states, foreign countries and other governmental authorities
having jurisdiction over the Company's or any of its subsidiaries' business or
properties, except for any violations that would not, either individually or in
the aggregate, have a Material Adverse Effect on the Company.
(i) SEC Documents.
(i) Reports. The Company has furnished to the Investor prior
to the date hereof copies of its Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 ("Form 10-K"), its
Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1998 (the "Form 10-Q"), all amendments to the Form 10-K
and Form 10-Q, and all other registration statements, reports and
proxy statements filed by the Company with the SEC on or after
March 31, 1998 (the Form 10-K, the Form 10-Q's and such
registration statements, reports proxy statements and amendments
thereto are collectively referred to herein as the "SEC
Documents"). Each of the SEC Documents, as of the date thereof
(or if amended or superseded by a filing prior to the Closing
Date, then on the date of such filing), did not, and each of the
registration statements, reports and proxy statements filed by
the Company with the SEC after the date hereof and prior to the
Closing Date will not, as of the date thereof (or if amended or
superseded by a filing prior to the date of this Agreement, then
on the date of such filing), contain any untrue statement of a
material fact or omit to state a material fact necessary in order
to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Neither
the Company nor any of its subsidiaries is a party to any
material contract, agreement or other arrangement that was
required to have been filed as an exhibit to the SEC Documents
that was not so filed.
(ii) Financial Statements. The Company has provided the
Investor with copies of its audited financial statements (the
"Audited Financial Statements") for the fiscal year ended
December 31, 1997, and its unaudited financial statements for the
three (3) month period ended March 31, 1998 (the "Balance Sheet
Date"). Since the Balance Sheet Date, the Company has duly filed
with the SEC all registration statements, reports and proxy
statements required to be filed by it under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the
Securities Act. The audited and unaudited consolidated financial
statements of the Company included in the SEC Documents filed
prior to the date hereof fairly present, in conformity with
generally accepted accounting principles ("GAAP") (except as
otherwise permitted by Form 10-Q) applied on a consistent basis
(except as may be indicated in the notes thereto), the
consolidated financial position of the Company as at the dates
thereof and the consolidated results of its operations and cash
flows for the periods then ended (subject to normal year-end
audit adjustments in the case of unaudited interim financial
statements).
(j) Absence of Certain Changes Since Balance Sheet Date. Since
the Balance Sheet Date, the business and operations of the Company and each of
its subsidiaries have been conducted in the ordinary course consistent with past
practice, and there has not been:
(i) any declaration, setting aside or payment of any
dividend or other distribution of the assets of the Company
with respect to any shares of its capital stock or any
repurchase, redemption or other acquisition by the Company
or any of its subsidiaries of any outstanding shares of the
Company's capital stock;
(ii) any damage, destruction or loss, whether or not
covered by insurance, except for such occurrences that have
not resulted, and are not expected to result, in a Material
Adverse Effect on the Company;
(iii) any waiver by the Company or any of its
subsidiaries of a valuable right or of a material debt owed
to it, except for such waivers that have not resulted, and
are not expected to result, individually or in the
aggregate, in a Material Adverse Effect on the Company;
(iv) any material change or amendment to, or any waiver
of any material rights under a material contract or other
arrangement by which the Company or any of its subsidiaries,
or any of their respective assets or properties, is bound or
subject, except for changes, amendments or waivers that are
expressly provided for or disclosed in this Agreement or
that have not resulted, and are not expected to result,
individually or in the aggregate, in a Material Adverse
Effect on the Company;
(v) any change by the Company or any of its
subsidiaries in its accounting principles, methods or
practices or in the manner in which it keeps its accounting
books and records, except any such change required by a
change in GAAP; or
(vi) any other event or condition of any character,
except for such events and conditions that have not
resulted, and are not expected to result, individually or in
the aggregate, in a Material Adverse Effect on the Company.
(k) Invention Assignment and Confidentiality Agreement. Each
employee and consultant or independent contractor of the Company or any of its
subsidiaries whose duties include the development of products or Intellectual
Property, and each former employee and consultant or independent contractor
whose duties included the development of products or Intellectual Property, has
entered into and executed an invention assignment and confidentiality agreement
in customary form or an employment or consulting agreement containing
substantially similar terms.
(l) Intellectual Property.
(i) Ownership or Right to Use. The Company or one of
its subsidiaries has sole title to and owns, or is licensed
or otherwise possesses legally enforceable rights to use,
all patents or patent applications, software, know-how,
registered or unregistered trademarks and service marks and
any applications therefor, registered or unregistered
copyrights, trade names, and any applications therefor,
trade secrets or other confidential or proprietary
information ("Intellectual Property") necessary to enable
the Company and its subsidiaries to carry on their
respective businesses as currently conducted, except where
any deficiency, or group of deficiencies, therein would not
have a Material Adverse Effect on the Company. The Company
covenants that it shall, where the Company in the exercise
of reasonable judgment deems it appropriate, use reasonable
business efforts to seek copyright and patent registration,
and other appropriate intellectual property protection, for
Intellectual Property of the Company.
(ii) Licenses; Other Agreements. Neither the Company
nor any of its subsidiaries is currently subject to any
exclusive licenses (whether such exclusivity is temporary or
permanent) to any material portion of the Intellectual
Property of the Company or any of its subsidiaries. There
are not outstanding any licenses or agreements of any kind
relating to any Intellectual Property of the Company or any
of its subsidiaries, except for agreements with OEM's and
other customers of the Company or any such subsidiary
entered into in the ordinary course of its business and
other licenses and agreements that, individually or in the
aggregate, are not material. Neither the Company nor any of
its subsidiaries is obligated to pay any royalties or other
payments to third parties with respect to the marketing,
sale, distribution, manufacture, license or use of any
Intellectual Property, except as it may be so obligated in
the ordinary course of its business, as disclosed in the
Company's SEC Documents or where the aggregate amount of
such payments could not reasonably be expected to be
material.
(iii) No Infringement. To the Company's best knowledge,
neither the Company nor any of its subsidiaries has violated
or infringed, nor is it currently violating or infringing,
and neither the Company nor any of its subsidiaries has
received any communication alleging that either the Company,
any of its subsidiaries or any of their respective employees
or consultants has violated or infringed, any Intellectual
Property of any other Person, to the extent that any such
violation or infringement, either individually or together
with all other such violations and infringements, would have
a Material Adverse Effect on the Company.
(iv) Employees and Consultants. To the Company's best
knowledge, no employee of or consultant to the Company or
any of its subsidiaries is in default under any term of any
employment contract, agreement or arrangement relating to
Intellectual Property of the Company or any of its
subsidiaries or any non-competition arrangement, other
contract or restrictive covenant relating to the
Intellectual Property of the Company or any of its
subsidiaries, where such default, together with all other
such defaults, would have a Material Adverse Effect on the
Company. The Intellectual Property of the Company and its
subsidiaries (other than any Intellectual Property duly
acquired or licensed from third parties) was developed
entirely by the employees of or consultants to the Company
or one of its subsidiaries during the time they were
employed or retained by it, and to the Company's best
knowledge, at no time during conception or reduction to
practice of such Intellectual Property of the Company or its
subsidiaries were any such employees or consultants
operating under any grant from a governmental authority or
subject to any employment agreement or invention assignment
or non-disclosure agreement or any other obligation with a
third party that would materially and adversely affect the
Company's or any of its subsidiaries' rights in the
Intellectual Property of the Company or one of its
subsidiaries. Such Intellectual Property of the Company and
its subsidiaries does not, to the Company's best knowledge,
include any invention or other intellectual property of such
employees or consultants made prior to the time such
employees or consultants were employed or retained by the
Company or one of its subsidiaries nor any intellectual
property of any previous employer of such employees or
consultants nor the intellectual property of any other
Person.
(m) Registration Rights. Except as otherwise provided in this
Agreement, the Company, as of the Closing Date, is not currently subject to any
grant or agreement to grant to any Person any rights (including piggyback
registration rights) to have any securities of the Company registered with the
SEC or registered or qualified with any other governmental authority.
(n) Title to Property and Assets. The material properties and
assets of the Company and each of its subsidiaries are owned by the Company or
such subsidiary free and clear of all mortgages, deeds of trust, liens, charges,
encumbrances and security interests except for statutory liens for the payment
of current taxes that are not yet delinquent and liens, encumbrances and
security interests that arise in the ordinary course of business and do not
affect such properties and assets of the Company and its subsidiaries, taken as
a whole. With respect to the property and assets it leases, each of the Company
and its subsidiaries is in compliance with such leases in all material respects.
(o) Tax Matters. Each of the Company and it subsidiaries has
filed all material tax returns required to be filed, which returns are true,
complete and correct in all material respects, and neither the Company nor any
of its subsidiaries is in default in the payment of such taxes, including
penalties and interest, assessments, fees and other charges, shown thereon due
or otherwise assessed, other than those being contested in good faith and for
which adequate reserves have been provided or those currently payable without
interest that were payable pursuant to said returns or any assessments with
respect thereto.
(p) Subsidiaries. The Company does not presently own or
control, directly or indirectly, any more than a 1% interest in any other
Person.
(q) Environmental Matters. During the period that the Company
or any of its subsidiaries has owned or leased its properties and facilities,
(i) there have been no disposals, releases or threatened releases of Hazardous
Materials on, from or under such properties or facilities which, either
individually or in the aggregate, would have a Material Adverse Effect on the
Company, and (ii) neither the Company, its subsidiaries nor, to the Company's
knowledge, any other Person, has used, generated, manufactured or stored on,
under or about such properties or facilities or transported to or from such
properties or facilities any Hazardous Materials, where such use, generation,
manufacture or storage, either individually or in the aggregate, would have a
Material Adverse Effect on the Company. The Company has no knowledge of any
presence, disposals, releases or threatened releases of Hazardous Materials on,
from or under any of such properties or facilities, which may have occurred
prior to the Company or any of its subsidiaries having taken possession of any
of such properties or facilities and which, either individually or in the
aggregate, would have a Material Adverse Effect on the Company. For purposes of
this Agreement, the terms "disposal," "release," and "threatened release" shall
have the definitions assigned thereto by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et
seq., as amended ("CERCLA"). For the purposes of this Agreement, "Hazardous
Materials" means any hazardous or toxic substance, material or waste which is
regulated under, or defined as a "hazardous substance", "pollutant",
"contaminant", "toxic chemical", "hazardous material", "toxic substance" or
"hazardous chemical" under (A) CERCLA; (B) the Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. Section 11001 et seq.; (C) the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq.; (D) the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq.; (E) the Occupational Safety and
Health Act of 1970, 29 U.S.C. Section 651 et seq.; (F) regulations promulgated
under any of the above statutes; or (G) any applicable state or local statute,
ordinance, rule, or regulation that has a scope or purpose similar to those
statutes identified above.
(r) Brokers and Finders. Except for ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLC,
none of the Company, its subsidiaries, their respective directors or officers
and their respective agents has incurred any obligation or liability, contingent
or otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement or any of the transactions
contemplated hereby. The Company agrees to pay as and when due all amounts
payable to ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLC in connection with any of the transactions
contemplated by this Agreement. The Company will indemnify and hold the Investor
harmless from any brokerage or finder's fees or agents' commissions or other
similar payment alleged to be due by or through the Company or any of such other
Persons as a result of the action of the Company, its subsidiaries, their
respective directors or officers or their respective agents.
(s) Shareholder Rights Plan. Neither the execution and
delivery of this Agreement nor the Warrant, nor the consummation of any of the
transactions contemplated hereby and thereby, will: (i) result in the Investor,
together with or without any of its "Affiliates" (as defined in the Company's
Rights Agreement, dated as of November 18, 1988, between the Company and Zions
First National Bank, a Utah banking corporation (the "Rights Plan")),
"Associates" (as defined in the Rights Plan) and "Subsidiaries" (as defined in
the Rights Plan) becoming an "Acquiring Person" (as defined in the Rights Plan);
(ii) result in a "Triggering Event" (as defined in the Rights Plan); or (iii)
otherwise trigger the provisions of the Rights Plan. To the Company's best
knowledge, no event has occurred on or before the Closing Date which would
trigger any of the provisions of the Rights Plan. Upon issuance, each of the
Conversion Shares will be deemed to represent a Right, as defined in the Rights
Plan.
(t) Full Disclosure. The information contained in this
Agreement, the Warrant, the Disclosure Letter and the SEC Documents with respect
to the business, operations, assets, results of operations and financial
condition of the Company, and the transactions contemplated by this Agreement
and the Warrant, are true and complete in all material respects and do not omit
to state any material fact or facts necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4........REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE
INVESTOR. The Investor hereby represents and warrants to the Company and agrees
that:
(a) Organization, Good Standing and Qualification. The
Investor is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all corporate power and
authority required to (i) carry on its business as presently conducted and (ii)
enter into this Agreement and the Warrant, and to consummate the transactions
contemplated hereby and thereby. The Investor is qualified to do business and is
in good standing in each jurisdiction in which the failure to so qualify would
have a Material Adverse Effect on the Investor.
(b) Authorization. This Agreement and the Warrant have been
duly authorized by all necessary corporate action on the part of the Investor.
This Agreement and the Warrant constitute the Investor's valid and legally
binding obligations, enforceable in accordance with their respective terms,
except (i) as may be limited by (A) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
enforcement of creditors' rights generally and (B) the effect of rules of law
governing the availability of equitable remedies and (ii) as rights to indemnity
or contribution may be limited under federal or state securities laws or public
policy thereunder.
(c) Governmental Consents. No consent, approval, order or
authorization of, or registration qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Investor is required in connection with the consummation of the transactions
contemplated by this Agreement and the Warrant, except for the filing of such
qualifications or filings under the Securities Act or the Exchange Act and the
regulations thereunder and all applicable state securities laws as may be
required in connection with the transactions contemplated by this Agreement or
the Warrant. All such qualifications and filings will, in the case of
qualifications, be effective on the Closing Date and will, in the case of
filings, be made within the time prescribed by law.
(d) Non-Contravention. The execution, delivery and performance
of this Agreement and the Warrant by the Investor, and the consummation by the
Investor of the transactions contemplated hereby and thereby, do not and will
not: (i) contravene or conflict with the Investor's certificate of incorporation
or bylaws, each as amended to the Closing Date; (ii) constitute a violation of
any provision of any federal, state, local or foreign law binding upon or
applicable to the Investor; or (iii) constitute a default or require any consent
under, give rise to any right of termination, cancellation or acceleration of,
or to a loss of any benefit to which the Investor is entitled under, or result
in the creation or imposition of any lien, claim or encumbrance on any assets of
the Investor under, any contract to which the Investor is a party or any permit,
license or similar right relating to the Investor or by which the Investor may
be bound or affected in such a manner as, together with all other such matters,
would have a Material Adverse Effect on the Investor.
(e) Litigation. There is no Action pending that seeks to
prevent, enjoin, alter or delay any of the transactions contemplated by this
Agreement or the Warrant.
(f) Purchase for Own Account. The Purchased Shares and the
Warrant are being acquired for investment for the Investor's own account, not as
a nominee or agent, and not with a view to the public resale or distribution
thereof within the meaning of the Securities Act, and the Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. The Investor also represents that it has not been formed
for the specific purpose of acquiring the Purchased Shares and the Warrant.
(g) Investment Experience. The Investor understands that the
purchase of the Purchased Shares and the Warrant involve substantial risk. The
Investor has experience as an investor in securities of companies and
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment in the Purchased Shares and the Warrant and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of its investment in the Purchased Shares and the Warrant
and protecting its own interests in connection with this investment.
(h) Accredited Investor Status. The Investor is an "accredited
investor" within the meaning of Regulation D promulgated under the Securities
Act.
(i) Restricted Securities. The Investor understands that the
Purchased Shares and the Warrant are, and the Warrant Shares upon issuance will
be, characterized as "restricted securities" under the Securities Act, inasmuch
as they are being acquired from the Company in a transaction not involving a
public offering and that under the Securities Act and applicable regulations
thereunder such securities may be resold without registration under the
Securities Act only in certain limited circumstances. The Investor is familiar
with Rule 144 of the SEC, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.
(j) Legends. The Investor agrees that the certificates for the
Purchased Shares and, upon issuance thereof, the Warrant Shares will bear the
following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 or with any state
securities commission, and may not be transferred or disposed
of by the holder in the absence of a registration statement
which is effective under the Securities Act of 1933 and
applicable state laws and rules, or, unless, immediately prior
to the time set for transfer, such transfer may be effected
without violation of the Securities Act of 1933 and other
applicable state laws and rules."
In addition, the Investor agrees that the Company may place stop transfer orders
with its transfer agents with respect to such certificates. The appropriate
portion of the legend and the stop transfer orders shall be removed promptly
upon delivery to the Company of such satisfactory evidence as reasonably may be
required by the Company that such legend or stop orders are not required to
ensure compliance with the Securities Act.
(k) Review of Information. The Investor has received and
reviewed, and has been given the opportunity to ask questions of the Company
with respect to, the following Company documents: (i) Form 10-K, dated ▇▇▇▇▇ ▇▇,
▇▇▇▇, (▇▇) Proxy Statement, dated ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇▇) Amendment No. 1 to S-4
Registration Statement, dated May 15, 1998 (including the prospectus contained
therein), (iv) Form 10-Q, dated May 11, 1998, (v) Form 10-K/A, dated May 13,
1998, and (vi) Form 8-K, dated July 13, 1998.
(l) Acknowledgment of Risks. The Investor hereby acknowledges
that its investment in the Purchased Shares is subject to certain risks and
uncertainties, including those risks and uncertainties set forth under "Risk
Factors" in the Company's Amendment No. 1 to S-4 Registration Statement, dated
May 15, 1998.
5........CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT CLOSING.
The obligations of the Investor under Sections l and 2 are subject to the
fulfillment or its waiver, before the Closing of each of the following
conditions:
(a) Representations and Warranties True. Each of the
representations and warranties of the Company contained in Section 3 shall be
true and correct in all material respects on and as of the date hereof and on
and as of the Closing Date, with the same effect as though such representations
and warranties had been made as of the Closing Date.
(b) Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it at or before the Closing and
shall have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
(c) Securities Exemptions. The offer and sale of the Purchased
Shares and the Warrant to the Investor pursuant to this Agreement shall be
exempt from the registration requirements of the Securities Act and the
registration or qualification requirements of all applicable state securities
laws.
(d) Proceedings and Documents. All corporate and other
proceedings of the Company in connection with the transactions contemplated at
the Closing and all documents incident thereto shall be reasonably satisfactory
in form and substance to the Investor, and the Investor shall have received all
such counterpart originals and certified or other copies of such documents as it
may reasonably request. Such documents shall include the following:
(i) Certified Charter Documents. A complete and correct
copy of: (A) the Articles, certified as of a recent date by
the Secretary of State of Utah, (B) the Certificate of
Designation, certified as of a recent date by the Secretary
of State of Utah and (C) the Bylaws, certified as of the
Closing Date by the Secretary of the Company; and
(ii) Board Resolutions. A copy, certified by the
Secretary of the Company, of the resolutions of the Board
approving this Agreement and the Warrant and the issuance of
the Purchased Shares and the Warrant and the other matters
contemplated hereby and thereby.
(e) Opinion of Company Counsel. The Investor shall have
received an opinion on behalf of the Company, dated as of the Closing Date, from
▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the Company, in substantially the form attached
hereto as Exhibit C.
(f) No Material Adverse Effect. Between the date hereof and
the Closing, there shall not have occurred any Material Adverse Effect on the
Company.
(g) Other Actions. The Company shall have executed such other
certificates, agreements, instruments and other documents, and taken such other
actions, as shall be customary or reasonably requested by the Investor in
connection with the transactions contemplated hereby.
6........CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company under Sections 1 and 2 are subject to the fulfillment
or its waiver before the Closing of each of the following conditions:
(a) Representations and Warranties True. The representations
and warranties of the Investor contained in Section 4 shall be true and correct
in all material respects on and as of the date hereof and on and as of the
Closing Date with the same effect as though such representations and warranties
had been made as of the Closing Date.
(b) Performance. The Investor shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it at or before
the Closing and shall have obtained all approvals, consents and qualifications
necessary to complete the purchase and sale described herein.
(c) Payment of Purchase Price. The Investor shall have
delivered to the Company the full purchase price of the Purchased Shares and the
Warrant as specified in Section 1(e).
(d) Securities Exemptions. The offer and sale of the Purchased
Shares and the Warrant to the Investor pursuant to this Agreement shall be
exempt from the registration requirements of the Securities Act and the
registration and qualification requirements of all applicable state securities
laws.
(e) Proceedings and Documents. All corporate and other
proceedings of the Investor in connection with the transactions contemplated at
the Closing and all documents incident thereto shall be reasonably satisfactory
in form and substance to the Company and to the Company's legal counsel, and the
Company shall have received all such counterpart originals and certified or
other copies of such documents as it may reasonably request.
7........COVENANTS OF COMPANY. The Company covenants and agrees that:
(a) Information Rights.
(i) Financial Information. For so long as the Investor holds
any of the Purchased Shares, the Warrant, the Warrant Shares or
the Conversion Shares, the Company shall:
(A) Annual Reports. Furnish to the Investor promptly
following the filing of such report with the SEC a copy of
the Company's Annual Report on Form 10-K for each fiscal
year, which shall include a consolidated balance sheet as of
the end of such fiscal year, a consolidated statement of
income and a consolidated statement of cash flows of the
Company and its subsidiaries for such year, setting forth in
each case in comparative form the figures from the Company's
previous fiscal year, all prepared in accordance with
generally accepted accounting principles and practices,
consistently applied, and audited by nationally recognized
independent certified public accountants. If the Company is
no longer required to file Annual Reports on Form 10-K, the
Company shall, within ninety (90) days following the end of
each respective fiscal year, deliver to the Investor a copy
of such balance sheets, statements of income and statements
of cash flows.
(B) Quarterly Reports. Furnish to the Investor promptly
following the filing of such report with the SEC, a copy of
each of the Company's Quarterly Reports on Form 10-Q, which
shall include a consolidated balance sheet as of the end of
the respective fiscal quarter, consolidated statements of
income and consolidated statements of cash flows of the
Company and its subsidiaries for the respective fiscal
quarter and for the year to-date, setting forth in each case
in comparative form the figures from the comparable periods
in the Company's immediately preceding fiscal year, all
prepared in accordance with generally accepted accounting
principles and practices (except as otherwise permitted by
Form 10-Q), consistently applied, but all of which may be
unaudited. If the Company is no longer required to file
Quarterly Reports on Form 10-Q, the Company shall, within
forty-five (45) days following the end of each of the first
three (3) fiscal quarters of each fiscal year, deliver to
the Investor a copy of such balance sheets, statements of
income and statements of cash flows.
(ii) SEC Filings. The Company shall deliver to the
Investor copies of each other
document filed with the SEC on a non-confidential basis promptly following the
filing of such document with the SEC.
(b) Registration Rights.
(i) Definitions. For purposes of this Agreement:
(A) Registration. The terms "register," "registered,"
and "registration" refer to a registration effected by
preparing and filing a registration statement in compliance
with the Securities Act and the declaration or ordering of
effectiveness of such registration statement.
(B) Registrable Securities. The term "Registrable
Securities" means: (1) all shares of Common Stock issued or
issuable (a) upon conversion of any of the Purchased Shares
or Warrant Shares, (b) pursuant to the Right of
Participation or the Right of Maintenance, and (2) any
shares of Common Stock issued as (or issuable upon the
conversion or exercise of any warrant, right or other
security that is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of,
any of the securities described in the immediately preceding
clause. Notwithstanding the foregoing, "Registrable
Securities" shall exclude any Registrable Securities sold by
any individual, corporation, partnership, trust or other
entity or organization, including a governmental authority
or any political subdivision thereof (each, a "Person") in a
transaction in which rights under this Section 7(b) are not
assigned in accordance with this Agreement or any
Registrable Securities sold in a public offering, whether
sold pursuant to Rule 144 promulgated under the Securities
Act, or in a registered offering, or otherwise.
(C) Registrable Securities Then Outstanding. The number
of shares of "Registrable Securities then outstanding" shall
mean the number of shares of Common Stock that are
Registrable Securities and (1) are then issued and
outstanding or (2) are then issuable pursuant to any
conversion of the Warrant Shares.
(D) Holder. The term "Holder" means any Person owning
of record Registrable Securities that have not been sold to
the public or pursuant to Rule 144 promulgated under the
Securities Act or any permitted assignee of record of such
Registrable Securities to whom rights under this Section
7(b) have been duly assigned in accordance with this
Agreement.
(E) Forms ▇-▇, ▇-▇ and S-3. The terms "Form ▇-▇," "▇▇▇▇
▇-▇" and "Form S-3" mean, respectively, such forms under the
Securities Act each as are in effect on the date hereof or
such successor registration forms under the Securities Act
subsequently adopted by the SEC requiring similar disclosure
and permitting similar incorporation by reference to other
documents filed by the Company with the SEC.
(ii) Shelf Registration.
(A) Undertaking to Register. Within ninety (90) days
after the Closing Date, the Company shall file a
registration statement on Form S-3 to register all of the
Registrable Securities for resale to the general public (the
"Shelf Registration Statement").
(B) Selling Procedures; Suspension.
(1) Except in the event that paragraph (2) below
applies, the Company shall: (a) if deemed necessary by the
Company, prepare and file from time to time with the SEC a
post-effective amendment to the Shelf Registration Statement
or a supplement to the related prospectus or a supplement or
amendment to any document incorporated therein by reference
or file any other required document so that such
registration statement shall not contain an untrue statement
of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading, and so that, as thereafter delivered
to purchasers of the Registrable Securities being sold
thereunder, such prospectus shall not contain an untrue
statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading; (b) provide the
Holders copies of any documents filed pursuant to the
immediately preceding clause (a); and (c) inform each Holder
that the Company has complied with its obligations in the
immediately preceding clause (a) (or that, if the Company
has filed a post-effective amendment to the Shelf
Registration Statement which has not yet been declared
effective, the Company shall notify each such Holder to that
effect, it shall use its best efforts to secure the
effectiveness of such post-effective amendment and shall
immediately notify each Holder pursuant to the immediately
preceding clause (a) when the amendment has become
effective).
(2) In the event (a) of any request by the SEC or any
other federal or state governmental authority during the
period of effectiveness of the Shelf Registration Statement
for amendments or supplements thereto or related prospectus
or for additional information; (b) of the issuance by the
SEC or any other federal or state governmental authority of
any stop order suspending the effectiveness of the Shelf
Registration Statement or the initiation of any proceedings
for that purpose; (c) of the receipt by the Company of any
notification with respect to the suspension of the
qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such
purpose; (d) of any event or circumstance which necessitates
the making of any changes in the registration statement or
prospectus, or any document incorporated or deemed to be
incorporated therein by reference, so that, in the case of
the Shelf Registration Statement, it shall not contain any
untrue statement of a material fact or any omission to state
a material fact required to be stated therein or necessary
to make the statements therein not misleading, and that in
the case of the prospectus, it shall not contain any untrue
statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to
make the statements therein, in the light of the
circumstances under which they were made, not misleading; or
(e) that, in the reasonable, good faith judgment of the
Company's management or the Board, (i) the offering of
securities pursuant thereto would materially and adversely
affect (A) a pending or proposed acquisition, merger,
consolidation, reorganization, restructuring or similar
transaction of or by the Company or other material corporate
activity or transaction, or (B) bona fide negotiations,
discussions or proposals with respect to any of the
foregoing, and (ii) in the event sales of Registrable
Securities were made under the Shelf Registration Statement
and disclosure of all material information with respect to
the applicable circumstance(s) described in the immediately
preceding clause (e)(i) had not been made, such
circumstance(s) could reasonably be expected to cause a
violation of the Securities Act or the Exchange Act (each a
"Suspension Event"), then, subject to Section
7(b)(ii)(B)(4), the Company shall deliver a notice in
writing to the Holders (a "Suspension Notice") to the effect
of the foregoing and, upon receipt of such Suspension
Notice, each such Holder shall refrain from selling any
Registrable Securities pursuant to the Shelf Registration
Statement (a "Suspension") until such Holder's receipt of
copies of the supplemented or amended prospectus provided
for in Section 7(b)(ii)(B)(1)(a), or until it is advised in
writing by the Company that the prospectus may be used, and
has received copies of any additional or supplemental
filings that are incorporated or deemed incorporated by
reference in such prospectus.
(3) In the event of any Suspension Event, or any
material delay in effecting the registration under Section
7(b)(ii)(A), the Company shall use its best efforts to
ensure that the use of the prospectus so suspended or
delayed may be commenced or resumed, as the case may be, and
that the Suspension shall terminate and the Holder's ability
to sell pursuant to the prospectus so suspended shall
commence or resume, as the case may be, as soon as
practicable and, in the case of a pending development or
event referred to in Section 7(b)(ii)(B)(2)(d) or (e) as
soon, in the reasonable and good faith judgment of the
Board, as disclosure of such pending development, filing or
event or the resumption of sales pursuant to the
registration statement would not have a material adverse
effect on the Company's ability to consummate or materially
prejudice the Company's interest with respect to the
transaction, if any, contemplated by such development,
filing or event. Notwithstanding any other provision of this
Agreement, the Company shall have the right to cause a
maximum of two (2) Suspensions pursuant to Section
7(b)(ii)(B)(2)(d) or (e), neither of which may be within
sixty (60) days of the last day of the other, as provided
above (including for this purpose a delay in effecting the
registration pursuant to Section 7(b)(ii)(A)) during any
12-month period after the initial effective date of the
registration statement, and the total number of days for
which all Suspensions (including for this purpose a delay in
effecting the Shelf Registration Statement pursuant to
Section 7(b)(ii)(A)) during any 12-month period shall not
exceed ninety (90) days in the aggregate.
(4) The Company shall use its best efforts to maintain
the effectiveness of the Shelf Registration Statement
pursuant this Section 7(b)(ii) for three (3) years after the
Closing Date. The Company from time to time shall amend or
supplement such registration statement and the prospectus
contained therein to the extent necessary to comply with the
Securities Act and any applicable state securities statue or
regulation. The 3-year period time period referenced in the
preceding sentence during which the Company is obligated to
keep such registration statement effective shall be extended
for a number of days equal to the number of days during
which any Suspension was in effect. The Company shall use
best efforts to obtain the withdrawal of any order
suspending the effectiveness of the Shelf Registration
Statement, or the lifting of any suspension of the
qualification (or exemption from qualification) of any of
the securities for sale in any jurisdiction, at the earliest
practicable moment.
(C) Expenses. The Company shall pay all expenses incurred in
connection with the registration pursuant to this Section 7(b)(ii),
including all federal and Blue Sky registration, filing and
qualification fees, printer's and accounting fees, and fees and
disbursements of the Company's and the Holder's respective counsel,
but excluding underwriters' discounts and commissions relating to
shares sold by the Holders.
(D) Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities under this Section
7(b)(ii), the Company shall perform all of its obligations under
Section 7(b)(v).
(iii) Demand Registration.
(A) Request by Holders. If the Company, at any time
prior to the third (3rd) anniversary of the Closing Date, is
unable to maintain the effectiveness of the Shelf
Registration Statement, other than in connection with a
Suspension Event, and during such time, the Company receives
a written request from the Holders of at least twenty-five
percent (25%) of the Registrable Securities then outstanding
that the Company file a registration statement under the
Securities Act covering the registration of Registrable
Securities, then the Company shall, within ten (10) business
days after the receipt of such written request, give written
notice of such request ("Request Notice") to all Holders,
and use its best efforts to effect, as soon as practicable,
the registration under the Securities Act of all Registrable
Securities that Holders request to be registered and
included in such registration by written notice given such
Holders to the Company within twenty (20) days after receipt
of the Request Notice; provided, however, that the
Registrable Securities requested by all Holders to be
registered pursuant to such request must be at least fifteen
percent (15%) of all Registrable Securities then
outstanding. Such registration shall be effected on a Form
S-1 or S-2, whichever is then available for the Company's
use under the rules promulgated under the Securities Act.
(B) Underwriting. If the Holders initiating a
registration request under this Section 7(b)(iii)
("Initiating Holders") intend to distribute the Registrable
Securities covered by their request by means of an
underwriting, then they shall so advise the Company as a
part of their request, and the Company shall include such
information in the applicable Request Notice. In such event,
the right of any Holder to include such Holder's Registrable
Securities in such registration shall be conditioned upon
such Holder's participation in such underwriting, and the
inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority
in interest of the initiating Holders and such Holder
determined based on the number of Registrable Securities
held by such Holders and being registered). All Holders
proposing to distribute their securities through such
underwriting shall enter into an underwriting agreement in
customary form with the managing underwriter or underwriters
selected for such underwriting by the Holders of a majority
of the Registrable Securities being registered and
reasonably acceptable to the Company (including a market
stand-off agreement of up to 180 days if required by such
underwriters); provided, however, that it shall not be
considered customary to require any of the Holders to
provide representations and warranties regarding the Company
or indemnification of the underwriters for material
misstatements or omissions in the registration statement or
prospectus for such offering.
(C) Number of Demand Registrations. The Company shall
be obligated to effect two (2) registrations pursuant to
this Section 7(b)(iii).
(D) Deferral. Notwithstanding the foregoing, if the
Company shall furnish to Holders requesting the filing of a
registration statement pursuant to this Section 7(b)(iii) a
certificate signed by the President or Chief Executive
Officer of the Company stating that in the reasonable, good
faith judgment of the Board, it would be materially
detrimental to the Company and its shareholders for such
registration statement to be filed, then the Company shall
have the right to defer such filing for a period of not more
than sixty (60) days after receipt of the request of the
initiating Holders; provided, however, that the Company may
not utilize this right more than once in any twelve (12)
month period.
(E) Expenses. The Company shall pay all expenses
incurred in connection with any registration effected
pursuant to this Section 7(b)(iii), including all federal
and Blue Sky registration, filing and qualification fees,
printer's and accounting fees, and fees and disbursements of
the Company's and the Holder's respective counsel, but
excluding underwriters' discounts and commissions relating
to shares sold by the Holders. Each Holder participating in
a registration effected pursuant to this Section 7(b)(iii)
shall bear such Holder's proportionate share (based on the
total number of shares sold in such registration other than
for the account of the Company) of all discounts,
commissions or other amounts payable to underwriters or
brokers in connection with such offering by the Holders.
Notwithstanding the foregoing, the Company shall not be
required to pay for any expenses of any registration begun
pursuant to this Section 7(b)(iii) if the registration
request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be
registered; provided, however, that if at the time of such
withdrawal, the Holders have learned of a material adverse
change in the condition, business or prospects of the
Company not known to the Holders at the time of their
request for such registration and have withdrawn their
request for registration after learning of such material
adverse change, then the Holders shall not be required to
pay any of such expenses.
(F) Obligations of the Company. Whenever required to
effect the registration of Registrable Securities under this
Section 7(b)(iii), the Company shall perform all of its
obligations under Section 7(b)(v).
(iv) Piggyback Registrations. The Company shall notify all
Holders of Registrable Securities in writing at least thirty (30) days
prior to filing any registration statement under the Securities Act
for purposes of effecting a public offering of securities of the
Company (including, but not limited to, registration statements
relating to secondary offerings of securities of the Company, but
excluding registration statements relating to any employee benefit
plan or any merger or other corporate reorganization) and shall afford
each such Holder an opportunity to include in such registration
statement all or any part of the Registrable Securities then held by
such Holder. Each Holder desiring to include in any such registration
statement all or any part of the Registrable Securities held by such
Holder shall within ten (10) business days after receipt of the
above-described notice from the Company, so notify the Company in
writing, and in such notice shall inform the Company of the number of
Registrable Securities such Holder wishes to include in such
registration statement. If a Holder decides not to include all of its
Registrable Securities in any registration statement thereafter filed
by the Company, such 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 with respect to offerings of its securities, all upon the
terms and conditions set forth herein.
(A) Underwriting. If a registration statement under which
the Company gives notice under this Section 7(b)(iv) is for an
underwritten offering, then the Company shall so advise the
Holders of Registrable Securities. In such event, the right of
any such Holder's Registrable Securities to be included in such a
registration pursuant shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent
provided in this Section 7(b)(iv). All Holders proposing to
distribute their Registrable Securities through such underwriting
shall enter into an underwriting agreement in customary form with
the managing underwriter or underwriters selected for such
underwriting (including a market stand-off agreement of up to 180
days if required by such underwriters); provided, however, that
it shall not be considered customary to require any of the
Holders to provide representations and warranties regarding the
Company or indemnification of the underwriters for material
misstatements or omissions in the registration statement or
prospectus for such offering. Notwithstanding any other provision
of this Agreement, if the managing underwriter determine(s) in
good faith that marketing factors require a limitation of the
number of shares to be underwritten, then the managing
underwriter(s) may exclude shares from the registration and the
underwriting, and the number of shares that may be included in
the registration and the underwriting shall be allocated, first
to the Company, and second, to each of the Holders and other
holders of registration rights on a parity with the Holders
requesting inclusion of their Registrable Securities in such
registration statement on a pro rata basis based on the total
number of Registrable Securities and other securities entitled to
registration then held by each such Holder or other holder;
provided, however, that the right of the underwriters to exclude
shares (including Registrable Securities) from the registration
and underwriting as described above shall be restricted so that:
(i) the number of Registrable Securities included in any such
registration is not reduced below twenty-five percent (25%) of
the aggregate number of Registrable Securities for which
inclusion has been requested; and (ii) up to fifteen percent
(15%) of the shares that are not Registrable Securities but are
shares held by any employee, officer or director of the Company
(or any subsidiary of the Company), shall first be excluded from
such registration and underwriting before any Registrable
Securities are so excluded. If any Holder disapproves of the
terms of any such underwriting, such Holder may elect to withdraw
therefrom by written notice to the Company and the underwriter,
delivered at least ten (10) business days prior to the effective
date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded
and withdrawn from the registration. For any Holder that is a
partnership, the Holder and the partners and retired partners of
such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of
any of the foregoing Persons, and for any Holder that is a
corporation, the Holder and all corporations that are affiliates
of such Holder, shall be deemed to be a single "Holder," and any
pro rata reduction with respect to such "Holder" shall be based
upon the aggregate amount of shares carrying registration rights
owned by all entities and individuals included in such "Holder,"
as defined in this sentence.
(B) Expenses. The Company shall pay all expenses incurred in
connection with any registration pursuant to this Section
7(b)(iv), including all federal and Blue Sky registration, filing
and qualification fees, printer's and accounting fees, and fees
and disbursements of the Company's and the Holders' respective
counsel, but excluding any underwriters' discounts and
commissions relating to shares sold by the Holders.
(C) Not Demand Registration. Registration pursuant to this
Section 7(b)(iv) shall not be deemed to be a demand registration
as described in Section 7(b)(iii). Except as otherwise provided
herein, there shall be no limit on the number of times the
Holders may request registration of Registrable Securities under
this Section 7(b)(iv).
(D) Obligations of the Company. Whenever required to effect
the registration of any Registrable Securities under this Section
7(b)(iii), the Company shall perform all of its obligations under
Section 7(b)(v).
(v) General Registration Obligations of the Company. Whenever
required to effect the registration of any Registrable Securities
under this Agreement, the Company shall, as expeditiously as
reasonably possible:
(A) Registration Statement. Prepare and file with the SEC a
registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration
statement to become effective as promptly as possible after the
filing date; provided, however, that, except as otherwise
required by this Section 7(b), including Section 7(b)(ii)(B)(4),
the Company shall not be required to keep any such registration
statement effective for more than ninety (90) days.
(B) Amendments and Supplements. 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.
(C) Prospectuses. Furnish to the Holders 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 the Registrable Securities owned by
them that are included in such registration.
(D) Blue Sky. Use its best efforts to register and qualify
the securities covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall
be reasonably requested by the Holders, provided that the Company
shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(E) Underwriting. In the event of any underwritten public
offering, enter into and perform its obligations under an
underwriting agreement in usual and customary form, with the
managing underwriter(s) of such offering.
(F) Notification. Notify each Holder of Registrable
Securities covered by such registration statement at any time
when a prospectus relating thereto is required to be delivered
under the Securities Act of the happening of any event as a
result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(G) Opinion and Comfort Letter. Furnish, at the request of
any Holder requesting registration of Registrable Securities, on
the date that such Registrable Securities are delivered to the
underwriters for sale, if such securities are being sold through
underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with
respect to such securities becomes effective, (1) an opinion,
dated as of such date, of the counsel representing the Company
for the purposes of such registration, in form and substance as
is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of
the Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting registration
of Registrable Securities and (2) a "comfort" letter dated as of
such date, from the independent certified public accountants of
the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an
underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders requesting registration,
addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
(vi) Furnish Information. It shall be a condition
precedent to the obligations of the Company to take any
action pursuant to Section 7(b)(ii), (iii) or (iv) that the
selling Holders shall furnish to the Company such
information regarding themselves, the Registrable Securities
held by them, and the intended method of disposition of such
securities as shall reasonably be required to timely effect
the registration of their Registrable Securities.
(vii) Indemnification. In the event any Registrable Securities
are included in a registration effected under Section 7(b)(ii), (iii)
or (iv):
(A) By the Company. To the extent permitted by law, the Company
shall indemnify and hold harmless each Holder, the partners, officers,
shareholders, employees, representatives and directors of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and
each Person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or Liabilities (joint or several) to which
they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(each, a "Violation"):
(1) any untrue statement or alleged untrue statement of
a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto;
(2) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to
make the statements therein not misleading; or
(3) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any federal or
state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any federal or
state securities law in connection with the offering covered
by such registration statement; for any legal or other
expenses reasonably incurred by them, as incurred, in
connection with investigating or defending any such loss,
claim, damage, liability or action;
provided, however, that the indemnity agreement contained in
paragraph (A) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such
loss, claim, damage, liability or action to the extent that
it arises out of or is based upon a Violation that occurs in
reliance upon and in conformity with written information
furnished expressly for use in connection with such
registration by such Holder, partner, officer, shareholder,
employee, representative, director, underwriter or
controlling person (within the meaning of the Securities
Act) of such Holder.
(B) By Selling Holders. To the extent permitted by law, each
selling Holder shall indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the registration
statement, each Person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder
selling securities under such registration statement or any of such
other Holder's partners, officers, shareholders, employees,
representatives and directors and any Person who controls such Holder
within the meaning of the Securities Act or the Exchange Act, against
any losses, claims, damages or liabilities (joint or several) to which
the Company or any such officer or director, controlling person,
underwriter or other such Holder, partner, officer, shareholder,
employee, representative, director or controlling person of such other
Holder may become subject under the Securities Act, the Exchange Act
or other federal or state law, insofar as such losses, claims, damages
or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity
with written information furnished by such Holder expressly for use in
connection with such registration; and each such Holder shall
reimburse any legal or other expenses reasonably incurred by the
Company or any such officer or director, controlling person (within
the meaning of the Securities Act), underwriter or other Holder,
partner, officer, shareholder, employee, representative, director or
controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in
this paragraph (B) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement
is effected without the consent of the Holder which consent shall not
be unreasonably withheld; and provided further, that the total amounts
payable in indemnity by a Holder under this subsection or otherwise in
respect of any Violation shall not exceed the net proceeds received by
such Holder in the registered offering out of which such Violation
arises.
(C) Notice. Promptly after receipt by an indemnified party of
notice of the commencement of any action (including any governmental
action), such indemnified party shall, if a claim in respect thereof
is to be made against any indemnifying party under this section,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires, jointly with
any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its
own counsel, with the fees and expenses to be paid by the indemnifying
party, to the extent that representation of such indemnified party by
the counsel retained by the indemnifying party would be inappropriate
due to actual or potential conflict of interests between such
indemnified party and any other party represented by such counsel in
such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of liability
except to the extent the indemnifying party is materially prejudiced
as a result thereof.
(D) Defects Eliminated in Final Prospectus. The foregoing
indemnity agreements of the Company and the Holders are subject to the
condition that, insofar as they relate to any Violation made in a
preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the SEC at the time the registration statement
in question becomes effective or the amended prospectus filed with the
SEC pursuant to SEC Rule 424(b) (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any Person if a
copy of the Final Prospectus was timely furnished to the indemnified
party and was not furnished to the Person asserting the loss,
liability, claim or damage at or prior to the time such action is
required by the Securities Act.
(E) Contribution. In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case
in which either (1) any Holder exercising rights under this Agreement,
or any controlling person of any such Holder, makes a claim for
indemnification pursuant to this Section 7(b)(vii), but it is
judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding the fact that this
section provides for indemnification in such case, or (2) contribution
under the Securities Act may be required on the part of any such
selling Holder or any such controlling person in circumstances for
which indemnification is provided under this Section 7(b)(vii); then,
and in each such case, the Company and such Holder shall contribute to
the aggregate losses, claims, damages or liabilities to which they may
be subject (after contribution from others) in such proportion so that
such Holder is responsible for the portion represented by the
percentage that the public offering price of its Registrable
Securities offered by and sold under the registration statement bears
to the public offering price of all securities offered by and sold
under such registration statement, and the Company and other selling
Holders are responsible for the remaining portion; provided, however,
that, in any such case: (a) no such Holder shall be required to
contribute any amount in excess of the public offering price of all
such Registrable Securities offered and sold by such Holder pursuant
to such registration statement; and (b) no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation.
(F) Survival. The obligations of the Company and Holders under
this Section 7(b)(vii) shall survive until the fifth (5th) anniversary
of the closing date of any offering of Registrable Securities in a
registration statement, regardless of the expiration of any statutes
of limitation or extensions of such statutes.
(viii) Termination of the Company's Obligations. The Company
shall have no further obligations pursuant to this Section 7(b)
with respect to any Registrable Securities proposed to be sold by
a Holder in a registration pursuant to Section 7(b)(ii), (iii) or
(iv) more than three (3) years after the Closing Date, or, if, in
the written opinion of counsel to the Company, reasonably
acceptable to counsel for a Holder, all such Registrable
Securities proposed to be sold by a Holder may then be sold under
Rule 144 under the Securities Act in one transaction without
exceeding the volume limitations thereunder.
(ix) No Registration Rights to Third Parties. So long as the
Investor holds any Purchased Shares, the Warrant or any
Conversion Shares, without the prior written consent of the
Investor, the Company covenants and agrees that it shall not
grant, or cause or permit to be created, for the benefit of any
Person any registration rights of any kind (whether similar to
the registration rights described in this Section 7(b), or
otherwise) relating to shares of the Common Stock or any other
voting securities of the Company, other than rights that are on
parity with or subordinate to the rights of the Holders.
(c) Obligations Regarding Confidential Information.
(i) Obligations. Except to the extent required by law or
judicial order or except as otherwise provided herein, each party
to this Agreement covenants and agrees that such party shall hold
any of the other's Confidential Information in confidence and
shall: (A) use the same degree of care to prevent unauthorized
disclosure or use of the Confidential Information that the
receiving party uses with its own information of like nature (but
in no event less than reasonable care), (B) limit disclosure of
the Confidential Information, including any materials regarding
the Confidential Information that the receiving party has
generated, to such of its employees and contractors as have a
need to know the Confidential Information to accomplish the
purposes of this Agreement, and (C) advise its employees, agents
and contractors of the confidential nature of the Confidential
Information and of the receiving party's obligations under this
Agreement and the Corporate Non-Disclosure Agreement Number 05331
dated as of June 5, 1992 (the "Non-Disclosure Agreement").
(ii) Certain Definitions. For purposes of this Agreement,
the term "Confidential Information" refers to this Agreement, the
Warrant, the Project Sapphire Equity Financing Term Sheet, the
Non-Disclosure Agreement and all drafts of such documents
(collectively, the "Transaction Agreements"). Any employee or
contractor of the receiving party having access to the
Confidential Information shall be required to sign a
non-disclosure agreement protecting the Confidential Information
if not already bound by such a non-disclosure agreement.
(iii) Non-Disclosure of Confidential Information. Except to
the extent required by law or judicial or administrative order or
except as otherwise provided herein, neither party shall disclose
any Transaction Agreement or any of its terms without the other's
prior written approval. Either party may disclose any Transaction
Agreement, or the terms thereof, to the extent required by law or
judicial or administrative order, provided that the disclosing
party notifies the other party promptly before such disclosure
and cooperates with the other party to seek confidential
treatment with respect to the disclosure if requested by the
other party. Notwithstanding the foregoing provisions or any
other provision to the contrary, the Company shall not, without
the Investor's prior written consent (which consent generally
will not be granted), file any Transaction Agreement other than
this Agreement and the Warrant (each of which may be filed) with
the SEC or any other governmental authority or regulatory body
(an "Exhibit Filing"); provided, however, that, in connection
with any offering of securities by the Company for which
registration is sought under the Securities Act, or any filing
required to be made by the Company under the Exchange Act, the
Company may make the Exhibit Filing, but if and only if: (A) the
Company is instructed by the SEC to make the Exhibit Filing in a
written comment provided to the Company as a part of the SEC's
review of such filing, (B) the Company provides the Investor with
a copy of such comment promptly following the Company's receipt
thereof, (C) the Company uses its best efforts to persuade the
SEC to withdraw its comment, (D) the Company provides the
Investor with a reasonable opportunity to comment on the
Company's written response to the SEC with respect to such
comment, (E) the Company provides the Investor with the
opportunity to meet with the Company, in person or by phone,
together with the staff of the SEC to assist the Company in
responding to such comment, and (F) the Company engages in a
conference with the SEC Branch Chief responsible for the
offering, in which a representative of the Investor participates
and is given an opportunity to be heard, and after such
conference the Branch Chief persists in his or her requirement
that such Exhibit Filing be made by the Company. In furtherance
of the foregoing, the Company acknowledges and agrees that,
unless advised by counsel of the Company to the contrary, it
shall not take the position, in connection with any filing or
discussion with, or response to, the SEC or any state securities
regulatory authority, that it is required by law or the rules or
regulations of any federal, state or local organization to file
any Transaction Agreement or any other agreement in existence on
the date hereof between the Company and the Investor with any
regulatory authorities (including the SEC); and the Company shall
not, except as otherwise permitted above, file any of the
Transaction Agreements with the SEC or any other governmental
authority or regulatory body. The Company agrees that it shall
provide the Investor with drafts of any documents, press releases
or other filings in which any Transaction Agreement or the
transactions contemplated thereby are disclosed at least five (5)
business days prior to the filing or disclosure thereof, and
that, unless permitted by the terms of this Section, it shall not
disclose, issue or file any such document, press release or other
filing to which Investor has objected.
(iv) Public Announcements. Prior to the Closing, the parties
shall agree on the content of a joint press release announcing
the existence of this Agreement, which press release shall only
be issued in the form mutually agreed by the parties.
(v) Third Party Information. Neither party shall be required
to disclose to the other any confidential information of any
third party without having first obtained such third party's
prior written consent.
(vi) Other Disclosures. All other confidential information
exchanged by the parties hereto shall be disclosed pursuant to
the Non-Disclosure Agreement.
(d) Board and Committee Observer.
(i) So long as the Investor owns any Purchased Shares,
Warrant Shares or Conversion Shares or the Warrant or any part
thereof equaling or representing the right to receive in the
aggregate at least ninety percent (90%) of the number of
Conversion Shares as of the Closing Date (as may be adjusted
pursuant to Section 11(n)), the Company shall permit a
representative of the Investor, approved by the Company, such
approval not to be unreasonably withheld (the "Observer"), to
attend all meetings of the Board and all committees of the Board,
whether in person, telephonic or other, in a non-voting, observer
capacity and shall provide to the Investor, concurrently with the
members of the Board or such Board committee, notice of such
meeting and a copy of all materials provided to such members. A
majority of the disinterested members of the Board shall be
entitled to recuse the Observer from portions of any Board or
Board committee meeting and to redact portions of Board or Board
committee materials delivered to the Observer where and to the
extent that such majority determines, in good faith, that: (a)
such recusal is reasonably necessary to preserve attorney-client
privilege with respect to a material matter; or (b) the presence
of the Observer would materially inhibit deliberations by the
Board because of a reasonable concern of a conflict of interest
between the Company and Investor.
(ii) Exchanges of confidential and proprietary information
between the Company and the Observer shall be governed by the
terms of the Non-Disclosure Agreement, and any Confidential
Information Transmittal Records provided in connection therewith.
(iii) The Company acknowledges that the Observer will likely
have, from time to time, information that may be of interest to
the Company ("Information") regarding a wide variety of matters
including, by way of example only, (a) the Investor's
technologies, plans and services, and plans and strategies
relating thereto, (b) current and future investments the Investor
has made, may make, may consider or may become aware of with
respect to other companies and other technologies, products and
services, including, without limitation, technologies, products
and services that may be competitive with those of the Company,
and (c) developments with respect to the technologies, products
and services, and plans and strategies relating thereto, of other
companies, including, without limitation, companies that may be
competitive with the Company. The Company recognizes that a
portion of such Information may be of interest to the Company.
Such Information may or may not be known by the Observer. The
Company, as a material part of the consideration for this
Agreement, agrees that neither the Investor nor the Observer
shall have any duty to disclose any Information to the Company or
permit the Company to participate in any projects or investments
based on any Information, or to otherwise take advantage of any
opportunity that may be of interest to the Company if it were
aware of such Information, and hereby waives, to the extent
permitted by law, any claim based on the corporate opportunity
doctrine or otherwise that could limit the Investor's ability to
pursue opportunities based on such Information or that would
require the Investor or Observer to disclose any such Information
to the Company or offer any opportunity relating thereto to the
Company.
(e) Rights in the event of a Corporate Event.
(i) Corporate Events. A "Corporate Event" shall mean any of
the following, whether accomplished through one or a series of
related transactions: (A) any transaction, other than an
Acquisition Issuance, that results in a greater than thirty-three
percent (33%) change in the total outstanding number of voting
securities (which, for purposes of this Agreement, shall mean all
securities of the Company that presently are, or would be upon
conversion, exchange or exercise, entitled to vote in the
election of directors) of the Company immediately after such
issuance (other than any such change solely as a result of a
stock split, stock dividend or other recapitalization affecting
holders of Common Stock and other classes of voting securities of
the Company on a pro rata basis); (B) an acquisition of the
Company or any of its "Significant Subsidiaries" (as defined in
the SEC's Rule 1-02(w) of Regulation S-X) by consolidation,
merger, share purchase or exchange or other reorganization or
transaction in which the holders of the Company's or such
Significant Subsidiary's outstanding voting securities
immediately prior to such transaction own, immediately after such
transaction, securities representing less than fifty percent
(50%) of the voting power of the Company, any such Significant
Subsidiary or the Person issuing such securities or surviving
such transaction, as the case may be, provided that this clause
(B) shall not apply to the pro rata distribution by the Company
to its shareholders of all the voting securities of any of its
subsidiaries as to which assets, other than Assets of the
Graphics Business, were contributed by the Company in
anticipation of such distribution; (C) the acquisition of all or
substantially all the assets of the Company or any Significant
Subsidiary; (D) the grant by the Company or any of its
Significant Subsidiaries of an exclusive license for any material
portion of the Company's or such Significant Subsidiary's
Intellectual Property to a Person other than the Investor or any
of its subsidiaries; (E) any transaction or series of related
transactions that results in the failure of the majority of the
members of the Board immediately prior to the closing of such
transaction or series of related transactions failing to
constitute a majority of the Board (or its successor) immediately
following such transaction or series of related transactions.
(ii) Notice of Corporate Events and Ten Percent (10%)
Acquisitions. Until expiration of the period (x) beginning on the
Closing Date and (y) ending on the later of twenty-four (24)
months after the Closing Date and six (6) months after the first
commercial shipments of the product code-named Merced by the
Investor, but in no event ending later than December 31, 2000
(the "ROFR Period"), the Company shall provide the Investor with
detailed written notice of terms of any offer (written or oral)
from any Person: (A) for a proposed Corporate Event or (B) to
acquire ten percent (10%) or more of the Company's outstanding
voting securities. Any notice shall be delivered to the Investor
within two (2) business days after the date the Company first
becomes aware of such offer or proposed Corporate Event or ten
percent (10%) acquisition. Without limiting the generality of the
foregoing, such notice shall set forth the identity(ies) of the
Person(s) involved.
(iii) Right of First Refusal. During the ROFR Period, the
Company shall, prior to effecting or entering into any agreement
for any Corporate Event, present to the Investor in writing the
final terms and conditions of the proposed Corporate Event,
including the name of the other party or parties to the Corporate
Event and a copy of the definitive agreements that the Company is
prepared to enter into (such information and agreements, a "Final
Notice"). The Investor shall have thirty (30) business days after
the date of receipt of the Final Notice to deliver written notice
to the Company agreeing to enter into a written agreement with
the Company on substantially the same terms and conditions
specified in the Final Notice, which agreement shall nevertheless
provide for consummation of the transaction within one-hundred
twenty (120) days after the date of delivery of the Final Notice
(such 120 day period subject to extensions for regulatory
compliance). During such 30 business day period, the Investor
shall be entitled to conduct due diligence with the reasonable
cooperation of the Company. If the Investor fails to so agree in
writing within such 30 business day period, for a period of one
hundred twenty (120) days thereafter, the Company shall have the
right to enter into an agreement regarding such Corporate Event
with the party or parties specified in the applicable Final
Notice.
(iv) Right of Resale. If the Investor shall fail to exercise
its right of first refusal as to a Corporate Event pursuant to
Section 7(e)(iii), the Investor shall, upon the Company's
entering into an agreement to consummate a Corporate Event, have
the right to sell to the Company any or all Purchased Shares,
Warrant Shares and Conversion Shares. Such sale shall be made on
the following terms and conditions:
(A) The price per share at which such shares are to be
sold to Company shall be equal to the greater of: (1) Per
Share Purchase Price and (2) either the highest price per
share of capital stock (or equivalent) paid in connection
with the Corporate Event or, if the transaction involves the
sale of a Significant Subsidiary or assets or the licensing
of Intellectual Property, the Investor's pro rata share of
the consideration received, directly or indirectly, by the
Company in such transaction based on its then fully-diluted
ownership of the Company's capital stock.
(B) Immediately prior to the consummation of the
Corporate Event, the Investor shall deliver to the Company
the certificate or certificates representing shares to be
sold, each certificate to be properly endorsed for transfer.
(C) The Company shall, assuming its receipt of the
certificate or certificates for the shares to be sold by the
Investor, pay the aggregate purchase price therefor in cash
immediately upon consummation of the Corporate Event.
(v) Right of Notification and Negotiation. For a period
(X) commencing on the day after the last day of the ROFR
Period and (Y) ending on the day that is the two (2) year
anniversary of such last day, the Company shall, prior to
the Board's approving or disapproving a Corporate Event or
the Company's or any of its subsidiaries' entering into a
definitive agreement with respect to a Corporate Event,
notify the Investor of all terms and conditions of such
Corporate Event and then attempt to negotiate in good faith
with the Investor for a period of not less than fifteen (15)
business days for the Investor to acquire the Company (or
Significant Subsidiary, assets or license, as the case may
be) or enter into another Corporate Event with the Company.
During such fifteen (15) business day period, the Investor
shall be entitled to conduct due diligence with the
reasonable cooperation of the Company. During such fifteen
(15) business day period, any alternative proposal made by
the Investor shall be submitted by the Company to the Board
and the Board shall, in good faith, either approve or
disapprove the Investor's alternative proposal. To the
extent that the Company and the Investor do not enter into
an agreement with respect to such an acquisition or other
Corporate Event with the Investor during such fifteen (15)
business day period, the Board shall be free to approve or
disapprove such Corporate Event and the Company shall be
free to enter into a definitive agreement with respect to a
Corporate Event with a third party and subsequently
consummate such Corporate Event; provided, however, that
such definitive agreement is entered into within one hundred
twenty (120) days following termination of such fifteen (15)
business day period; provided further, that if during such
fifteen (15) business day period, the Investor shall have
made a written offer for the acquisition of the Company, the
Corporate Event with such a third party shall be for at
least ninety-five percent (95%) of the price offered by the
Investor and on other terms no less favorable to
shareholders of the Company than the terms of the offer
proposed by the Investor with respect to shareholders other
than the Investor.
(vi) Right to Consent. During the ROFR Period, without
the Investor's prior written consent, the Company shall not
(and shall not permit any of its subsidiaries to) enter into
or agree to or consummate any acquisition by it of
securities or any business or assets of another Person where
the consideration paid to any single Person or group of
affiliated Persons is voting securities of the Company (or
any other securities exercisable or exchangeable for or
convertible into such voting securities) (an "Acquisition
Issuance ") constituting in the aggregate more than
thirty-three percent (33%) of the Company's voting
securities outstanding immediately after the consummation of
such acquisition.
(vii) Spin-Off of Graphics Business. If (A) the Company
completes a Spin Off of its Graphics Business in which the
Investor receives its pro-rata share of the voting
securities of the Spun-Off Business and (B) the Spun-Off
Business has assumed in a writing reasonably satisfactory to
the Investor all of the Company's obligations under this
Section7(e), then the Company's obligations under this
Section 7(e) shall terminate. As used in this Agreement, (A)
"Assets" means all the assets, properties, rights, licenses,
permits, contracts, causes of action, claims, operations and
businesses of the Graphics Business of every kind and
description, as the same shall exist on the date of the Spin
Off; (B) "Graphics Business" means the development,
manufacture, marketing or sale of graphics controller chips,
boards and driver software for the personal computer market;
and (C) "Spin Off" means (1) a transaction involving the
following: (x) the creation by the Company of a wholly owned
subsidiary that contains the Assets (the "Spun-Off
Business"); (y) followed by a distribution by the Company of
all outstanding voting securities of the Spun-Off Business
to the Company's shareholders on a pro-rata basis in
exchange for no consideration; and (z) the written agreement
by the Company not to compete with the Spun-Off Business
with respect to the Graphics Business; or (2) any
transaction similar to that described in the foregoing
clause (1) as reasonably approved by the Investor.
(f) Rights of Participation.
(i) General. The Investor and each subsidiary of which
the Investor beneficially owns, directly or indirectly, at
least fifty percent (50%) of the voting securities (a
"Majority Owned Subsidiary") and to which rights under this
Section 7(f) have been duly assigned (each of the Investor
and such assignee, a "Participation Rights Holder") shall
have a right of first refusal to purchase such Participation
Rights Holder's Pro Rata Share of all (or any part) of any
New Securities that the Company may from time to time issue
after the Closing Date (the "Right of Participation");
provided, however, that a Participation Rights Holder shall
not have the Right of Participation with respect to any
issuance of New Securities that would result in less than a
ten percent (10%) reduction in such Participation Rights
Holder's Pro Rata Share.
(ii) Pro Rata Share. "Pro Rata Share" means the ratio
of (A) the number of Registrable Securities held by such
Participation Rights Holder, to (B) the difference between
(1) the total number of shares of Common Stock (and other
voting securities of the Company, if any) then outstanding
(immediately prior to the issuance of New Securities giving
rise to the Right of Participation), where for such purposes
all Conversion Shares then issuable (but unissued) are
deemed outstanding, and (2) the number of Dilutive
Securities issued since the last Notice Date excluding any
Maintenance Securities issued pursuant to the last
Maintenance Notice.
(iii) New Securities. "New Securities" shall mean any
Common Stock, Preferred Stock or other voting capital stock
of the Company, whether now authorized or not, and rights,
options or warrants to purchase such Common Stock or
Preferred Stock, and securities of any type whatsoever that
are, or may become, convertible into or exchangeable or
exercisable for such Common Stock, Preferred Stock or other
voting capital stock; provided, however, that the term "New
Securities" shall not include:
(A) any shares of Common Stock (or options or warrants
therefor) issued to employees officers, directors,
contractors, advisors or consultants of the Company pursuant
to incentive agreements or incentive plans approved by the
Board;
(B) the Purchased Shares issued under this Agreement;
(C) the Warrant or any Warrant Shares or shares of
Common Stock issued upon conversion of any Purchased Shares
or Warrant Shares;
(D) any securities issued in connection with any stock
split stock, dividend or other similar event in which all
Participation Rights Holders are entitled to participate on
a pro rata basis;
(E) any securities issued upon the exercise, conversion
or exchange of any outstanding security if such outstanding
security constituted a New Security; or
(F) any securities issued pursuant to the acquisition
of another Person by the Company by consolidation, merger,
purchase of assets, or other reorganization in which the
Company acquires, in a single transaction or series of
related transactions, assets of such Person or fifty percent
(50%) or more of the voting power of such Person or fifty
percent (50%) or more of the equity ownership of such other
Person.
(iv) Procedures. If the Company proposes to undertake
an issuance of New Securities (in a single transaction or a
series of related transactions) that would result in an
aggregate ten percent (10%) or greater reduction in the Pro
Rata Share of all Participation Rights Holders, the Company
shall give to each Participation Rights Holder written
notice of its intention to issue New Securities (the
"Participation Notice"), describing the amount and the type
of New Securities and the price and the general terms upon
which the Company proposes to issue such New Securities.
Each Participation Rights Holder shall have fifteen (15)
business days from the date of receipt of any such
Participation Notice to agree in writing to purchase such
Participation Rights Holder's Pro Rata Share of such New
Securities for the price and upon the terms and conditions
specified in the Participation Notice by giving written
notice to the Company and stating therein the quantity of
New Securities to be purchased (not to exceed the
Participation Rights Holder's Pro Rata Share). If any
Participation Rights Holder fails to so agree in writing
within such 15 business day period, then such Participation
Rights Holder shall forfeit the right hereunder to
participate in such sale of New Securities. All sales
hereunder shall be consummated concurrently with the closing
of the transaction triggering the Right of Participation.
(v) Failure to Exercise. Upon the expiration of such
fifteen (15) business day period, the Company shall have one
hundred twenty (120) days thereafter to sell the New
Securities described in the Participation Notice (with
respect to which the Participation Rights Holders' rights of
first refusal hereunder were not exercised), or enter into
an agreement to do so, within sixty (60) days thereafter, at
no less than ninety-five percent (95%) of the price and upon
non-price terms not materially more favorable to the
purchasers thereof than specified in the Participation
Notice. If the Company has not issued and sold such New
Securities within such 90-day period, or entered into an
agreement to do so within sixty (60) days thereafter, then
the Company shall not thereafter issue or sell any New
Securities without again first offering such New Securities
to the Participation Rights Holders pursuant to this Section
7(f).
(vi) Termination. The Company's obligations under this
Section 7(f) shall terminate upon expiration of the ROFR
Period.
(g) Right of Maintenance.
(i) General. Each Participation Rights Holder shall,
pursuant to the terms and conditions of this Section 7(g),
have the right to purchase from the Company shares of Common
Stock, Series B Preferred Stock or other voting capital
stock of the Company, the kind of stock to be determined by
each Participation Rights Holder ("Maintenance Securities"),
as a result of issuances by the Company of Dilutive
Securities from time to time issue after the Closing Date,
solely in order to maintain such Participation Rights
Holder's Prior Percentage Interest in the Company (the
"Right of Maintenance"). Each right to purchase Maintenance
Securities pursuant to this Section 7(g) shall be on the
same terms (other than price to the extent provided in
paragraph (iii) or (vii) below, as applicable) as the
issuance of the Dilutive Securities that gave rise to the
right to purchase such Maintenance Securities.
(ii) Dilutive Securities. "Dilutive Securities" means
any Common Stock, voting Preferred Stock or other voting
capital stock of the Company, whether now authorized or not;
provided, however, that the term "Dilutive Securities" shall
not include:
(A) any securities other than Common Stock, voting
Preferred Stock or other voting capital stock (e.g.,
warrants or options to purchase Common Stock, Preferred
Stock or other capital stock);
(B) the Purchased Shares issued under this Agreement;
(C) the Warrant or any Warrant Shares or shares of
Common Stock issued upon conversion of any Purchased Shares
or Warrant Shares;
(D) any securities issued in connection with any stock
split, stock dividend or similar event in which all
Participation Rights Holders are entitled to participate on
a pro rata basis;
(E) any securities for which the issuance gave rise to
the Right of Participation (regardless of whether any such
right was exercised) or to a Corporate Event; or
(F) any securities issuable upon the exercise,
conversion or exchange of any securities described in (D) or
(E) above.
(iii) Purchase Price.
(A) Employee Stock. To the extent that the right to
purchase Maintenance Securities arises out of the issuance
of Dilutive Securities to employees, officers, directors,
contractors, advisors or consultants of the Company pursuant
to incentive agreements or incentive plans approved by the
Board ("Employee Stock"), the per share "Purchase Price" of
the Maintenance Securities shall, subject to subparagraph
(D) below, equal the average Market Price of such
Maintenance Securities over the ten (10) trading days
immediately preceding the date on which the Participation
Rights Holder elects to purchase such Maintenance
Securities.
(B) Other Dilutive Securities. To the extent that the
right to purchase Maintenance Securities arises out of any
issuance of Dilutive Securities other than Employee Stock,
the per share "Purchase Price" of the Maintenance Securities
shall, subject to subparagraph (D) below, equal the lower of
(1) the weighted average of the per share prices at which
such Dilutive Securities were issued and (2) the average
Market Price of such Maintenance Securities over the ten
(10) trading days immediately preceding the date on which
the Participation Rights Holder elects to purchase such
Maintenance Securities. If the issuance of any Dilutive
Securities occurs upon the exercise, conversion or exchange
of other securities ("Exchangeable Securities"), then the
per share price at which such Dilutive Securities shall be
deemed to have been issued shall be the sum of (x) the per
share amount paid upon such exercise, conversion or
exchange, plus (y) the per share amount previously paid for
the Exchangeable Securities (adjusted for any stock splits,
stock dividends or other similar events).
(C) Market Price. For purposes of this Section
7(g)(iii), "Market Price" means, as to any Maintenance
Securities on a given day, the average of the closing prices
of such security's (but, if a Participation Rights Holder
has elected to purchase Series B Preferred Stock, the Common
Stock's) sales on all domestic securities exchanges on which
such security may at the time be listed, or, if there have
been no sales on any such exchange on such day, the average
of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such
security is not so listed, the average of the representative
bid and asked prices quoted on the Nasdaq National Market as
of 4:00 P.M., New York time, on such day, or, if on any day
such security is not quoted on the Nasdaq National Market,
the average of the highest bid and lowest asked prices on
such day in the domestic over-the-counter market as reported
by the National Quotation Bureau, Incorporated, or any
similar successor organization. If at any time the
Maintenance Securities are not listed on any domestic
securities exchange or quoted on the Nasdaq National Market
or the domestic over-the-counter market ("Unlisted
Securities"), the "Market Price" shall be the fair value
thereof determined jointly by the Company and the Holder.
(D) Alternative Purchase Price. If a Participation
Rights Holder does not elect to purchase its Maintenance
Amount at the time of issuance of any Dilutive Securities
specified in a Maintenance Note, and in the written opinion
of the Company's independent auditors, made available to
each Participation Rights Holder upon request, the effect of
determining the Purchase Price after such issuance pursuant
to subparagraph (A) or (B) above would require the Company
to take a charge against earnings in accordance with GAAP,
then for purposes of this Section 7(g)(iii) "Purchase Price"
shall mean the Market Price on the date the Participation
Rights Holder elects to purchase its Maintenance Amount.
(E) Consideration Other than Cash. If Dilutive
Securities or Exchangeable Securities were issued for
consideration other than cash, the per share amounts paid
for such Dilutive Securities or Exchangeable Securities
shall be determined jointly in good faith by the Company and
the Participation Rights Holder.
(F) Appraiser. If the Company and the Participation
Rights Holder are unable to reach agreement within a
reasonable period of time with respect to (1) the Market
Price of Unlisted Securities or (2) the per share amounts
paid for Dilutive Securities or Exchangeable Securities
issued for consideration other than cash, such Market Price
or per share amounts paid, as the case may be, shall be
determined by an appraiser jointly selected by the Company
and the Participation Rights Holder. The determination of
such appraiser shall be final and binding on the Company and
the Participation Rights Holder. The fees and expenses of
such appraiser shall be paid for by the Company.
(iv) Prior Percentage Interest. A Participation Rights
Holder's "Prior Percentage Interest" for purposes of the
Right of Maintenance is the ratio of (A) the number of
Registrable Securities held by such Participation Rights
Holder as of the date of such Maintenance Notice (the
"Notice Date"), to (B) the difference between (1) the total
number of shares of Common Stock (and other voting
securities of the Company, if any) outstanding on the Notice
Date (assuming issuance of the Common Stock or other
securities described in such Maintenance Notice), where for
such purposes all Conversion Shares then issuable (but
unissued) are deemed outstanding, and (2) the total number
of Dilutive Securities issued since the later of the Closing
Date and the last Notice Date (but excluding any Maintenance
Securities issued pursuant to the last Maintenance Notice).
(v) Maintenance Amount. A Participation Rights Holder's
"Maintenance Amount" with respect to any Maintenance Notice
shall equal such number of Maintenance Securities as shall
(upon purchase thereof in full by the Participation Rights
Holder) enable such Participation Rights Holder to maintain
its Prior Percentage Interest on a fully-diluted basis. As
an example, assume that the Company had 10,000 shares
outstanding and the Participation Rights Holder holds 20% of
such shares (or 2,000 shares). The Company first issues 400
shares to a third party ("Issuance 1"), an amount
insufficient to trigger a Notice of Issuance pursuant to
Section 7(g)(vi). The Company then proposes to issue 4,600
shares to a third party ("Issuance 2"), an amount sufficient
to trigger a Maintenance Notice. The Participation Rights
Holder shall have the right to maintain its 20% interest
after considering Issuances 1 and 2 and the new shares
issued to the Participation Rights Holder. In this example,
the Participation Rights Holder shall have the right to
purchase an additional 1,250 shares, thereby resulting in
the Participation Rights Holder holding 20% of the
securities outstanding (3,250 shares out of 16,250 shares).
(vi) Maintenance Notice. Within fifteen (15) business
days after each anniversary of the Closing Date, and within
fifteen (15) business days before each issuance of Dilutive
Securities which when cumulated with all prior issuances of
Dilutive Securities since the later of (i) the Closing Date
and (ii) the date of the last Notice Date (subsequent to
which the Participation Rights Holder has had an opportunity
to purchase Maintenance Securities), would result in a five
percent (5%) or greater reduction in a Participation Rights
Holders' Prior Percentage Interest, the Company shall give
to each Participation Rights Holder written notice (the
"Maintenance Notice") describing the number of Dilutive
Securities issued since such prior Notice Date and the
non-price terms upon which the Company issued such Dilutive
Securities, and the Maintenance Amount that such
Participation Rights Holder is entitled to purchase as a
result of such issuances.
(vii) Purchase of Maintenance Securities. Each
Participation Rights Holder shall have the right to purchase
at the time of issuance of the Dilutive Securities specified
in a Maintenance Notice up to such Participation Rights
Holder's Maintenance Amount at the same purchase price paid
by the other purchasers of such Dilutive Securities and upon
the other terms and conditions applicable to such other
purchasers and specified in the Maintenance Notice. If a
Participation Rights Holder fails to exercise its right to
purchase Dilutive Securities pursuant to the preceding
sentence, such Participation Rights Holder shall have sixty
(60) days after the issuance of the Dilutive Securities
specified in the applicable Maintenance Notice to purchase
its Maintenance Amount at the Purchase Price (as determined
pursuant to subparagraphs (A), (B), (C) and (D) above) and
upon the other terms and conditions specified in the
Maintenance Notice. The closing of such purchase shall occur
within ten (10) days after such election to purchase. If any
Participation Rights Holder fails to elect to purchase such
Participation Rights Holder's full Maintenance Amount of
Maintenance Securities within such 60-day period, then such
Participation Rights Holder shall forfeit the right
hereunder to purchase that part of its Maintenance Amount
that it did not so elect to purchase.
(viii) Termination. The Company's obligations under
this Section 7(g) shall terminate upon expiration of the
ROFR Period.
(h) Standstill Agreement. During the ROFR Period, the Investor
shall neither acquire, nor enter into discussions, negotiations,
arrangements or understandings with any third party to acquire,
beneficial ownership of any Voting Stock, any securities convertible
into or exchangeable for Voting Stock, or any other right to acquire
Voting Stock (except, in any case, by way of stock dividends or other
distributions or offerings made available to holders of any Voting
Stock generally) without the written consent of the Company, if the
effect of such acquisition would be to increase the Voting Power of
all Voting Stock then beneficially owned by the Investor or which it
has a right to acquire to more than fifteen percent (15%) (the
"Standstill Percentage") of the Total Voting Power of the Company at
the time in effect; provided, however, that:
(i) The Investor may acquire Voting Stock without regard to
the foregoing limitation, and such limitation shall be suspended,
but not terminated, if and for as long as: (1) a tender or
exchange offer is made and is not withdrawn or terminated by
another Person or group of Persons to purchase or exchange for
cash or other consideration any Voting Stock that, if accepted or
if otherwise successful, would result in such Person or group
beneficially owning or having the right to acquire shares of
Voting Stock with aggregate Voting Power of more than ten percent
(10%) of the Total Voting Power of the Company then in effect and
such offer is not withdrawn or terminated prior to the Investor
making an offer to acquire Voting Stock or acquiring Voting
Stock; provided, however, that the foregoing standstill
limitation will be reinstated once any such tender or exchange
offer is withdrawn or terminated; (2) another Person or group of
Persons hereafter acquires Voting Stock that results in such
Person or group being required to file a Schedule 13D, under the
rules set forth in Section 13(d) promulgated under the Exchange
Act, as such rules are in effect on the date hereof;or other
similar or successor schedule or form, indicating that the
purpose of such acquisition is other than for mere investment;
provided, however, that the foregoing standstill limitation will
be reinstated once the percentage of Total Voting Power
beneficially owned by such other Person or group falls below five
percent (5%); (3) another Person or group of Persons hereafter
acquires Voting Stock that results in such Person or group being
required to file a Schedule 13G, or other similar or successor
schedule or form, indicating that such other Person or group
beneficially owns or has the right to acquire Voting Stock with
aggregate Voting Power of more than twenty percent (20%) of the
Total Voting Power of the Company; provided, however, that the
foregoing standstill limitation will be reinstated once the
percentage of Total Voting Power beneficially owned by such other
Person or group falls below five percent (5%); or (4) another
Person or group of Persons orally or in writing contacts the
Company and advises the Company of such person's or group's
intention to commence a tender or exchange offer that, if so
commenced, would result in a suspension pursuant to clause (1)
above (e.g., a "bear hug" offer); provided, however, that the
foregoing standstill limitation will be reinstated if such
intention is withdrawn in writing or other reasonable evidence of
such withdrawal is provided to the Investor. The Company shall
notify the Investor in writing of the occurrence of any event
described in clauses (1) through (4) of the immediately preceding
sentence immediately after the Company has become aware of any
such event, and in any case, shall provide the Investor with
written notice of any such event within twenty-four (24) hours of
the occurrence thereof.
(ii) The Investor will not be obliged to dispose of any
Voting Stock if the aggregate percentage of the Total Voting
Power of the Company represented by Voting Stock beneficially
owned by the Investor or which the Investor has a right to
acquire is increased beyond the Standstill Percentage: (1) as a
result of a recapitalization of the Company or a repurchase or
exchange of securities by the Company or any other action taken
by the Company or any of its Affiliates; (2) as the result of
acquisitions of Voting Stock made during the period when the
Investor's "standstill" obligations are suspended pursuant to
Section 7(h)(i); (3) as a result of an equity index transaction,
provided that the Investor shall not vote such shares; (4) by way
of stock dividend or other distribution or right or offering made
available to holders of shares of Voting Stock generally; (5)
with the consent of a simple majority of the authorized members
of the Board; or (6) as part of a transaction on behalf of the
Investor's Defined Benefit Pension Plan, Profit Sharing
Retirement Plan, 401(k) Savings Plan, Sheltered Employee
Retirement Plan and Sheltered Employee Retirement Plan Plus or
any successor or additional retirement plans thereto
(collectively, the "Retirement Plans") where the Company's shares
in such Retirement Plans are voted by a trustee for the benefit
of the Investor's or any of its subsidiaries' employees or, for
those Retirement Plans where the Investor controls voting, where
the Investor agrees not to vote any shares of such Retirement
Plan Voting Stock that would cause the Investor to exceed the
Standstill Percentage.
(iii) As used in this Section 7(h), (1) the term "Voting
Stock" means the Common Stock and any other securities issued by
the Company having the ordinary power to vote in the election of
directors of the Company (other than securities having such power
only upon the happening of a contingency that has not occurred);
(2) the term "Voting Power" with respect to any Voting Stock
means the number of votes such Voting Stock is entitled to cast
in the election of directors of the Company at any meeting of its
shareholders ; (3) the term "Total Voting Power" means the total
number of votes which may be cast in the election of directors of
the Company at any meeting of its shareholders if all Voting
Stock was represented and voted to the fullest extent possible at
such meeting other than votes that may be cast only upon the
happening of a contingency that has not occurred; and (4) the
terms "beneficial ownership," "beneficially own," "beneficially
owned," and "beneficially owning" shall have the same meanings as
when used in Rule 13d-3 promulgated under the Exchange Act. For
purposes of this Section 7(h), the Investor shall not be deemed
to have beneficial ownership of any Voting Stock held by a
pension plan or other employee benefit program of the Investor if
the Investor does not have the power to control the investment
decisions of such plan or program.
8........INDEMNIFICATION.
(a) Agreement to Indemnify.
(i) Company Indemnity. The Investor, its Affiliates and
Associates, and each officer, director, shareholder, employer,
representative and agent of any of the foregoing (collectively,
the "Investor Indemnitees") shall each be indemnified and held
harmless to the extent set forth in this Section 8 by the Company
with respect to any and all Damages incurred by any Investor
Indemnitee as a proximate result of any inaccuracy or
misrepresentation in, or breach of, any representation, warranty,
covenant or agreement made by the Company in this Agreement
(including any exhibits, schedules or disclosure letters hereto).
Indemnification or other claims with respect to the other
Transaction Agreements shall be covered by the provisions of
those agreements and not by this Section 8, and indemnification
for claims arising from the registration of Conversion Shares
under federal and state securities laws are covered by Section
7(b)(vii) and not this Section 8.
(ii) Investor Indemnity. The Company, its respective
Affiliates and Associates, and each officer, director,
shareholder, employer, representative and agent of any of the
foregoing (collectively, the "Company Indemnitees") shall each be
indemnified and held harmless to the extent set forth in this
Section 8, by the Investor, in respect of any and all Damages
incurred by any Company Indemnitee as a proximate result of any
inaccuracy or misrepresentation in, or breach of, any
representation, warranty, covenant or agreement made by the
Investor in this Agreement. Indemnification or other claims with
respect to the other Transaction Agreements shall be covered by
the provisions of those agreements and not by this Section 8, and
indemnification for claims arising from the registration of
Conversion Shares under federal and state securities laws are
covered by Section 7(b)(vii) and not this Section 8.
(iii) Equitable Relief. Nothing set forth in this Section 8
shall be deemed to prohibit or limit any Investor Indemnitee's or
Company Indemnitee's right at any time before, on or after the
Closing, to seek injunctive or other equitable relief for the
failure of any Indemnifying Party to perform or comply with any
covenant or agreement contained herein.
(b) Survival. All representations and warranties of the Investor and
the Company contained herein and all claims of any Investor Indemnitee or
Company Indemnitee in respect of any inaccuracy or misrepresentation in or
breach hereof, shall survive the Closing until the third (3rd) anniversary
of the Closing Date, regardless of whether the applicable statute of
limitations, including extensions thereof, may expire. All covenants and
agreements of the Investor and the Company contained in this Agreement
shall survive the Closing in perpetuity (except to the extent any such
covenant or agreement shall expire by its terms). All claims of any
Investor Indemnitee or Company Indemnitee in respect of any breach of such
covenants or agreements shall survive the Closing until the expiration of
two (2) years following the non-breaching party's obtaining actual
knowledge of such breach.
(c) Claims for Indemnification. If any Investor Indemnitee or Company
Indemnitee (an "Indemnitee") shall believe that such Indemnitee is entitled
to indemnification pursuant to this Section 8 in respect of any Damages,
such Indemnitee shall give the appropriate Indemnifying Party (which for
purposes hereof, in the case of an Investor Indemnitee, means the Company,
and in the case of a Company Indemnitee, means the Investor) prompt written
notice thereof. Any such notice shall set forth in reasonable detail and to
the extent then known the basis for such claim for indemnification. The
failure of such Indemnitee to give notice of any claim for indemnification
promptly shall not adversely affect such Indemnitee's right to indemnity
hereunder except to the extent that such failure adversely affects the
right of the Indemnifying Party to assert any reasonable defense to such
claim. Each such claim for indemnity shall expressly state that the
Indemnifying Party shall have only the twenty (20) business day period
referred to in the next sentence to dispute or deny such claim. The
Indemnifying Party shall have twenty (20) business days following its
receipt of such notice either (a) to acquiesce in such claim by giving such
Indemnitee written notice of such acquiescence or (b) to object to the
claim by giving such Indemnitee written notice of the objection. If the
Indemnifying Party does not object thereto within such twenty (20) business
day period, such Indemnitee shall be entitled to be indemnified for all
Damages reasonably and proximately incurred by such Indemnitee in respect
of such claim. If the Indemnifying Party objects to such claim in a timely
manner, the senior management of the Company and the Investor shall meet to
attempt to resolve such dispute. If the dispute cannot be resolved by the
senior management, either party may make a written demand for formal
dispute resolution and specify therein the scope of the dispute. Within
thirty (30) days after such written notification, the parties agree to meet
for one (1) day with an impartial mediator and consider dispute resolution
alternatives other than litigation. If an alternative method of dispute
resolution is not agreed upon within thirty (30) days after the one day
mediation, either party may begin litigation proceedings. Nothing in this
section shall be deemed to require arbitration.
(d) Defense of Claims. In connection with any claim that may give rise
to indemnity under this Section 8 resulting from or arising out of any
claim or Proceeding against an Indemnitee by a Person that is not a party
hereto, the Indemnifying Party may (unless such Indemnitee elects not to
seek indemnity hereunder for such claim) but shall not be obligated to,
upon written notice to the relevant Indemnitee, assume the defense of any
such claim or Proceeding if the Indemnifying Party with respect to such
claim or Proceeding acknowledges to the Indemnitee the Indemnitee's right
to indemnity pursuant hereto to the extent provided herein (as such claim
may have been modified through written agreement of the parties) and
provides assurances, reasonably satisfactory to such Indemnitee, that the
Indemnifying Party shall be financially able to satisfy such claim to the
extent provided herein if such claim or Proceeding is decided adversely;
provided, however, that nothing set forth herein shall be deemed to require
the Indemnifying Party to waive any crossclaims or counterclaims the
Indemnifying Party may have against the Indemnified Party for damages. The
Indemnified Party shall be entitled to retain separate counsel, reasonably
acceptable to the Indemnifying Party, if the Indemnified Party shall
determine, upon the written advice of counsel, that an actual or potential
conflict of interest exists between the Indemnifying Party and the
Indemnified Party in connection with such Proceeding. The Indemnifying
Party shall be obligated to pay the reasonable fees and expenses of such
separate counsel to the extent the Indemnified Party is entitled to
indemnification by the Indemnifying Party with respect to such claim or
Proceeding under this Section 8(d). If the Indemnifying Party assumes the
defense of any such claim or Proceeding, the Indemnifying Party shall
select counsel reasonably acceptable to such Indemnitee to conduct the
defense of such claim or Proceeding, shall take all steps necessary in the
defense or settlement thereof and shall at all times diligently and
promptly pursue the resolution thereof. If the Indemnifying Party shall
have assumed the defense of any claim or Proceeding in accordance with this
Section 8(d), the Indemnifying Party shall be authorized to consent to a
settlement of, or the entry of any judgment arising from, any such claim or
Proceeding, with the prior written consent of such Indemnitee, not to be
unreasonably withheld; provided, however, that the Indemnifying Party shall
pay or cause to be paid all amounts arising out of such settlement or
judgment concurrently with the effectiveness thereof; provided further,
that the Indemnifying party shall not be authorized to encumber any of the
assets of any Indemnitee or to agree to any restriction that would apply to
any Indemnitee or to its conduct of business; and provided further, that a
condition to any such settlement shall be a complete release of such
Indemnitee and its Affiliates, directors, officers, employees and agents
with respect to such claim, including any reasonably foreseeable collateral
consequences thereof. Such Indemnitee shall be entitled to participate in
(but not control) the defense of any such action, with its own counsel and
at its own expense. Each Indemnitee shall, and shall cause each of its
Affiliates, directors, officers, employees and agents to, cooperate fully
with the Indemnifying Party in the defense of any claim or Proceeding being
defended by the Indemnifying Party pursuant to this Section 8(d). If the
Indemnifying Party does not assume the defense of any claim or Proceeding
resulting therefrom in accordance with the terms of this Section 8(d), such
Indemnitee may defend against such claim or Proceeding in such manner as it
may deem appropriate, including settling such claim or Proceeding after
giving notice of the same to the Indemnifying Party, on such terms as such
Indemnitee may deem appropriate. If any Indemnifying Party seeks to
question the manner in which such Indemnitee defended such claim or
Proceeding or the amount of or nature of any such settlement, such
Indemnifying Party shall have the burden to prove by a preponderance of the
evidence that such Indemnitee did not defend such claim or Proceeding in a
reasonably prudent manner.
(e) Certain Definitions. As used in this Section 8, (i) "Affiliate"
means, with respect to any Person, any Person directly or indirectly
controlling, controlled by or under direct or indirect common control with
such other Person; (ii) "Associate" means, when used to indicate a
relationship with any Person, (A) any other Person of which such first
Person is an officer, director or partner or is, directly or indirectly,
the beneficial owner of ten percent (10%) or more of any class of equity
securities, membership interests or other comparable ownership interests
issued by such other Person, (B) any trust or other estate in which such
first Person has a ten percent (10%) or more beneficial interest or as to
which such first Person serves as trustee or in a similar fiduciary
capacity, and (C) if such first Person is an individual, any relative or
spouse of such first Person who has the same home as such first Person or
who is a director or officer of such first Person; (iii) "Damages" means
all demands, claims, actions or causes of action, assessments, losses,
damages, costs, expenses, liabilities, judgments, awards, fines, response
costs, sanctions, taxes, penalties, charges and amounts paid in settlement,
including (A) interest on cash disbursements in respect of any of the
foregoing at the prime rate of Bank of America NT&SA (or its successor), as
in effect from time to time, compounded quarterly, from the date each such
cash disbursement is made until the date the party incurring such cash
disbursement shall have been indemnified in respect thereof, and (B)
reasonable out-of-pocket costs, fees and expenses (including reasonable
costs, fees and expenses of attorneys, accountants and other agents of, or
other parties retained by, such party); and (iv) "Proceeding" means any
action, suit, hearing, arbitration, audit, proceeding (public or private)
or investigation that is brought or initiated by or against any federal,
state, local or foreign governmental authority or any other Person.
9. ASSIGNMENT AND DELEGATION. Notwithstanding anything herein to the
contrary:
(a) Information Rights. The rights of the Investor under
Section 7(a) are transferable to any Holder who acquires or holds at least one
hundred thousand (100,000) Registrable Securities; provided, however, that no
Person may be assigned any of the foregoing rights unless the Company is given
written notice by the assigning party at the time of such assignment stating the
name and address of the assignee and identifying the securities of the Company
as to which the rights in question are being assigned; provided further, that
any such assignee shall receive such assigned rights subject to all the terms
and conditions of this Agreement, including the provisions of this Section 9.
(b) Registration Rights. The registration rights of the
Investor under Section 7(b) may be assigned to any Permitted Transferee who
acquires or holds at least one hundred thousand (100,000) Registrable
Securities; provided, however, that no Person may be assigned any of the
foregoing rights unless the Company is given written notice by the assigning
party at the time of such assignment stating the name and address of the
assignee and identifying the securities of the Company as to which the rights in
question are being assigned; provided further, that any such assignee shall
receive such assigned rights subject to all the terms and conditions of this
Agreement, including the provisions of this Section 9.
(c) Confidential Information. The obligations of the Company
or the Investor or under Section 7(c) may not be delegated.
(d) Board Observer. The rights of the Investor under Section
7(d) may not be assigned.
(e) Rights On Corporate Events. The rights of the Investor
under Section 7(e) may be assigned only in whole, and not in part, and only to a
Majority Owned Subsidiary (and only in conjunction with a transfer to such
subsidiary of all of the Investor's Purchased Shares, Warrant Shares, Conversion
Shares and interest in the Warrant); provided, however, that no Person may be
assigned any of the foregoing rights unless the Company is given written notice
by the Investor at the time of such assignment stating the name and address of
the assignee; provided further, that any such assignee shall receive such
assigned rights subject to all the terms and conditions of this Agreement.
(f) Rights of Participation and Maintenance. The rights of the
Investor under Sections 7(f) and 7(g) may be assigned only in whole, and not in
part, and only to a Majority Owned Subsidiary (and only in conjunction with a
transfer to such subsidiary of all of the Investor's Purchased Shares, Warrant
Shares, Conversion Shares and interest in the Warrant); provided, however, that
no Person may be assigned any of the foregoing rights unless the Company is
given written notice by the Investor at the time of such assignment stating the
name and address of the assignee; provided further, that any such assignee shall
receive such assigned rights subject to all the terms and conditions of this
Agreement.
10.......TRANSFERABILITY OF PURCHASED AND WARRANT SHARES. Without the
prior written consent of the Company (which shall not be unreasonably withheld),
the Investor may sell or otherwise transfer the Warrant (in whole or in part) or
any Purchased Shares and Warrant Shares only to a Permitted Transferee.
"Permitted Transferee" means (a) the Company or any of its subsidiaries, (b) a
Person that, directly or indirectly, controls, is controlled by or is under
common control with the Investor or (c) any other Person, including any
professional financial investor (such as a venture capital firm, investment
bank, investment fund or high net worth individual), provided that such Person
has not expressed to the Investor any present intent to seek changes in the
composition of the Board or the Company's management or otherwise to become
actively involved in operating the Company, and provided further that such
Person is not at the time of such sale a direct, material competitor of the
Company.
11.......MISCELLANEOUS.
(a) Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
assigns of the parties, provided such assignment was made in accordance with
Section 9 and upon the respective successors of the parties.
(b) Governing Law. This Agreement shall be governed by and
construed under the internal laws of the State of Delaware, without reference to
principles of conflict of laws or choice of laws.
(c) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(d) Headings. The headings and captions used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
(e) Notices. Any notice required or permitted under this
Agreement shall be given in writing, shall be effective when received, and shall
in any event be deemed received and effectively given upon personal delivery to
the party to be notified or three (3) business days after deposit with the
United States Post Office, by registered or certified mail, postage prepaid, or
one (1) business day after deposit with a nationally recognized courier service
such as FedEx for next business day delivery under circumstances in which such
service guarantees next business day delivery, or one (1) business day after
facsimile with copy delivered by registered or certified mail, in any case,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof or at such other address
as the Investor or the Company may designate by giving at least ten (10) days
advance written notice pursuant to this Section 11(e).
(f) Amendments and Waivers. This Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the holders of a majority of the
aggregate number of (i) Warrant Shares issuable upon exercise of the Warrant and
(ii) Purchased Shares, Warrant Shares and Conversion Shares then outstanding
(excluding any of such shares that have been sold in a transaction in which
rights under Section 7(b) are not assigned in accordance with this Agreement or
sold to the public pursuant to SEC Rule 144 or otherwise). Any amendment or
waiver effected in accordance with this Section 11(f) shall be binding upon the
Investor, the Company and their respective successors and assigns.
Notwithstanding the foregoing, neither Section 7(c), 7(d), 7(e), 7(f) or 7(g)
nor Section 9 may be amended without the written consent of the Company and the
Investor, which may be withheld in either of their sole and absolute discretion.
(g) Severability. If any provision of this Agreement is held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
(h) Entire Agreement. This Agreement, together with the other
Transaction Agreement and all exhibits and schedules hereto and thereto
constitutes the entire agreement and understanding of the parties with respect
to the subject matter hereof and supersedes any and all prior negotiations,
correspondence, agreements. understandings duties or obligations between the
parties with respect to the subject matter hereof.
(i) Further Assurances. From and after the date of this
Agreement upon the request of the Company or the Investor, the Company and the
Investor shall execute and deliver such instruments, documents or other writings
as may be reasonably necessary or desirable to confirm and carry out and to
effectuate fully the intent and purposes of this Agreement.
(j) Construction. Whenever in this Agreement the word
"include" or "including" is used, such term shall be deemed to mean "include,
without limitation," or "including, without limitation," as the case may be, and
the language following "include" or "including" shall not be deemed to set forth
an exhaustive list. The words "hereof," "herein," '"hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Article, Section, subsection,
paragraph, exhibit and schedule references are to this Agreement unless
otherwise specified.
(k) Fees, Costs and Expenses. All fees, costs and expenses
(including attorney's' fees and expenses) incurred by either part hereto in
connection with the preparation, negotiation and execution of this Agreement and
the other Transaction Agreements and the consummation of the transactions
contemplated hereby and thereby (including the costs associated with any filings
with, or compliance with any of the requirements of, any governmental
authorities), shall be the sole and exclusive responsibility of such party.
(l) Competition. Nothing set forth herein shall be deemed to
preclude, limit or restrict the Company's or the Investor's ability to compete
with the other.
(m) Cooperation in HSR Act Filings.
(i) In the event of a proposed voluntary conversion of
Purchased Shares and/or Warrant Shares that would require a
filing by Intel under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), the Investor and its
respective affiliates (including any "ultimate parent entity", as
defined in the HSR Act), and the Company and its respective
affiliates (including any "ultimate parent entity", as defined in
the HSR Act), shall promptly prepare and make their respective
filings and thereafter shall make all required or requested
submissions under the HSR Act or any analogous applicable law, if
required. In taking such actions or making any such filings, the
parties hereto shall furnish information required in connection
therewith and seek timely to obtain any applicable actions,
consents, approvals or waivers of governmental authorities;
provided, however, that the parties hereto shall cooperate with
each other in connection with the making of all such filings to
the extent permitted by applicable law. Without limiting the
generality of the foregoing, to the extent permitted by
applicable law and so long as the following shall not involve the
disclosure of confidential or proprietary information of one
party hereto to another, each party shall cooperate with the
other by (A) providing copies of all documents to be filed to the
non-filing party and its advisors prior to filing and, if
requested, accepting reasonable additions, deletions or changes
suggested in connection therewith and (B) providing to each other
party copies of all correspondence from and to any governmental
authority in connection with any such filing.
(ii) Notwithstanding the foregoing, neither the Investor nor
any of its affiliates shall be under any obligation to comply
with any request or requirement imposed by the Federal Trade
Commission (the "FTC"), the Department of Justice (the "DofJ") or
any other governmental authority in connection with the
compliance with the requirements of the HSR Act, or any other
applicable law, if the Investor, in the exercise of its
reasonable discretion, deems such request or requirement unduly
burdensome. Without limiting the generality of the foregoing, the
Investor shall not be obligated to comply with any request by, or
any requirement of, the FTC, the DofJ or any other governmental
authority: (A) to disclose information the Investor deems it in
its best interests to keep confidential; (B) to dispose of any
assets or operations; or (C) to comply with any proposed
restriction on the manner in which it conducts its operations. If
the Investor shall receive a second request in respect of its HSR
Filing determined by it to be unduly burdensome and it shall
prove unable to negotiate a means satisfactory to the Investor
for complying with such burdensome second request, or the FTC or
DofJ shall impose any condition on the Investor or its affiliates
in respect thereof deemed unacceptable by the Investor, the
Company and the Investor shall cooperate in good faith to
negotiate an alternative transaction that provides the Investor
with the economic benefits it would receive if it were to convert
the Purchased Shares and/or Warrant Shares.
(n) Adjustments for Stock Splits, Etc. Wherever in this Agreement
there is a reference to a specific number of shares of capital stock
of the Company, then, upon the occurrence of any subdivision,
combination or stock dividend of such shares of capital stock, the
specific number of shares so referenced in this Agreement shall
automatically be proportionally adjusted to reflect the affect on the
outstanding shares of such class or series of stock by such
subdivision, combination or stock dividend.
(o) Index of Defined Terms. The following terms shall have the
respective meanings given to them in the sections indicated below:
Acquisition Issuance.........................7(e)(vi)
Action...........................................3(g)
Affiliate........................................8(e)
Agreement....................................Preamble
Articles.........................................3(f)
Assets......................................7(e)(vii)
Associate........................................8(e)
Audited Financial Statements.................3(i)(ii)
Balance Sheet Date...........................3(i)(ii)
beneficially own............................7(h)(iii)
beneficially owned..........................7(h)(iii)
beneficial ownership........................7(h)(iii)
beneficially owning.........................7(h)(iii)
Board............................................1(a)
Bylaws...........................................3(f)
CERCLA...........................................3(q)
Certificate of Designation.......................1(a)
Closing.............................................2
Closing Date........................................2
Common Stock.....................................1(a)
Company......................................Preamble
Company Indemnitees..........................8(a)(ii)
Confidential Information.....................7(c)(ii)
Conversion Shares.............................3(d)(i)
Corporate Event...............................7(e)(i)
Damages..........................................8(e)
Dilutive Securities..........................7(g)(ii)
Disclosure Letter...................................3
DofJ........................................11(n)(ii)
Employee Stock...........................7(g)(iii)(A)
Exchange Act.................................3(i)(ii)
Exchangeable Securities..................7(g)(iii)(B)
Exhibit Filing..............................7(c)(iii)
Final Notice................................7(e)(iii)
Final Prospectus.........................7(b)(vii)(D)
Form 10-K.....................................3(i)(i)
Form 10-Q.....................................3(i)(i)
Form S-1...................................7(b)(i)(E)
Form S-2...................................7(b)(i)(E)
Form S-3...................................7(b)(i)(E)
FTC...11 .....................................(n)(ii)
GAAP.........................................3(i)(ii)
Graphic Business............................7(e)(vii)
Hazardous Materials..............................3(q)
Holder.....................................7(b)(i)(D)
HSR Act......................................11(n)(i)
HSR Act..........................................3(e)
HSR Requirements.................................3(e)
Include.........................................11(k)
Including.......................................11(k)
Indemnitee.......................................8(c)
Information.................................7(d)(iii)
Initiating Holders.......................7(b)(iii)(B)
Intellectual Property.........................3(l)(i)
Investor.....................................Preamble
Investor Indemnitees..........................8(a)(i)
Issuance 1....................................7(g)(v)
Issuance 2....................................7(g)(v)
Maintenance Amount............................7(g)(v)
Maintenance Notice...........................7(g)(vi)
Maintenance Securities........................7(g)(i)
Majority Owned Subsidiary.....................7(f)(i)
Market Price.............................7(g)(iii)(C)
Material Adverse Effect..........................3(a)
New Securities..............................7(f)(iii)
Non-Disclosure Agreement......................7(c)(i)
Notice Date..................................7(g)(iv)
Observer......................................7(d)(i)
Participation Notice.........................7(f)(iv)
Participation Rights Holder...................7(f)(i)
Per Share Purchase Price.........................1(c)
Permitted Transferee...............................10
Person.....................................7(b)(i)(B)
Preferred Stock...............................3(b)(i)
Prior Percentage Interest....................7(g)(iv)
Pro Rata Share...............................7(f)(ii)
Proceeding.......................................8(e)
Purchase Price...........................7(g)(iii)(A)
Purchased Shares.................................1(b)
Register...................................7(b)(i)(A)
Registered.................................7(b)(i)(A)
Registrable Securities.....................7(b)(i)(B)
Registrable Securities Then
Outstanding...........................7(b)(i)(C)
Registration...............................7(b)(i)(A)
Request Notice...........................7(b)(iii)(A)
Retirement Plans.............................7(h)(ii)
Right of Maintenance..........................7(g)(i)
Right of Participation....................... 7(f)(i)
Rights Plan......................................3(s)
ROFR Period.................................7(e)(iii)
SEC..............................................3(e)
SEC Documents................................ 3(i)(i)
Securities Act...............................3(d)(ii)
Series B Preferred Stock.....................Recitals
Series A Preferred Stock......................3(b)(i)
Shelf Registration Statement..............7(b)(ii)(A)
Significant Subsidiary........................7(e)(i)
Spin Off....................................7(e)(vii)
Spun-Off Business...........................7(e)(vii)
Standstill Percentage............................7(h)
Suspension.............................7(b)(ii)(B)(2)
Suspension Event.......................7(b)(ii)(B)(2)
Suspension Notice......................7(b)(ii)(B)(2)
Total Voting Power..........................7(h)(iii)
Transaction Agreements.......................7(c)(ii)
Unlisted Securities......................7(g)(iii)(C)
Violation................................7(b)(vii)(A)
Voting Power................................7(h)(iii)
Voting Stock................................7(h)(iii)
Warrant..........................................1(d)
Warrant Shares...................................1(d)
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ COMPUTER INTEL CORPORATION
CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President & Chief Executive Officer Title: Sr. Vice President
Date Signed: 7/21/98 Date Signed:
Address: Attention: ▇▇▇▇▇ ▇▇▇▇▇▇ Address: Attn: Treasurer
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ M/S SC4-210
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone No:(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile No:(▇▇▇) ▇▇▇-▇▇▇▇
With copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq. With copy to: Attn: General Counsel
▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ M/S ▇▇▇-▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone No:(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile No:(▇▇▇) ▇▇▇-▇▇▇▇
Signature page to
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ Computer Corporation
Series B Stock and Warrant
Purchase Agreement