1
EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of January 18,
2000, by and among Auspex Systems, Inc., a Delaware corporation, with
headquarters located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇ (the "COMPANY"), and the investors listed on the Schedule of Buyers
attached hereto (individually, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and each Buyer is executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("REGULATION D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 ACT");
B. The Company has authorized a new series of its Preferred Stock, par
value $0.001 per share, which shall be called the Company's Series B Convertible
Preferred Stock (the "PREFERRED STOCK"), which shall be convertible into shares
of the Company's common stock, par value $0.001 per share (the "COMMON STOCK")
(as converted, the "CONVERSION SHARES"), in accordance with the terms of the
Company's Certificate of Designations, Preferences and Rights of the Preferred
Stock in the form attached hereto as Exhibit A (the "CERTIFICATE OF
DESIGNATIONS");
C. Each Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, (i) the number of shares of the Preferred Stock set forth
opposite such Buyer's name on the Schedule of Buyers (which number of shares to
be issued to all the Buyers in the aggregate shall equal 25,000 shares of
Preferred Stock, collectively, the "PREFERRED SHARES"), and (ii) warrants (the
"WARRANTS") to purchase up to 64.20544 shares of Common Stock (as exercised
collectively, the "WARRANT SHARES") for each Preferred Share purchased by such
Buyer on the Closing Date (as defined below) (as set forth opposite such Buyer's
name on the Schedule of Buyers), such Warrants to be substantially in the form
attached hereto as Exhibit B;
D. Contemporaneously with the execution and delivery of this Agreement,
the Company and each Buyer is executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as Exhibit C (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
2
NOW THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
a. Purchase of Preferred Shares. Subject to satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7, the Company shall issue
and sell to each Buyer and each Buyer agrees to purchase from the Company the
number of Preferred Shares set forth opposite such Buyer's name on the Schedule
of Buyers, along with the related Warrants (the "CLOSING"). The purchase price
(the "PURCHASE PRICE") of each Preferred Share and the related Warrants at the
Closing shall be an aggregate of $1,000. "BUSINESS DAY" means any day other than
Saturday, Sunday or other day on which commercial banks in the city of New York
are authorized or required by law to remain closed.
b. The Closing Date. The date and time of the Closing (the
"CLOSING DATE") shall be 10:00 a.m., Pacific Time, within one (1) Business Day
following the date hereof, subject to satisfaction (or waiver) of the conditions
to the Closing set forth in Sections 6 and 7 (or such later date as is mutually
agreed to by the Company and the Buyer). The Closing shall occur on the Closing
Date at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
c. Form of Payment. On the Closing Date (i) each Buyer shall pay
the Purchase Price to the Company for the Preferred Shares and the related
Warrants to be issued and sold to such Buyer by wire transfer of immediately
available funds in accordance with the Company's written wire instructions, and
(ii) the Company shall deliver to each Buyer stock certificates (in the
denominations as such Buyer shall request) (the "STOCK CERTIFICATES")
representing such number of the Preferred Shares which such Buyer is then
purchasing along with the related Warrants, duly executed on behalf of the
Company and registered in the name of such Buyer.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer (i) is acquiring the Preferred
Shares and the Warrants, (ii) upon conversion of the Preferred Shares, will
acquire the Conversion Shares then issuable and (iii) upon exercise of the
Warrants, will acquire the Warrant Shares issuable upon exercise thereof (the
Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares,
collectively are referred to herein as the "SECURITIES"), for its own account
for investment only and not with a view towards, or for resale in connection
with, the public sale or distribution thereof, except pursuant to sales
registered or exempted under the 1933 Act; provided, however, that by making the
representations herein, such Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
2
3
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such Securities.
d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Sections 3 and 9(m) below. Such Buyer understands that its investment in the
Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a form reasonably satisfactory to the Company,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such Buyer provides the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated
under the 1933 Act (or a successor rule thereto) ("RULE 144"); (ii) any sale of
the Securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of
the Securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the ▇▇▇▇ ▇▇▇) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such Securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption
3
4
thereunder. Notwithstanding the foregoing, the Securities may be pledged in
connection with a bona fide margin account or other loan secured by the
Securities.
g. Legends. Such Buyer understands that the certificates or other
instruments representing the Preferred Shares and the Warrants and, until such
time as the sale of the Conversion Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares and the
Warrant Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A FORM REASONABLY SATISFACTORY TO THE
ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, SUCH SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if (i) such Securities are registered for sale under the 1933 Act, (ii)
in connection with a sale, assignment or transfer of such securities, such
holder provides the Company with an opinion of counsel, in a form reasonably
satisfactory to the Company, to the effect that such sale, assignment or
transfer may be made without registration under the 1933 Act or (iii) such
holder provides the Company with reasonable assurance that such Securities can
be sold pursuant to Rule 144. Such Buyer acknowledges, covenants and agrees to
sell Securities represented by a certificate(s) from which the legend has been
removed, only pursuant to (i) a registration statement effective under the 1933
Act or (ii) advice of counsel to such holder that such sale is exempt from the
registration requirements of Section 5 of the 1933 Act, provided that the Buyer
gives written notice to the Company specifying the amount of securities sold and
the exemption relied on and, provided further, that for sales pursuant to Rule
144 such notice will be satisfied by the Buyer providing the Company with a copy
of its Form 144.
h. Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of such Buyer and are valid and binding agreements of
such Buyer enforceable against such Buyer in accordance with their terms,
subject as to enforceability to general principles of equity and to applicable
4
5
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that jurisdiction
specified on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and its
"SUBSIDIARIES" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns the capital stock or holds an equity
or similar interest) (a complete list of which is set forth in Schedule 3(a))
are corporations duly organized and validly existing in good standing under the
laws of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authorization to own properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, "MATERIAL ADVERSE EFFECT"
means any material adverse effect on the business, properties, assets,
operations, results of operations or financial condition of the Company and its
Subsidiaries taken as a whole, or on the transactions contemplated hereby or by
the agreements and instruments to be entered into in connection herewith, or on
the authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined below) or the Certificate of Designations.
b. Authorization; Enforcement; Compliance with Other Instruments.
The Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement, the Registration Rights Agreement,
the Irrevocable Transfer Agent Instructions (as defined in Section 5), the
Warrants and each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement (collectively,
the "TRANSACTION DOCUMENTS"), and to issue the Securities in accordance with the
terms hereof and thereof. The execution and delivery of the Transaction
Documents by the Company and the execution and filing of the Certificate of
Designations by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation the issuance of
the Preferred Shares and the Warrants and the reservation for issuance and the
issuance of the Conversion Shares and the Warrant Shares issuable upon
conversion or exercise thereof, have been duly authorized by the Company's Board
of Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders. The Transaction Documents have been
duly executed and delivered by the Company. This Agreement and the Registration
Rights Agreement and, when executed and delivered, the other Transaction
Documents, constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium,
5
6
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies.
c. Capitalization. The authorized capital stock of the Company
consists of (i) 50,000,000 shares of Common Stock, of which as of the date
hereof 27,951,035 shares are issued and outstanding, 6,308,285 shares are
issuable and reserved for issuance pursuant to the Company's stock option and
purchase plans and 0 shares are issuable and reserved for issuance pursuant to
securities (other than the Preferred Shares and the Warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock and (ii) 5,000,000
shares of preferred stock, of which 50,000 shares are designated as Series A
Participating Preferred Stock, none of which are outstanding as of the date
hereof and 25,000 shares are designated as Series B Convertible Preferred Stock,
none of which are outstanding as of the date hereof. All of such outstanding
shares have been and are, or upon issuance will be, validly issued, fully paid
and nonassessable. Except as disclosed in Schedule 3(c): (i) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company; (ii)
there are no outstanding debt securities issued by the Company; (iii) there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries; (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement); (v) there are no
outstanding securities of the Company or any of its Subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; and (vii) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to each Buyer true and
correct copies of the Company's Certificate of Incorporation, as amended and as
in effect on the date hereof (the "CERTIFICATE OF INCORPORATION"), and the
Company's By-laws, as in effect on the date hereof (the "BY-LAWS"), and the
terms of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
d. Issuance of Securities. The Preferred Shares are duly
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable, (ii) free from all taxes, liens
and charges with respect to the issuance thereof and (iii) entitled to the
rights and preferences set forth in the Certificate of Designations. At least
9,101,388 shares of Common Stock (subject to adjustment pursuant to the
Company's covenant set forth in Section 4(f) below) have been duly authorized
and reserved for issuance upon conversion of the Preferred Shares and exercise
of the Warrants. Upon conversion or exercise
6
7
in accordance with the Certificate of Designations or the Warrants, as the case
may be, the Conversion Shares and the Warrant Shares will be validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issuance thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. The issuance by the Company of the
Securities is exempt from registration under the 1933 Act. The offer and sale by
the Company of the Preferred Shares and the Warrants is being made in reliance
upon the exemption from registration set forth in Rule 506 of Regulation D under
the 1933 Act and is only being made to "accredited investors" that meet the
requirements of Rule 501(a) of Regulation D and similar exemptions under state
law.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the Company,
the performance by the Company of its obligations under the Certificate of
Designations and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the reservation
for issuance and issuance of the Conversion Shares and the Warrant Shares) will
not (I) result in a violation of the Certificate of Incorporation, any
certificate of designations of any outstanding series of preferred stock of the
Company or the By-laws; (II) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party; or (III) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of the principal
market or exchange on which the Common Stock is traded or listed) applicable to
the Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected. Except as disclosed in
Schedule 3(e): neither the Company nor its Subsidiaries is in violation of any
term of (i) its Certificate of Incorporation, any certificate of designations of
any outstanding series of preferred stock or its By-laws or their organizational
charter or by-laws, respectively, or (ii) any statute, rule or regulation
applicable to the Company or its Subsidiaries and neither the Company nor its
Subsidiaries is in default under any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order, except for such
violations or defaults which would not, individually or in the aggregate, have a
Material Adverse Effect. The business of the Company and its Subsidiaries is not
being conducted, and shall not be conducted, in violation of any law, ordinance
or regulation of any governmental entity except for such violations the
sanctions for which either individually or in the aggregate would not have a
Material Adverse Effect. Except as specifically contemplated by this Agreement
and except such as have been obtained as of the date hereof, the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents or the
Certificate of Designations in accordance with the terms hereof or thereof.
Except as disclosed in Schedule 3(e), all consents, authorizations, orders,
filings and registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior to the date
hereof and such consents shall have been obtained prior to the Closing. The
Company and its Subsidiaries are unaware of any facts or circumstances which
might reasonably be expected to give rise to any of the foregoing. The Company
is not in
7
8
violation of the listing requirements of the Nasdaq National Market as in effect
on the date hereof and on the Closing Date and has no actual knowledge of any
facts which would reasonably lead to delisting or suspension of the Common Stock
by the Nasdaq National Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since June 30, 1998, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the 1934 Act (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC DOCUMENTS"). A complete list of the Company's SEC Documents is set forth on
Schedule 3(f). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents.
None of the SEC Documents, at the time they were filed with the SEC, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements of the SEC with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Neither the Company
nor any of its Subsidiaries nor any of their officers, directors, employees or
agents have provided the Buyers with any material, nonpublic information other
than the Material Information (as defined below). The Company meets the
requirements for the use of Form S-3 for registration of the resale of the
Registrable Securities (as defined in the Registration Rights Agreement) by each
Buyer.
g. Absence of Certain Changes. Except as disclosed in Schedule
3(g), since June 30, 1999 there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, liabilities or results of operations of the Company or its
Subsidiaries, taken as a whole. The Company has not taken any steps, and does
not currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of its Subsidiaries have any
knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings or any knowledge of any fact which would reasonably lead a creditor
to do so.
h. Absence of Litigation. Except as disclosed in Schedule 3(h),
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company, the Common Stock or any of the
8
9
Company's Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such, except as expressly set forth
in Schedule 3(h). Except as set forth in Schedule 3(h), to the knowledge of the
Company none of the directors or officers of the Company have been involved in
securities related litigation during the past five years.
i. Acknowledgment Regarding the Buyer's Purchase of Preferred
Shares. The Company acknowledges and agrees that each of the Buyers is acting
solely in the capacity of arm's length purchaser with respect to the Transaction
Documents and the Certificate of Designations and the transactions contemplated
thereby. The Company further acknowledges that none of the Buyers is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the Certificate of Designations and the
transactions contemplated thereby and any advice given by any of the Buyers or
any of their respective representatives or agents in connection with the
Transaction Documents and the Certificate of Designations and the transactions
contemplated thereby is merely incidental to such Buyer's purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
j. No Undisclosed Events, Liabilities, Developments or
Circumstances. Except for the issuance of the Preferred Shares and Warrants
contemplated by this Agreement and except for the disclosure of the Company's
quarterly financial results for the period ended December 31, 1999 (the
"Material Information"), no event, liability, development or circumstance has
occurred or exists with respect to the Company or its Subsidiaries or their
respective businesses, properties, operations or financial condition, that would
be required to be disclosed by the Company under applicable securities laws on a
registration statement (including by way of incorporation by reference) filed
with the SEC relating to an issuance and sale by the Company of its Common Stock
and which has not been publicly disclosed.
k. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the ▇▇▇▇ ▇▇▇) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of the Nasdaq National Market, nor will the
Company or any of its Subsidiaries take any action or steps that would require
registration of the Securities under the 1933 Act or cause the offering of the
Securities to be integrated with other offerings.
m. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its
9
10
Subsidiaries, is any such dispute threatened. None of the Company's or its
Subsidiaries' employees is a member of a union, neither the Company nor any of
its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that their relations with their employees
are good. No executive officer (as defined in Rule 501(f) of the ▇▇▇▇ ▇▇▇) has
notified the Company's Board of Directors that such officer intends to leave the
Company or otherwise terminate such officer's employment with the Company and
the Company does not have any plans, as of the date hereof, to terminate any
such officer during the six months following the date of this Agreement.
n. Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service ▇▇▇▇ registrations, service names, issued patents,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. Except as set forth on Schedule 3(n), none of the Company's
trademarks, trade names, service marks, service ▇▇▇▇ registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
government authorizations, trade secrets or other intellectual property rights
have expired or terminated, or are expected to expire or terminate within two
years from the date of this Agreement except where such expiration or
termination would not have, either individually or in the aggregate, a Material
Adverse Effect. The Company and its Subsidiaries do not have any knowledge of
any infringement by the Company or its Subsidiaries of trademarks, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service names,
service marks, service ▇▇▇▇ registrations, trade secrets or other similar rights
of others, or of any such development of similar or identical trade secrets or
technical information by others and, except as set forth on Schedule 3(n), no
claim, action or proceeding has been made or brought against, or to the
Company's knowledge, has been threatened against, the Company or its
Subsidiaries regarding trademarks, trade name rights, patents, patent rights,
inventions, copyrights, licenses, service names, service marks, service ▇▇▇▇
registrations, trade secrets or other infringement; and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties except where the failure to do so would not have
either individually or in the aggregate a Material Adverse Effect.
o. Regulatory Permits. Except where the absence of which would
not have a Material Adverse Effect, the Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses. Neither the Company nor any such Subsidiary has received any notice
of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
p. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii)
10
11
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
q. Tax Status. The Company and each of its Subsidiaries has made
or filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and for which the Company has set aside on its books provision reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim.
r. Transactions With Affiliates and Employees. Except as set
forth on Schedule 3(r) or in the SEC Documents filed at least ten days prior to
the date hereof and other than the grant or exercise of stock options disclosed
on Schedule 3(c), none of the officers, directors or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
s. Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Preferred Shares
will increase in certain circumstances. The Company further acknowledges that
its obligation to issue Conversion Shares upon conversion of the Preferred
Shares in accordance with this Agreement and the Certificate of Designations and
its obligation to issue the Warrant Shares in accordance with this Agreement and
the Warrants is, in each case, absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
t. Application of Takeover Protections. The Company and its board
of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation or the laws of
the state of its incorporation which is or could become applicable to the Buyers
as a result of the Buyers and the Company fulfilling their obligations under the
Transaction Documents and the Certificate of Designations, including, without
limitation, the Company's issuance of the Securities and the Buyers' ownership
of the Securities.
11
12
u. Rights Agreement. The Company specifically represents,
warrants and agrees that, in accordance with Section 1 of the Rights Agreement
between the Company and the First National Bank of Boston, dated April 19, 1995
(the "RIGHTS PLAN"), regardless of the number of Conversion Shares and Warrant
Shares of which each Buyer is deemed the Beneficial Owner (as defined in the
Rights Plan), none of the Buyers is intended to be or will be deemed to be an
Acquiring Person as defined by the Rights Plan because of the acquisition of the
Securities (including the Conversion Shares and the Warrant Shares) pursuant to
this Agreement, and the acquisition of the Securities (including the Conversion
Shares and the Warrant Shares) pursuant to this Agreement, shall not, under any
circumstances, trigger a Distribution Date as defined by the Rights Plan;
provided, however, that only Securities (including the Conversion Shares and the
Warrant Shares) acquired pursuant to this Agreement shall be deemed excluded
from the number of shares of Common Stock deemed beneficially owned by each
Buyer in determining whether such Buyer is an Acquiring Person within the
meaning of the Rights Plan.
v. Year 2000 Compliance. The Company has initiated a review and
assessment of all areas within its and each Subsidiary's business and operations
that could be materially adversely affected by the "YEAR 2000 PROBLEM" (that is,
the risk that computer applications used by the Company or any of the
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999). Based on the foregoing, the Company believes that the computer
applications that are material to its or any Subsidiary's business and
operations are reasonably expected to be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000.
w. Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(w) or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and any of
its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
x. Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiaries has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operations of the Company and its Subsidiaries,
taken as a whole.
12
13
y. Environmental Laws. The Company and its Subsidiaries (i) are
in compliance in all material respects with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses, except where the
failure to receive such permits, licenses or approvals would not, individually
or in the aggregate, have a Material Adverse Effect and (iii) are in compliance
in all material respects with all terms and conditions of any such permit,
license or approval, except where the failure to be in compliance or receive
such permits, licenses or approvals would not, individually or in the aggregate,
have a Material Adverse Effect.
z. No Other Agreements. The Company has not, directly or
indirectly, made any agreements with any Buyer relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.
aa. No Materially Adverse Contracts. Except as specifically
disclosed in the SEC Documents, or as set forth in Schedule 3(aa), neither the
Company nor any of its Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is expected in the future
to have a Material Adverse Effect. Except as specifically disclosed in the SEC
Documents, or as set forth in Schedule 3(aa), neither the Company nor any of its
Subsidiaries is a party to any contract or agreement which in the judgment of
the Company's officers has or is expected to have a Material Adverse Effect.
4. COVENANTS.
a. Best Efforts. Each party hereto shall use its best efforts to
satisfy timely each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
b. Form D and Blue Sky. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for, or obtain exemption for
the Securities for, sale to each Buyer at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to such Buyer on
or prior to the Closing Date. The Company shall make all filings and reports
relating to the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States following the
Closing Date.
c. Reporting Status. Until the earlier of (i) the date which is
one year after the date on which each Investor (as that term is defined in the
Registration Rights Agreement) may sell all of the Conversion Shares and the
Warrant Shares acquired by such Investor without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor thereto) and
13
14
(ii) the date on which (A) each Investor shall have sold all the Conversion
Shares and the Warrant Shares acquired by such Investor and (B) none of the
Preferred Shares or Warrants is outstanding (the "REPORTING PERIOD"), the
Company shall file all reports required to be filed with the SEC pursuant to the
1934 Act, and the Company shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the
sale of the Preferred Shares for substantially the same purposes and in
substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the
following to each Investor during the Reporting Period: (i) unless filed and
available through the SEC's ▇▇▇▇▇ system, within two (2) Business Days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) or amendments thereto filed
pursuant to the 1933 Act; (ii) on the same day as the release thereof, facsimile
copies of all press releases issued by the Company or any of its Subsidiaries
(or the day after, if released through a recognized wire service) and (iii)
copies of any notices and other information made available or given to the
stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than the sum of (A) 200% of the number of shares of Common
Stock needed to provide for the issuance of the Conversion Shares and (B) 100%
of the number of shares of Common Stock needed to provide for the issuance of
the Warrant Shares (without regard to any limitations on conversions or exercise
thereof).
g. Proxy Statement. The Company shall provide each stockholder
entitled to vote at the next meeting of stockholders of the Company, which
meeting shall occur on or before the earlier of (A) the date which is 75 days
after the Proxy Statement Triggering Date (as defined below) and (B) the date on
which the Company holds its next annual meeting of stockholders, which date
shall be no later than December 15, 2000 (the "STOCKHOLDER MEETING DEADLINE"), a
proxy statement, which has been previously reviewed by each Buyer and Legal
Counsel (as defined in the Registration Rights Agreement), soliciting each such
stockholder's affirmative vote at such stockholder meeting for approval of the
Company's issuance of all of the Securities as described in this Agreement (such
affirmative vote being referred to as the "STOCKHOLDER APPROVAL"), and the
Company shall use its best efforts to (i) solicit its stockholders' approval of
such issuance of the Securities and (ii) cause the Board of Directors of the
Company to recommend to the stockholders that they approve such proposal. If the
Company fails to hold a meeting of its stockholders by the Stockholder Meeting
Deadline, then, as partial relief (which remedy shall not be exclusive of any
other remedies available at law or in equity), the Company shall pay to each
holder of Preferred Shares an amount in cash per Preferred Share held by such
holder equal to the product of (i) $1,000; multiplied by (ii) 0.02; multiplied
by (iii) the quotient
14
15
of (x) the number of days after the Stockholder Meeting Deadline that a meeting
of the Company's stockholders is not held, divided by (y) 30. The Company shall
make the payments referred to in the immediately preceding sentence within five
days of the earlier of (I) the holding of the meeting of the Company's
stockholders, the failure of which resulted in the requirement to make such
payments, and (II) the last day of each 30-day period beginning on the
Stockholder Meeting Deadline. In the event the Company fails to make such
payments in a timely manner, such payments shall bear interest at the rate of
2.0% per month (pro rated for partial months) until paid in full. "PROXY
STATEMENT TRIGGERING DATE" shall mean the first date after the date of this
Agreement on which during the five consecutive trading days ending on and
including such date of determination there are three trading days on which the
sum of (A) the number of shares of Common Stock previously issued upon
conversion of any Preferred Shares and (B) the number of shares of Common Stock
issuable upon conversion of all the outstanding Preferred Shares based on the
Conversion Price in effect on the date of such determination (without regard to
any limitation upon the conversion of any Preferred Shares), equals or exceeds
18% of the number of shares of Common Stock issued and outstanding immediately
prior to the Closing Date.
h. Listing. The Company shall promptly secure the listing of all
of the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system (including
the Nasdaq National Market), if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Registrable Securities from time to time issuable under the terms of the
Transaction Documents and the Certificate of Designations. The Company shall use
its best efforts to maintain the Common Stock's authorization for listing on the
Nasdaq National Market or The New York Stock Exchange, Inc.("NYSE"). Neither the
Company nor any of its Subsidiaries shall take any action which may result in
the delisting or suspension of the Common Stock on the Nasdaq National Market or
NYSE (other than to switch listings from the Nasdaq National Market to NYSE).
The Company shall promptly, and in no event later than the following Business
Day, offer to provide to each Buyer copies of any notices it receives from the
Nasdaq National Market or NYSE regarding the continued eligibility of the Common
Stock for listing on such automated quotation system or securities exchange, but
only if such notices shall not contain any material nonpublic information. The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(h).
i. Expenses. Subject to Section 9(l) below, at the Closing, the
Company shall pay an expense allowance of $50,000 to HFTP Investment L.L.C. (a
Buyer), which amount shall be withheld by such Buyer from its Purchase Price.
j. Transactions With Affiliates. So long as (i) at least 2,500
Preferred Shares are outstanding, (ii) or Warrants to purchase at least 151,975
shares of Common Stock are outstanding or (iii) any Buyer owns Conversion Shares
or Warrant Shares with a market value of at least $2,500,000, the Company shall
not, and shall cause each of its Subsidiaries not to, enter into, amend, modify
or supplement, or permit any Subsidiary to enter into, amend, modify or
supplement, any agreement, transaction, commitment or arrangement with any of
its or any Subsidiary's officers, directors, persons who were officers or
directors at any time during the
15
16
previous two years, stockholders who beneficially own 5% or more of the Common
Stock, or Affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each a "RELATED Party"),
except for (a) customary employment arrangements, benefit programs and outside
director compensation arrangements on reasonable terms, (b) any agreement,
transaction, commitment or arrangement which is approved by a majority of the
disinterested directors of the Company or (c) any agreement, transaction,
commitment or arrangement on an arms-length basis on terms no less favorable
than terms which would have been obtainable from a person other than such
Related Party. For purposes hereof, any director who is also an officer of the
Company or any Subsidiary of the Company shall not be a disinterested director
with respect to any such agreement, transaction, commitment or arrangement.
"AFFILIATE" for purposes hereof means, with respect to any person or entity,
another person or entity that, directly or indirectly, (i) has a 5% or more
equity interest in that person or entity, (ii) has 5% or more common ownership
with that person or entity, (iii) controls that person or entity, or (iv) shares
common control with that person or entity. "CONTROL" or "controls" for purposes
hereof means that a person or entity has the power, direct or indirect, to
conduct or govern the policies of another person or entity.
k. Filing of Form 8-K. On or before the first (1st) Business Day
following the Closing Date, the Company shall file a Form 8-K with the SEC
describing the terms of the transaction contemplated by the Transaction
Documents and consummated at the Closing and including as exhibits to such Form
8-K this Agreement, the Certificate of Designations, the Registration Rights
Agreement and the Form of Warrant, in the form required by the 1934 Act.
l. Corporate Existence. So long as any Buyer beneficially owns
any Preferred Shares or Warrants, the Company shall maintain its corporate
existence and shall not sell all or substantially all of the Company's assets,
except in the event of a merger or consolidation or sale of all or substantially
all of the Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose common stock is listed for trading on the
Nasdaq National Market or NYSE.
m. Mandatory Conversion or Redemption. On or before the date
which is 183 days after the Closing Date, the Company (i) shall deliver to each
Buyer one or more Company's Conversion Election Notices or Notices of Redemption
at Company's Election (as each such term is defined in the Certificate of
Designations) for the conversion or redemption, respectively, of an aggregate of
at least 25% of the Preferred Shares purchased by such Buyer at the Closing,
subject to the satisfaction of the conditions set forth in Sections 7 and 6,
respectively, of the Certificate of Designations, (ii) shall comply with its
obligations under Sections 7 and 6 of the Certificate of Designations with
respect to the Company's Conversion Election Notices and Notices of Redemption
at Company's Election, respectively, referred to in the preceding clause (i),
and (iii) shall not have delivered any Company's Mandatory Conversion Period
Termination Notice (as defined in the Certificate of Designations) with respect
to a Company's Conversion Election Notice referred to in clause (i) above. On or
before the date which is 274 days after the Closing Date, the Company (A) shall
deliver to each Buyer one or more Company's Conversion Election Notices or
Notices of Redemption at Company's Election for the conversion or
16
17
redemption, respectively, of an aggregate total, when cumulated with the number
of shares converted or redeemed pursuant to the first sentence of this Section
4(m) for such Buyer, of 50% of the Preferred Shares purchased by such Buyer at
the Closing, subject to the satisfaction of the conditions set forth in Sections
7 and 6, respectively, of the Certificate of Designations, (B) shall comply with
its obligations under Sections 7 and 6 of the Certificate of Designations with
respect to the Company's Conversion Election Notices and Notices of Redemption
at Company's Election, respectively, referred to in the preceding clause (A),
and (C) shall not have delivered any Company's Mandatory Conversion Period
Termination Notice with respect to a Company's Conversion Election Notice
referred to in clause (A) above. Notwithstanding the above, for every day that
the Company is unable to issue shares of Common Stock to a holder of Preferred
Shares as a result of the limitation contained in Section 5 of the Certificate
of Designations, the deadlines contained in the first two sentences of this
Section 4(m) shall be extended solely with respect to such holder by one (1)
day.
n. Material Information Disclosure. The Company will publicly
disclose the Material Information on or before January 20, 2000.
5. TRANSFER AGENT INSTRUCTIONS.
17
18
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of each Buyer or its respective nominee(s), for the Conversion Shares
and the Warrant Shares in such amounts as specified from time to time by each
Buyer to the Company upon conversion of the Preferred Shares or exercise of the
Warrants (in the form attached hereto as Exhibit E, the "IRREVOCABLE TRANSFER
AGENT INSTRUCTIONS") unless such issuance is prohibited by Section 5 or Section
15 of the Certificate of Designations. Prior to registration of the Conversion
Shares and the Warrant Shares under the 1933 Act, all such certificates shall
bear the restrictive legend specified in Section 2(g) of this Agreement. The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares and the
Warrant Shares, prior to registration of the Conversion Shares and the Warrant
Shares under the ▇▇▇▇ ▇▇▇) will be given by the Company to its transfer agent
with respect to the Warrants Shares and Conversion Shares and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. If a Buyer provides the Company with an opinion of counsel, in
a form reasonably satisfactory to the Company, that registration of a resale by
such Buyer of any of such Securities is not required under the 1933 Act or such
Buyer provides the Company with reasonable assurance that the Securities can be
sold pursuant to Rule 144, the Company shall permit the transfer, and, in the
case of the Conversion Shares and the Warrant Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Buyer and without any restrictive legends.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the affected Buyer by vitiating the intent and purpose
of the transactions contemplated hereby. Accordingly, the Company acknowledges
that the remedy at law for a breach of its obligations under this Section 5
would be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Section 5, that the affected Buyer shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Preferred Shares and the related Warrants to each Buyer at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion by
providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
(ii) Such Buyer shall have delivered to the Company the Purchase
Price (less, with respect to HFTP Investment L.L.C., the amounts
withheld pursuant to Section 4(i)) for the Preferred Shares and the
related Warrants being purchased by such Buyer at the
18
19
Closing by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company.
(iii) The representations and warranties of such Buyer contained
herein shall be true and correct as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied with the covenants, agreements and
conditions required by the Transaction Documents to be performed,
satisfied or complied with by such Buyer at or prior to the Closing
Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Preferred
Shares and the related Warrants at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided
that these conditions are for such Buyer's sole benefit and may be waived by
such Buyer at any time in its sole discretion by providing the Company and each
Buyer with prior written notice thereof:
(i) The Company shall have executed each of the Transaction
Documents, and delivered the same to such Buyer.
(ii) The Certificate of Designations shall have been filed with
the Secretary of State of the State of Delaware, and a copy thereof
certified by the Secretary of State of the State of Delaware shall have
been delivered to such Buyer.
(iii) The Common Stock shall be designated for quotation on the
Nasdaq National Market or listed on NYSE and shall not have been
suspended from trading on or delisted from such exchanges nor shall
delisting or suspension by such exchanges have been threatened either
(A) in writing by such exchanges or (B) by falling below the minimum
listing maintenance requirements of such exchanges. The Company shall
have complied with the listing requirements of the Nasdaq National
Market for the Conversion Shares and the Warrant Shares issuable upon
conversion or exercise of the Preferred Shares and the related Warrants,
as the case may be.
(iv) The representations and warranties of the Company contained
herein shall be true and correct as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied with the covenants, agreements and
conditions required by the Transaction Documents and the Certificate of
Designations to be performed, satisfied or complied with by the Company
at or prior to the Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company,
dated as of the Closing Date, to the foregoing effect and as to such
other matters as such Buyer may reasonably request, including, without
limitation, an update as of the Closing Date regarding the
representation contained in Section 3(c) above.
19
20
(v) Such Buyer shall have received the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ dated as of the Closing Date, in substantially the
form of Exhibit D, attached hereto.
(vi) The Company shall have executed and delivered to such Buyer
the Stock Certificates for the Preferred Shares and the related Warrants
being purchased by such Buyer at the Closing.
(vii) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b) above in a form reasonably
acceptable to such Buyer (the "RESOLUTIONS").
(viii) As of the Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of the Preferred Shares and exercise of the
Warrants, at least 9,101,388 shares of Common Stock.
(ix) The Irrevocable Transfer Agent Instructions, in the form of
Exhibit E attached hereto, shall have been delivered to and acknowledged
in writing by the Company's transfer agent.
(x) The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company and each
Subsidiary in such corporation's state of organization issued by the
Secretary of State of such state as of a date within ten days of the
Closing Date.
(xi) The Company shall have delivered to such Buyer a secretary's
certificate, dated as of the Closing Date, certifying as to (A) the
Resolutions, (B) the Certificate of Incorporation and (C) the By-laws,
each as in effect at the Closing Date.
(xii) The Company shall have delivered to such Buyer a certified
copy of its Certificate of Incorporation as certified by the Secretary
of State of the State of Delaware within ten days of the Closing Date.
(xiii) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of
Common Stock outstanding as of a date within five days of the Closing
Date.
(xiv) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by the Transaction
Documents as such Buyer or its counsel may reasonably request.
8. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the
20
21
Company's other obligations under the Transaction Documents and the Certificate
of Designations, the Company shall defend, protect, indemnify and hold harmless
each Buyer and each other holder of the Securities and all of their
stockholders, officers, directors, employees and direct or indirect investors
and any of the foregoing persons' agents or other representatives (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "INDEMNITEES") from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable and documented
attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or Certificate of Designations or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or the Certificate of Designations or any other
certificate, instrument or document contemplated hereby or thereby or (c) any
cause of action, suit or claim brought or made against such Indemnitee (other
than a cause of action, suit or claim which is (x) brought or made by the
Company and (y) is not a shareholder derivative suit) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of the
Transaction Documents or the Certificate of Designations, (ii) any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Securities or (iii) solely the status of such
Buyer or holder of the Securities as an investor in the Company. To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. The corporate laws of
the State of Delaware shall govern all issues concerning the relative rights of
the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY
21
22
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other parties; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between each Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein. This Agreement and the instruments referenced herein contain
the entire understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or therein,
neither the Company nor any Buyer makes any representation, warranty, covenant
or undertaking with respect to such matters. No provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and the
Buyers which purchased at least two-thirds (2/3) of the Preferred Shares on the
Closing Date, or their assigns or, if prior to the Closing Date, the Buyers
listed on the Schedule of Buyers as being obligated to purchase at least
two-thirds (2/3) of the Preferred Shares. No provision hereof may be waived
other than by an instrument in writing signed by the party against whom
enforcement is sought. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the Preferred Shares or Warrants
then outstanding. No consideration shall be offered or paid to any person to
amend or consent to a waiver or modification of any provision of any of the
Transaction Documents or the Certificate of Designations unless the same
consideration also is offered to all of the parties to the Transaction Documents
or holders of the Securities, as the case may be.
f. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one (1) Business Day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
22
23
If to the Company:
Auspex Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq.
If to the Transfer Agent:
Boston EquiServe L.P.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
If to a Buyer, to it at the address and facsimile number set forth on
the Schedule of Buyers, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers, or at such other address and/or facsimile number
and/or to the attention of such other person(s) as the recipient party has
specified by written notice given to each other party five days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communications, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
g. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares and the related
Warrants. The Company shall not assign this Agreement or any rights or
obligations hereunder, including by merger or consolidation, except pursuant to
a Change of Control (as defined in Section 4(b) of the Certificate of
Designations) with respect
23
24
to which the Company is in compliance with its obligations under Sections 4(a)
and 4(b) of the Certificate of Designations, Section 9(b) of the Warrant and
Section 4(l) of this Agreement without the prior written consent of the Buyers
which purchased at least two-thirds (2/3) of the Preferred Shares on the Closing
Date, or their assigns. The rights under this Agreement are assignable by a
Buyer without the consent of the Company; provided, however, that any such
assignment shall not release such Buyer from its obligations hereunder unless
such obligations are assumed by such assignee and the Company has consented to
such assignment and assumption, which consent shall not be unreasonably
withheld. Notwithstanding anything to the contrary contained in the Transaction
Documents or the Certificate of Designations, Buyers shall be entitled to pledge
the Securities in connection with a bona fide margin account or other loan
secured by the Securities.
h. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and each Buyer contained
in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
9, and the indemnification provisions set forth in Section 8, shall survive the
Closing. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the right to
approve before issuance any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of any Buyer, to make any
press release or other public disclosure with respect to such transactions as
the Company reasonably believes, after consulting with its counsel, to be
required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
occurred with respect to a Buyer on or before one (1) Business Day after the
date hereof due to the Company's or a Buyer's failure to satisfy the conditions
set forth in Sections 6 and 7 above (and the non-breaching party's failure to
waive such unsatisfied condition(s)), the non-breaching party shall have the
option to terminate this Agreement with respect to such breaching party at the
close of business on such date without liability of any party to any other
party; provided, however, that if this Agreement is terminated pursuant to this
Section 9(l), the Company shall remain obligated
24
25
to reimburse a non-breaching Buyer for expenses up to the amount described in
Section 4(i) above.
m. Placement Agent. The Company acknowledges that it has not
engaged a placement agent in connection with the sale of the Preferred Shares
and the Warrants. The Company shall be responsible for the payment of any
placement agent's fees or brokers' commissions relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without limitation,
attorneys' fees and out of pocket expenses) arising in connection with any such
claim.
n. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
o. Remedies. Each Buyer and each holder of the Securities shall
have all rights and remedies set forth in the Transaction Documents and the
Certificate of Designations and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any person having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
p. Payment Set Aside. To the extent that the Company makes a
payment or payments to any Buyer hereunder or pursuant to the Registration
Rights Agreement, the Certificate of Designations or the Warrants or such Buyer
enforces or exercises its rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company or to a trustee, receiver or any other person under any
law (including, without limitation, any bankruptcy law, state or federal law,
common law or equitable cause of action), then, to the extent of any such
restoration, the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.
* * * * * *
25
26
IN WITNESS WHEREOF, each Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
AUSPEX SYSTEMS, INC. HFTP INVESTMENT L.L.C.
By: Promethean Asset Management, L.L.C.
Its: Investment Manager
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief By:
Executive Officer ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
Managing Member
▇▇▇▇▇▇ CAPITAL LTD.
By:
------------------------------------
▇▇▇▇▇▇▇ ▇. Simpler
Its: Vice President
▇▇▇▇▇▇▇ CAPITAL LTD.
By:
------------------------------------
▇▇▇▇▇▇▇ ▇. Simpler
Its: Vice President
▇▇▇▇▇▇▇▇, L.P.
By: ▇▇▇▇▇▇, ▇▇▇▇▇▇ & CO., L.P.
Its: General Partner
By:
------------------------------------
Name:
-----------------------------------
Its:
-----------------------------------
27
SCHEDULE OF BUYERS
NUMBER
OF NUMBER OF
INVESTOR ADDRESS PREFERRED WARRANT INVESTOR'S REPRESENTATIVES' ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER SHARES SHARES AND FACSIMILE NUMBER
---------------------- --------------------------------------- --------- --------- -----------------------------------
HFTP Investment L.L.C. c/o Promethean Asset Management, L.L.C. 6,000 385,233 Promethean Investment Group, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ Floor ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇. Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇ Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Residence: New York
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Zavis
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 312-902-1061
▇▇▇▇▇▇ Capital Ltd. c/o Citadel Investment Group, L.L.C. 6,820 437,881 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇.Simpler Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Residence: Illinois
▇▇▇▇▇▇▇ Capital Ltd. c/o Citadel Investment Group, L.L.C. 4,180 268,379 ▇▇▇▇▇▇ ▇▇▇▇▇▇ Zavis
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Simpler Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Residence: Illinois
▇▇▇▇▇▇▇▇, L.P. c/o ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P. 8,000 513,643 c/o ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - 26th Floor ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇ or ▇▇▇ ▇▇▇▇▇▇ Attn: ▇▇▇▇ ▇▇▇▇ or ▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Residence: Cayman Islands
28
SCHEDULES
Schedule of Buyers
Schedule 3(a) - Subsidiaries
Schedule 3(c) - Capitalization
Schedule 3(e) - Conflicts
Schedule 3(f) - SEC Documents
Schedule 3(g) - Material Changes
Schedule 3(h) - Litigation
Schedule 3(n) - Intellectual Property
Schedule 3(r) - Transactions with Affiliates
Schedule 3(w) - Liens
Schedule 3(aa) - Certain Agreements
Schedule 4(d) - Use of Proceeds
EXHIBITS
Exhibit A - Form of Certificate of Designations
Exhibit B - Form of Warrant
Exhibit C - Form of Registration Rights Agreement
Exhibit D - Form of Company Counsel Opinion
Exhibit E - Form of Irrevocable Transfer Agent Instructions
29
SCHEDULE 3(a)
SUBSIDIARIES
Name Date of Incorporation Place of Incorporation
------------------------------------------------------------------------------------------
Auspex Systems, Inc. 05/18/93 Delaware, USA
Auspex International, Inc. 07/19/93 California, USA
Auspex Systems, Inc. ▇▇/▇▇/▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
Auspex Systems Limited 08/23/93 Reading, United Kingdom
Auspex Systems GmbH 09/24/93 Munich, Germany
Auspex Systems S.A. 12/23/93 Paris, France
Auspex Foreign Sales Corporation 08/23/92 Barbados
Alphatronix, Inc. ▇▇/▇▇/▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇/▇▇/▇▇ ▇▇▇▇▇, ▇▇▇▇▇
Auspex Kabushiki Kaisha (K.K.)
The Company is in the process of qualifying to do business in the States of
Arizona, Maryland, Minnesota, North Carolina and Oregon. Auspex Systems sells
and markets its products, network data file servers, along with software and
service contracts in the States of Arizona, Maryland, Minnesota, North Carolina
and Oregon. In each of these states we have established sales offices with full
time sales and support personnel. Auspex leases the offices from a third party
in each of these states.
The Company is currently not in good standing in the Commonwealth of
Massachusetts as the required annual report was not filed with the Massachusetts
Secretary of State for the fiscal years ended June 30, 1998 and 1999. The
Company is in the process of filing such annual reports.
30
SCHEDULE 3(c)
CAPITALIZATION
(i) Preemptive Rights: None
(ii) Outstanding Debt Securities: None
(iii) Outstanding options, warrants or other rights to purchase securities or
contracts, commitments or arrangements to issue additional shares of
capital stock:
Stock Options Issued and Outstanding 4,171,879
Stock Options Available to Issue 1,450,642
ESPP Options Available to Issue 685,764
(iv) Agreements or arrangements to register Company securities: None
(v) Outstanding securities containing any redemption or similar provisions
or contract or arrangement to redeem a security: Stockholder Rights Plan
(vi) Securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the securities: None
(vii) Stock appreciation rights or "phantom stock" plans or arrangements: None
31
SCHEDULE 3(e)
CONFLICTS
Pursuant to the terms of Section 7 of the Company's Loan and Security Agreement
with Foothill Capital Corporation, dated as of December 22, 1999, as modified by
that certain consent and waiver letter by Foothill Capital Corporation to the
Company, dated January 12, 1999, the Company has agreed not to pay dividends in
cash or to redeem any of its capital stock (a) at any time during which an Event
of Default (as defined in the Loan and Security Agreement) has occurred and is
continuing, or (b) if, after any redemption of Series B Convertible Preferred
Stock or payment of cash dividends to the holders thereof, the Company shall
have less than $15,000,000 of "Excess Availability" as defined in the Loan and
Security Agreement and generally described as the aggregate of unrestricted cash
and cash equivalents, plus unused availability under the credit facility (the
lesser of the Borrowing Base or $15,000,000, less the amount of outstanding
advances and letters of credit), minus the amount of the Company's accounts
payable that are more than 60 days past due.
32
SCHEDULE 3(f)
SEC DOCUMENTS
TYPE OF FILING DATE OF FILING
-------------------------------------------------------------------------------
Annual Report on Form 10-K 9/24/98
10/16/98
Schedule 14(a) and Definitive Proxy Statement
11/12/98
Quarterly Report on Form 10-Q
2/12/99
Quarterly Report on Form 10-Q
5/12/99
Quarterly Report on Form 10-Q
9/27/99
Annual Report on Form 10-K
10/08/99
Schedule 14(a) and Definitive Proxy Statement
Quarterly Report on Form 10-Q 11/12/99
33
SCHEDULE 3(g)
MATERIAL CHANGES
None
34
SCHEDULE 3(h)
PENDING OR THREATENED LITIGATION, ETC.
1. Pending or threatened litigation:
The Company is not aware of any pending or threatened material litigation. The
NASD has initiated an inquiry regarding trading activity preceding the Company's
October 15, 1999 announcement of lower than expected earnings for the quarter
ended September 30, 1999. The Company is responding to requests for information
regarding the events leading up to the announcement.
2. Certain securities litigation:
▇▇▇▇▇▇▇ Cheyhel, a director of the Company, is one of several defendants named
in various shareholder lawsuits against Bay Networks, Inc. Mr. Cheyhel was the
Senior VP of Operations at Bay Networks.
▇▇▇▇▇ ▇▇▇▇, a director of the Company, is one of several defendants named in
various shareholder lawsuits against SystemsSoft, Inc. ▇▇. ▇▇▇▇ was an officer
and director of SystemSoft, Inc.
35
SCHEDULE 3(n)
INTELLECTUAL PROPERTY
1. Expired and expiring intellectual property rights:
Patent number 5053945, System and Method for Performing a Multi-File
Transfer Operation, will not expire within two years of this agreement
but the Company will allow it to lapse through nonpayment of annuity
fees as it has no perceived ongoing technological benefit.
2. Intellectual property claims:
None
36
SCHEDULE 3(r)
TRANSACTIONS WITH AFFILIATES AND EMPLOYEES
None
37
SCHEDULE 3(w)
LIENS
The Company has entered into a $15,000,000 revolving line of credit
agreement with Foothill Capital Corporation dated December 22, 1999. The line of
credit is secured by the assets of the Company and reflected on the attached
Uniform Commercial Code Search Financing Statement by Comerica Bank-California
(which has been terminated in favor of Foothill Capital Corporation). In
addition, the Company has several equipment operating leases with parties set
forth on the attached Uniform Commercial Code Search.
▇▇
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
SECRETARY OF STATE
SACRAMENTO
CERTIFICATE REQUESTED ON: DECEMBER 01, 1999
AUSPEX SYSTEMS INC
@ANY ADDRESS
FINANCING STATEMENT FILED ON MAY 25, 1990 AT 0800 FILE NO. 90-136373
DEBTOR: AUSPEX SYSTEMS INC
###-##-####
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇
SECURED PARTY: ELLCO LEASING CORP
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, CA'
CONTINUATION: FEB 02, 1995 AT 1252
FINANCING STATEMENT FILED ON JUL 26, 1996 AT 1610 FILE NO. ▇▇▇▇▇▇▇▇▇▇
DEBTOR: AUSPEX SYSTEMS INC.
###-##-####
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SECURED PARTY: AT&T CAPITAL SERVICES CORP.
▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FINANCING STATEMENT FILED ON SEP o4, 1996 AT 1519 FILE NO, 9624960418
DEBTOR: AUSPEX SYSTEMS, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
CERTIFICATE: 99340-R-0313 PAGE: 1
39
THE STATE OF CALIFORNIA
▇▇▇▇ ▇▇▇▇▇
SECRETARY OF STATE
SACRAMENTO
(CONTINUED) SEP 04, 1996 AT 1519 FILE NO. 9624960418
SECURED PARTY: AT&T CAPITAL CORPORATION
▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FINANCING STATEMENT FILED ON OCT 04, 1996 AT 0800 FILE NO. 9628260385
DEBTOR: AUSPEX SYSTEMS, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SECURED PARTY: HEWLETT-PACKARD COMPANY FINANCE &
REMARKETING DIVISION
▇▇▇ ▇▇▇▇▇ ▇▇▇., ▇▇▇▇. ▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
FINANCING STATEMENT FILED ON DEC 14, 1998 AT 0800 FILE NO. ▇▇▇▇▇▇▇▇▇▇
DEBTOR: AUSPEX SYSTEMS, INC.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SECURED PARTY: LYON CREDIT CORPORATION
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
LYON CREDIT CORPORATION
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ #▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
LYON CREDIT CORPORATION
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ #▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
MERRIMAK CAPITAL COMPANY LLC
▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
40
CERTIFICATE: 99340-R-0313 PAGE: 2
41
THE STATE OF CALIFORNIA
▇▇▇▇ ▇▇▇▇▇
SECRETARY OF STATE
SACRAMENTO
(CONTINUED) DEC 14, 1998 AT o8oo FILE NO. ▇▇▇▇▇▇▇▇▇▇
NEWCOURT FINANCIAL
USA INC. ▇▇▇ ▇▇▇▇ ▇▇▇▇ #▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
NEWCOURT FINANCIAL USA, INC.
III MONUMENT ▇▇ #▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇ BANCORP LEASING & FINANCIAL
▇▇▇▇ ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇ BANCORP LEASING & FINANCIAL
▇▇▇▇ ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ 97o62
ASSIGNMENT: JAN 26, 1999 AT 1606
ASSIGNMENT: FEB 19, 1999 AT 0800
ASSIGNMENT: MAR 18, 1999 AT 0800
ASSIGNMENT: MAR 18, 1999 AT 0800
ASSIGNMENT: JUN 09, 1999 AT 0800
ASSIGNMENT: JUN 09, 1999 AT 0800
ASSIGNMENT: JUL 16, 1999 AT 0800
RELEASE: AUG 04, 1999 AT 0800
FINANCING STATEMENT FILED ON FEB 01, 1999 AT 0800 FILE NO. 9904060630
DEBTOR: AUSPEX SYSTEMS, INC.
###-##-####
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
CERTIFICATE: 99340-R-0313 PAGE: 3
42
THE STATE OF CALIFORNIA
▇▇▇▇ ▇▇▇▇▇
SECRETARY OF STATE
SACRAMENTO
(CONTINUED) FEB 01, 1999 AT 0800 FILE NO. 9904060630
SECURED PARTY: SUN MICROSYSTEMS FINANCE
▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FINANCING STATEMENT FILED ON MAR 01, 1999 AT 1534 FILE NO. 9906360832
DEBTOR: AUSPEX SYSTEMS, INC.
###-##-####
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SECURED PARTY: SUN MICROSYSTEMS FINANCE
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FINANCING STATEMENT FILED ON APR 01, 1999 AT 0800 FILE NO. 99098609l2
DEBTOR: AUSPEX SYSTEMS, INC.
###-##-####
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SECURED PARTY: TRANSAMERICA EQUIPMENT FINANCIAL SERVICES
CORPORATION
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FINANCING STATEMENT FILED ON APR 13, 1999 AT 0800 FILE NO. 9911160972
DEBTOR: AUSPEX SYSTEMS, INC.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
CERTIFICATE: 99340-R-0313 PAGE: 4
43
THE STATE OF CALIFORNIA
▇▇▇▇ ▇▇▇▇▇
SECRETARY OF STATE
SACRAMENTO
(CONTINUED) APR 13, 1999 AT 0800 FILE NO. 9911160972
SECURED PARTY: COMERICA BANK-CALIFORNIA ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ M C 4043 ▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇
FINANCING STATEMENT FILED ON MAY 04, 1999 AT 1151 FILE NO. 9912660721
DEBTOR: AUSPEX SYSTEMS, INC.
###-##-####
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SECURED PARTY: THIRD STREET SERVICES, INC.
▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ASSIGNEE: THE CIT GROUP/EQUIPMENT FINANCING, INC.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FINANCING STATEMENT FILED ON MAY 17, 1999 AT 1644 FILE NO. 9913860721
DEBTOR: AUSPEX SYSTEMS, INC.
###-##-####
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SECURED PARTY: THIRD STREET SERVICES, INC.
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ASSIGNEE: CAPITAL ASSOCIATES INTERNATIONAL, INC.
▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
CERTIFICATE: 99340-R-0313 PAGE: 5
44
THE STATE OF CALIFORNIA
▇▇▇▇ ▇▇▇▇▇
SECRETARY OF STATE
SACRAMENTO
FINANCING STATEMENT FILED ON AUG 02, 1999 AT 0800 FILE NO. 9922660856
DEBTOR: AUSPEX SYSTEMS, INC.
###-##-####
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SECURED PARTY: TRANSAMERICA EQUIPMENT FINANCIAL SERVICES
CORPORATION
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
FINANCING STATEMENT FILED ON AUG 02, 1999 AT 0800 FILE NO. 9922660875
DEBTOR: AUSPEX SYSTEMS, INC.
###-##-####
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SECURED PARTY: TRANSAMERICA EQUIPMENT FINANCIAL SERVICES
CORPORATION
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
THE UNDERSIGNED FILING OFFICER HEREBY CERTIFIES THAT THE ABOVE LISTING IS A
RECORD OF ALL PRESENTLY EFFECTIVE FINANCING STATEMENTS, TAX LIENS, ATTACHMENT
LIENS AND JUDGMENT LIENS, INCLUDING ANY CHANGE DOCUMENTS RELATING TO THEM,
WHICH NAME THE ABOVE DEBTOR AND ARE ON FILE IN MY OFFICE AS OF NOVEMBER 19,
1999 AT 1700 HOURS.
▇▇▇▇ ▇▇▇▇▇
SECRETARY OF STATE
CERTIFICATE: 99340-R-0313 PAGE: 6
45
SCHEDULE 3(a)(a)
MATERIALLY ADVERSE CONTRACTS
None
46
SCHEDULE 4(d)
USE OF PROCEEDS
The Company will use the net proceeds of this transaction for working capital
and general corporate purposes. Pending such uses, the net proceeds to the
Company will be invested in investment-grade, interest-bearing securities.