Exhibit 10.2
CENTURY ELECTRONICS MANUFACTURING, INC.
Series B Convertible Preferred Stock
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PREFERRED STOCK PURCHASE AGREEMENT
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February 4, 1998
Century Electronics Manufacturing, Inc.
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PREFERRED STOCK PURCHASE AGREEMENT
Series B Convertible Preferred Stock
Centennial Technologies, Inc.
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The undersigned, Century Electronics Manufacturing, Inc., a
Delaware corporation (the "Company"), hereby agrees with you as follows:
SECTION 1
Authorization and Sale of the Shares
1.1 Authorization of the Shares. The Company has, or before the
Closing (as hereinafter defined) will have, authorized the issue and sale of
666,667 shares (the "Shares") of its Series B Convertible Preferred Stock, par
value $.0l per share (the "Preferred"), having the powers, preferences and
rights set forth in the Company's Restated Certificate of Incorporation (the
"Restated Certificate"), a copy of which is attached hereto as Exhibit A.
1.2 Sale of the Shares. Subject to the terms and conditions hereof
and in reliance upon the representations, warranties and agreements contained
herein, the Company will (a) issue and sell to you, at the Closing, 666,667
shares of Preferred for an aggregate purchase price of $4,000,000.00 (calculated
based on a price of $ 6.00 per share) and (b) pay to you $9.72 million in cash,
less those amounts set forth in Exhibit C hereto (the "Cash Consideration"), and
you will transfer to the Company (w) its 6% $6 million convertible subordinated
debenture due on June 25, 2007, (x) its Promissory Note dated July 1, 1997 in
the face amount of $1,891,125.00, (y) that certain Warrant dated July 1, 1997 to
purchase 250,000 shares of the Company's Common Stock, and (z) 3,683,635 shares
of the Company's Common Stock currently held by you.
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SECTION 2
Closing Date; Delivery
2.1 Closing Date. The purchase and sale of the Shares hereunder
(the "Closing") shall be held at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., Boston time, on February 2,
1998 or on such other business day thereafter on or prior to February 6, 1998 as
may be agreed upon by the Company and you. If the Closing does not occur by
February 6, 1997, this Agreement will be terminated forthwith and the parties
hereto will have no further obligations to each other under this Agreement.
2.2 Delivery. At the Closing, the Company will deliver to you the
Cash Consideration and a certificate or certificates (in definitive form) in
such denominations and registered in your name (or the name of your nominee)
representing the number of the shares of Preferred to be purchased by you from
the Company in return for the consideration set forth in Section 1.2 hereof.
SECTION 3
Representations and Warranties of the Company
Except to the extent set forth on the Company's Schedule of
Exceptions attached hereto (the "Schedule of Exceptions"), which Schedule of
Exceptions contains, with respect to each matter disclosed therein, a specific
reference to the representation and warranty to which such matter is an
exception, the Company hereby represents and warrants to you as follows:
3.1 Organization and Standing: Restated Certificate and By-Laws.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Company is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties. The Company has furnished you with
complete and correct copies of its Restated Certificate and By-Laws and, in each
case, all amendments to the date of this Agreement.
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3.2 Corporate Power. The Company has all requisite corporate power
and authority to own the properties owned by it and to carry on its business as
now conducted and to enter into this Agreement and the Stockholders Agreement
(as defined below) and will have at the Closing Date all requisite corporate
power to issue and sell the Shares, to issue the Common Stock initially issuable
upon conversion of the Shares and to carry out and perform its obligations under
the terms of this Agreement.
3.3 Subsidiaries. Other than as specified in the Schedule of
Exceptions attached hereto, the Company has no subsidiaries and does not own of
record or beneficially any capital stock or equity interest or investment in any
corporation, association or business entity.
3.4 Capitalization. The Company's authorized capital stock consists
of (a) 17,593,607 shares of Common Stock, par value $.01 per share (the "Common
Stock"), of which 9,500,088 shares are issued and outstanding, and (b) 2,739,726
shares of Series A Preferred (the "Series A Preferred") none of which are issued
and outstanding and (c) 666,667 shares of Preferred none of which are issued and
outstanding. All the aforesaid issued and outstanding shares are duly authorized
and validly issued, fully paid and nonassessable, are owned of record and (to
the best of the Company's knowledge and belief) beneficially by the stockholders
and in the amounts set forth in the Schedule of Exceptions, and have been
offered, issued, sold and delivered by the Company in compliance with applicable
federal and state securities laws. There are no outstanding preemptive,
conversion or other rights, options, warrants or agreements granted or issued by
or binding upon the Company for the purchase or acquisition of any shares of its
capital stock, except with respect to the Preferred and the Series A Preferred
in accordance with the provisions of this Agreement and the Restated Certificate
and except as disclosed in the Schedule of Exceptions. To the best of the
Company's knowledge and belief, no stockholder has granted options or other
rights to purchase any Common Stock from such stockholder other than as set
forth in the Schedule of Exceptions. The Company holds no shares of its capital
stock in its treasury. None of the Common Stock, the Preferred or the Series A
Preferred has been registered under Section 12 of the Securities Exchange Act of
1934, and no such registration is required in connection with the offer, issue
and sale of the Shares to you under the circumstances contemplated by this
Agreement.
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3.5 Authorization. All corporate action on the part of the Company,
its directors and stockholders necessary for the due authorization, execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated herein and therein, and for the due
authorization, issuance and delivery of the Shares and of the Common Stock
issuable upon conversion of the Shares has been taken or will be taken prior to
the Closing. This Agreement contains legal, valid and binding obligations of the
Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting enforcement of creditors' rights generally. The
execution, delivery and performance by the Company of this Agreement and
compliance herewith and the issuance and sale of the Shares and the issuance of
the Common Stock issuable upon conversion of the Shares will not result in any
violation of or be in conflict with, or result in a breach of, or constitute a
default under, any term or provision of any state or Federal law, ordinance,
rule or regulation to which the Company is subject, or the Company's Restated
Certificate or By-Laws, as amended and in effect on the date hereof, or any
mortgage, indenture, agreement, instrument, judgment, decree, order or other
restriction to which the Company is a party or by which it is bound, or result
in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of the Company pursuant to any such term. No
stockholder has any preemptive right or rights of first refusal by reason of the
issuance of the Shares. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable, and the Shares will be free of any liens or encumbrances. The
Common Stock issuable upon conversion of the Shares has been duly authorized and
validly reserved, not subject to any preemptive rights or rights of first
refusal and, upon issuance, will be validly issued, fully paid and
nonassessable.
3.6 Financial Information. The Company has furnished you with (i)
its unaudited balance sheet as of December 31, 1997 and statement of income and
changes in financial position for the six-month period then ended and (ii) its
audited balance sheet as of June 30, 1997 and statements of income and changes
in financial position for the twelve months ended June 30, 1997 (all of which
are collectively referred to as the "Financial Statements"). The Financial
Statements present fairly the financial position and results of operations of
the Company at the
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dates and for the periods to which they relate, have been prepared in accordance
with generally accepted accounting principles consistently followed throughout
the periods involved and show all material liabilities, absolute or contingent,
of the Company required to be recorded thereon in accordance with generally
accepted accounting principles as at the respective dates thereof.
3.7 Outstanding Debt. The Company has no outstanding indebtedness
for borrowed money except as reflected on the Financial Statements and is not a
guarantor or otherwise contingently liable for any such indebtedness. There
exists no default under the provisions of any instrument evidencing any
indebtedness or otherwise or of any agreement relating thereto.
3.8 Absence of Liabilities, The Company has no material liabilities
(fixed or contingent, including without limitation any tax liabilities due or to
become due) which are not fully reflected or provided for on the Financial
Statements, except as listed in the Schedule of Exceptions.
3.9 Absence of Certain Changes. Since June 30, 1997, except to the
extent described in the Schedule of Exceptions, there has not been any event or
condition of any character which has adversely affected the Company's business
or prospects, including but not limited to:
(a) Any material adverse change in the condition, assets,
liabilities or business of the Company;
(b) Any damage, destruction or loss of any of the properties or
assets of the Company (whether or not covered by insurance) materially
adversely affecting the business or plans of the Company;
(c) Any declaration, setting aside or payment or other distribution
in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by
the Company; or
(d) Any labor trouble, or any event or condition of any character,
materially adversely affecting the business or plans of the Company.
3.10 Taxes. The Company has duly filed within the time prescribed
by law (including extensions of time approved by the appropriate taxing
authority) all tax
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returns and reports required to be filed with the United States Internal Revenue
Service and with the commonwealth of Massachusetts, and (except to the extent
that the failure to file would not have a material adverse effect on the
condition or operations of the Company) with all other jurisdictions where such
filing is required by law; all such tax returns are true and correct; and the
Company has paid all taxes, interest, penalties, assessments or deficiencies
shown to be due or claimed to be due or in respect of such tax returns and
reports. The Company knows of (i) no other tax returns or reports which are
required to be filed which have not been so filed and (ii) no unpaid assessment
for additional taxes for any fiscal period or any basis therefor. The company's
federal income tax returns have not been audited by the Internal Revenue
Service.
3.11 Employee Benefits; ERISA. To the best of the Company's
knowledge (a) With respect to each employee benefit plan (as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) (an "Employee Benefit Plan") maintained by the Company or
an "ERISA Affiliate" (as defined below): (i) such plan has been administered and
operated in compliance with its terms and the applicable requirements of ERISA
and the Internal Revenue Code of 1986, as amended (the "Code"); (ii) no event
has occurred and there exists no circumstance under which the Company could
incur liability under ERISA, the Code, or otherwise (other than for
contributions or benefits paid or payable in the ordinary course of operation of
such plan); (iii) there are no actions, suits or claims pending or threatened
with respect to any Employee Benefit Plan or against the assets or a fiduciary
of any Employee Benefit Plan; (iv) no "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code) which is not covered by an
applicable exemption has occurred; (v) no "reportable event" (as defined in
Section 4043 of ERISA) has occurred; (vi) all contributions and premiums due
have been paid on a timely basis; and (vii) all contributions made under any
Employee Benefit Plan intended to be tax deductible meet the requirements for
deductibility under the Code. As used herein, the term "ERISA Affiliate" refers
to any organization that is (x) a member of a "controlled group" of which the
Company is a member or (y) under "common control" with the Company within the
meaning of Section 414(b) and (c) of the Code.
(b) Each Employee Benefit Plan maintained by the Company or an
ERISA Affiliate that is intended to qualify
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under Section 401(a) of the Code has received a favorable letter of
determination from the Internal Revenue Service that it so qualifies and that
its related trust is exempt from taxation under Section 501(a) of the Code. No
event has occurred that will or could give rise to disqualification or loss of
tax-exempt status of any such Employee Benefit Plan or trust under Sections
401(a) or 501(a) of the Code.
(c) No Company or ERISA Affiliate benefit plan is a "defined
benefit plan" within the meaning of Section 3(35) of ERISA, a "multiemployer
plan" within the meaning of Section 3(37) of ERISA, or a "multiple employer
plan" within the meaning of Section 413 of the Code.
(d) Except as set forth in the Schedule of Exceptions, neither the
approval or execution of this Agreement nor the consummation of the transactions
contemplated by this Agreement will (i) entitle any individual to severance pay
or (ii) accelerate the time of payment or vesting of, or increase the amount of,
compensation due to any individual.
3.12 Contracts; Insurance. Except as set forth in the Schedule of
Exceptions, the Company has no currently existing contract, obligation,
agreement, plan, arrangement, commitment or the like (written or oral) of any
material nature, including without limitation the following:
(a) Employment, bonus or consulting agreements, pension, profit
sharing, deferred compensation, incentive compensation, perquisite, stock
bonus, retirement, stock option, stock purchase, severance or termination
pay plan, phantom stock or similar plans, including agreements evidencing
rights to purchase securities of the Company and agreements among
shareholders and the Company or any Employee Benefit Plan;
(b) Loan or other agreements, notes, indentures, or instruments
relating to or evidencing indebtedness for borrowed money, or mortgaging,
pledging or granting or creating a lien or security interest or other
encumbrance on any of the Company's property or any agreement or
instrument evidencing any guaranty by the Company of payment or
performance by any other person;
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(c) Agreements with dealers, sales representatives, brokers or
other distributors, jobbers, advertisers or sales agencies;
(d) Agreements with any labor union or collective bargaining
organization or other labor agreements;
(e) Any contract or series of contracts with the same person for
the furnishing or purchase of machinery, equipment, goods or services,
including without limitation agreements with processors and
subcontractors;
(f) Any indenture, agreement or other document (including private
placement brochures) relating to the sale or repurchase of shares;
(g) Any joint venture contract or arrangement or other agreement
involving a sharing of profits or expenses to which the Company is a
party;
(h) Agreements limiting the freedom of the Company to compete in
any line of business or in any geographic area or with any person;
(i) Agreements providing for disposition of the business, assets or
shares of the Company, agreements of merger or consolidation to which the
Company is a party or letters of intent with respect to the foregoing;
(j) Licenses, agreements or arrangements providing for the use of
or limiting the use of Intellectual Property;
(k) Letters of intent or agreements with respect to the acquisition
of the business, assets or shares of any other business; and
(l) Insurance policies, health insurance plans, medical plans or
any benefit plans.
The Company has complied with all the material provisions of all
said contracts, obligations, licenses, agreements, plans, arrangements, and
commitments and is not in default thereunder.
You have been supplied with a true and correct copy of each of the
written contracts and a true and correct description of the oral contracts which
are referred to on
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the Schedule of Exceptions, together with all material amendments, waivers or
other changes to all such documents. The Schedule of Exceptions contains a
complete and correct summary (in the detail therein stated) of the material
terms of all scheduled documents, amendments, waivers or other changes to all
such documents.
The Company maintains insurance which is adequate to protect the
Company and its financial condition against the risks involved in the business
conducted by the Company.
3.13 Stockholders, Directors and Officers; Indebtedness. Set forth
in the Schedule of Exceptions is a correct and complete list or description of
all indebtedness of the Company to its officers, directors or stockholders or
any of their respective spouses or relatives and of all indebtedness of such
persons to the Company and of all contractual arrangements between the Company
and any officer, director or stockholder of the Company or any of their
respective spouses or relatives. Except as set forth in the Schedule of
Exceptions, none of the officers or directors or significant employees or
consultants of the Company, or their respective spouses or relatives, owns
directly or indirectly, individually or collectively, a material interest in any
entity which is a competitor, customer or supplier of (or has any existing
contractual relationship with) the Company.
3.14 Litigation. Except as set forth in the Schedule of Exceptions,
there is no pending or, to the Company's knowledge and belief, threatened
action, suit, proceeding or claim, or any basis therefor, whether or not
purportedly on behalf of the Company, to which the Company is or may be named as
a party or its property is or may be subject and in which an unfavorable
outcome, ruling or finding in any such matter or for all such matters taken as a
whole might have a material adverse effect on the condition, financial or
otherwise, or operations of the Company; and the Company has no knowledge of any
unasserted claim, the assertion of which is likely and which, if asserted, will
seek damages, an injunction or other legal, equitable, monetary or nonmonetary
relief which claim individually or collectively with other such unasserted
claims if granted would have a material adverse effect on the condition,
financial or otherwise, or operations of the Company.
3.15 Consents. No consent, approval, qualification, order
or authorization of, or filing with, any
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governmental authority is required in connection with the Company's valid
execution, delivery or performance of this Agreement and the Stockholders
Agreement, or the offer, issue or sale of the Shares by the Company, the
conversion of the Shares, the issuance of Common Shares upon conversion of the
Shares, or the consummation of any other transaction contemplated on the part of
the Company hereby, except the filing of the Restated Certificate with the
Secretary of State of the State of Delaware.
3.16 Properties; Liens and Encumbrances. The Company owns no real
property and has a valid and indefeasible ownership interest in all its other
property and assets, free from all mortgages, pledges, liens, security
interests, conditional sale agreements, encumbrances or charges, except (i) as
listed on the Schedule of Exceptions hereto; and (ii) tax, materialmen's or like
liens for obligations not yet due or payable or being contested in good faith by
appropriate proceedings.
3.17 Leases. Set forth on the Schedule of Exceptions is a correct
and complete list (including the amount of rents called for and a description of
the leased property) of all material leases, whether for real or personal
property, under which the Company is a lessee. The Company enjoys peaceful and
undisturbed possession under all such leases, all of such leases are valid and
subsisting and none of them is in default in any material respect.
3.18 Business of the Company. There is no pending nor, to the
Company's knowledge and belief, any threatened claim or litigation, or any basis
therefor, against or affecting the Company contesting its right to develop,
produce, manufacture, license, lease, sell or use any product, process, method,
substance, part or other material presently developed, produced, manufactured,
licensed, leased, sold or used or planned to be developed, produced,
manufactured, licensed, leased, sold or used by the Company in connection with
the operations of the Company; and the Company has no knowledge that (i) there
exists, or there is pending or planned, any patent, invention, device,
application or principle, or any statute, rule, law, regulation, standard or
code which would materially adversely affect the condition, financial or
otherwise, or the operations of the Company; or (ii) there is any other factor
(other than fire, flood, accident, act of war or civil commotion, or any other
cause or event beyond the control of the Company) which may materially
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adversely affect the condition, financial or otherwise, or the operations of the
Company.
3.19. Intellectual Property, etc. (a) Schedule 3.18 in the Schedule
of Exceptions sets forth a complete list of all material intellectual property
and proprietary rights owned or used by the Company, including, without
limitation, all franchises, permits, licenses, software, trademarks, service
marks, domain names, trade rights, trade dress, patents, patent applications and
copyrights (together with all inventions, know-how and other confidential
information, "Intellectual Property"). The Company has all franchises, permits,
licenses and other similar authority necessary for the conduct of its business
as now being conducted by it and as planned to be conducted, the lack of which
could materially and adversely affect the operations or condition, financial or
otherwise, of the Company, and it is not in default in any material respect
under any of such franchises, permits, licenses or other similar authority. The
Company is the exclusive owner of all right, title and interest in and or has
the valid and legal right to use all Intellectual Property necessary to conduct
its business as now being conducted and as planned to be conducted without
conflict with or infringement upon any valid rights of others except for
infringements or conflicts which could not materially and adversely affect the
operations or condition, financial or otherwise, of the Company. The Company has
not received any notice that the conduct of the business infringes upon or
conflicts with the asserted rights of others and has no knowledge that any
person is infringing upon or in conflict with its asserted rights.
(b) To the Company's knowledge and belief, all software used in the
business that contains or calls on a calendar function, provides specific dates
or calculates spans of dates is able to record, store, process and provide true
and accurate dates and calculations for dates and spans of dates including and
following January 1, 2000.
3.20 Minute Books. The minute books of the Company provided to your
special counsel contain a complete summary of all meetings of directors and
stockholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
3.21 Offering. Neither the Company nor anyone acting on its behalf
in connection with the offering or sale of the Shares or any similar securities
of the Company has
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directly or indirectly offered the Shares or any part thereof or any similar
securities for sale to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof with, anyone other than
you and not more than three (3) other institutional investors. The offer,
issuance and sale of the Shares as contemplated by this Agreement are exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act," which term shall include any successor federal statute),
and from any registration or filing requirements of any applicable state
securities laws, and neither the Company nor anyone acting on its behalf will
take any action hereafter that would cause the loss of such exemption.
3.22 Compliance with Other Instruments. The Company is not in
violation of any term of its Restated Certificate or By-Laws, in each case, as
in effect on the date hereof. The Company is not (and consummation of the
transactions contemplated by this Agreement will not cause the Company to be) in
violation of any term of any mortgage, indenture, contract, agreement,
instrument, judgment, decree, order, statute, rule or regulation to which the
Company is subject and a violation of which would have a material adverse effect
on the condition, financial or otherwise, or operations of the Company.
3.23 Employees. To the best of the Company's knowledge and belief,
no employee of the Company is, or is now expected to be, in violation of any
term of any employment contract, patent disclosure agreement, non-competition
agreement, or any other contract or agreement or any restrictive covenant or any
other common law obligation to a former employer relating to the right of any
such employee to be employed by the Company because of the nature of the
business conducted or to be conducted by the Company or to the use of trade
secrets or proprietary information of others, and the employment of the
Company's employees does not subject the Company or you to any liability. There
is no pending or, to the Company's knowledge and belief, threatened action,
suit, proceeding or claim, or to its knowledge any basis therefor or threat
thereof, with respect to any contract, agreement, covenant or obligation
referred to in the preceding sentence. The Company does not have any collective
bargaining agreement covering any of its employees, The Schedule of Exceptions
sets forth the names and current base salaries and existing bonus commitments of
the employees of the Company. Except as set forth on the Schedule of Exceptions,
each employee of the Company is an
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"employee at will" and may be terminated by the Company without any payment to
such employee (other than accrued wages).
3.24 Registration Rights. Except as provided for in this Agreement
and as set forth in the Schedule of Exceptions, the Company is not under any
obligation to register (as defined in Section 8.2 below) any of its currently
outstanding securities or any of its securities which may hereafter be issued.
3.25 Environmental and Safety Laws. The Company is not in violation
of any applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.
3.26 Disclosure. This Agreement and the Schedule of Exceptions do
not contain any untrue statement of a material fact and do not omit to state a
material fact necessary in order to make the statements contained therein or
herein not misleading. There is no fact known to the Company which materially
adversely affects or in the future may (so far as the Company can now foresee)
materially adversely affect the business, operations, affairs, condition,
properties or assets of the Company or any of its subsidiaries which has not
been set forth in this Agreement or in the other documents, certificates and
instruments delivered to you by or on behalf of the Company specifically for use
in connection with the transactions contemplated by this Agreement.
SECTION 4
Representations and Warranties of Purchaser
You hereby represent and warrant to the Company as follows:
4.1 Experience. You are experienced in evaluating and investing in
newly organized, emerging companies such as the Company.
4.2 Investment. You are acquiring the Shares to be purchased by you
for investment for your own account and not with the view to, or for resale in
connection with, any distribution thereof, provided that the disposition of your
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property shall at all times be within your control. You understand that the
Shares and the Common Stock issuable upon conversion of the Shares have not been
registered under the Securities Act by reason of specified exemption from the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of your investment intent as expressed herein.
4.3 Rule 144. You acknowledge that the Shares to be purchased by
you must be held indefinitely unless they are subsequently registered under the
Act or an exemption from such registration is available. You have been advised
or are aware of the provisions of Rule 144 promulgated under the Act, which
permits limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions and that such Rule may not become available
for resale of the Shares.
4.4 Access to Data. You have had an opportunity to discuss the
Company's business, management and financial affairs with its management and
have had the opportunity to review the Company's facilities.
SECTION 5
Conditions to Closing of Purchaser
Your obligation to purchase the Shares to be purchased by you at
the Closing is subject to the fulfillment to your satisfaction on or prior to
the date of the Closing of each of the following conditions:
5.1 Representations and Warranties Correct. The representations and
warranties made by the Company herein and pursuant hereto shall have been true
and correct in all material respects when made, and shall be true and correct in
all respects on the date of the Closing with the same force and effect as if
they had been made at and as of the date of the Closing, except for such changes
resulting from consummation of the transactions contemplated by this Agreement.
5.2 Performance. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by the Company on or prior to
the Closing shall have been performed or complied with in all material respects
and at such time the Company shall not be in default in the performance of or
compliance with any of the provisions of this Agreement or of the Restated
Certificate.
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5.3 Opinion of Company's Counsel. You shall have received from
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the Company, an opinion addressed to you, dated
the date of the Closing, and in substantially the form attached as Exhibit B
hereto.
5.4 Legal Investment. At the time of the Closing, the purchase of
the Shares to be purchased by you thereunder shall be legally permitted by all
laws and regulations to which you and the Company are subject.
5.5 Compliance Certificate. The Company shall have delivered to you
a certificate of the President of the Company, dated the date of the Closing,
certifying to the fulfillment of the conditions specified in Sections 5.1 and
5.2 of this Agreement and other matters you reasonably request.
5.6 [Not Used]
5.7 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be satisfactory in substance and
form to you and your counsel.
5.8 Proprietary Information and Inventions, and Non-Competition
Agreements.
(a) Each person employed by the Company who develops or has access
to Intellectual Property and proprietary information of the Company, including,
without limitation, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., has
executed and delivered to the Company a Proprietary Information and Inventions
Agreement substantially in the form of Exhibit D hereto.
(b) ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., and any
other person employed by the Company and designated as a "key person" by you,
shall have executed an Agreement Not to Compete in substantially the form of
Exhibit E hereto.
5.9 Qualifications. All authorizations, approvals or Permits, if
any, of any governmental authority or regulatory body that are now required in
connection with the lawful issuance and sale of the Shares pursuant to this
Agreement, the conversion of the Shares into Common Stock and the issuance of
such Common Stock upon such conversion
-15-
shall have been duly obtained and shall be in full force and effect on and as of
the Closing.
5.10 Certificate of Incorporation. The Company shall have duly filed
with the Secretary of State of the State of Delaware the Restated Certificate
and the Restated Certificate of Incorporation shall be in full force and effect
and shall not have been further amended.
5.11 [Not Used.]
5.12 Key Man Life Insurance. The Company shall have obtained the
life insurance required to be maintained by the Company pursuant to Section 7.7
and shall have furnished evidence satisfactory to you that such insurance is in
full force and effect.
5.13 Issuance Taxes. All taxes imposed by law in connection with the
issuance, sale and delivery of the Shares shall have been fully paid, and all
laws imposing such taxes shall have been fully complied with.
SECTION 6
Conditions to Closing of Company
The Company's obligation to sell the Shares to be purchased at the
Closing is subject to the fulfillment to its satisfaction on or prior to the
Closing Date of each of the conditions set forth in Sections 5.9, 5.10 and 5.11.
SECTION 7
Covenants of the Company
The Company hereby covenants and agrees, so long as you own any
Shares or any Common Stock issued upon conversion of Shares, as follows:
7.1 Basic Financial Information. The Company will furnish the
following reports to you so long as the you (or your representative) is a holder
of Preferred or Common Stock:
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred and twenty days thereafter, a
consolidated balance sheet of the Company and its subsidiaries, if any, as at
the
-16-
end of such fiscal year, and consolidated statements of income and sources and
applications of funds of the Company and its subsidiaries, if any, for such
year, prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and certified by
independent public accountants of recognized national standing selected by the
Company.
(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company, and in
any event within forty-five days thereafter, a consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end of each such quarterly
period, and consolidated statements of income and sources and applications of
funds of the Company and its subsidiaries for such period and for the current
fiscal year to date, prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in comparative form the
figures for the corresponding periods of the previous fiscal year, subject to
changes resulting from year-end audit adjustments, all in reasonable detail and
signed by the principal financial or accounting officer of the Company.
(c) From the date the Company becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in lieu of the financial information required pursuant to Sections
7.1(a) and (b), copies of its annual reports on Form 10-K and its quarterly
reports on Form 10-Q, respectively.
(d) Each of the financial statements referred to in subparagraphs
(a) and (b) of Section 7.1 and subparagraph (a) of Section 7.2 shall be true and
correct in all material respects as of the dates and for the periods stated
therein, subject in the case of the unaudited financial statements to changes
resulting from normal year-end adjustments (none of which would, alone or in the
aggregate, be materially adverse to the financial condition, operating results,
assets, operations or business prospects of the Company and its subsidiaries
taken as a whole).
7.2 [Not Used.]
7.3 [Not Used.]
-17-
7.4 Prompt Payment of Taxes, etc. The Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any subsidiary; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto; and provided, further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefor. The Company will promptly pay or cause to be paid when due, or in
conformance with customary trade terms, all other indebtedness incident to
operations of the Company.
7.5 ERISA Compliance, The Company and its subsidiaries will operate
and administer each Employee Benefit Plan in compliance with its terms and the
applicable requirements of ERISA and the Code.
7.6 Maintenance of properties and Leases. The Company will keep its
properties and those of its subsidiaries in good repair, working order and
condition, reasonable wear and tear, fire and other extraordinary casualty
excepted, and from time to time make all needful and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company and its
subsidiaries will at all times comply with each provision of all leases to which
any of them is a party or under which any of them occupies property if the
breach of such provision might have a material adverse effect on the condition,
financial or otherwise, or operations of the Company.
7.7 Insurance. The Company will keep its assets and those of its
subsidiaries which are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in the Company's line of business, in
amounts sufficient to prevent the Company or any subsidiary from becoming a
co-insurer and not in any event less than 100% of the insurable value of the
property insured; and the Company will maintain, with financially sound and
reputable insurers, insurance against other hazards and risks and liability to
persons and property to the extent and in the manner customary for companies in
similar businesses similarly situated.
-18-
7.8 Key Man Life Insurance. Unless otherwise agreed by the Board of
Directors, the Company will at all times maintain with financially sound and
reputable insurers term life insurance on the life of ▇▇. ▇▇▇ ▇▇▇▇▇▇▇▇▇, in the
amount of $2 million, and will pay all premiums in connection therewith. Such
policies shall not be cancelable except upon 30 days prior written notice to
you.
7.9 Accounts and Records. The Company will keep true records and
books of account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.
7.10 Independent Accountants. The Company will retain independent
public accountants of recognized national standing who shall certify the
Company's financial statements at the end of each fiscal year. In the event the
services of the independent public accountants so selected, or any firm of
independent public accountants hereafter employed by the Company are terminated,
the Company will promptly thereafter notify you and will request the firm of
independent public accountants whose services are terminated to deliver to you a
letter of such firm setting forth the reasons for the termination of their
services. In the event of such termination, the Company will promptly thereafter
engage another such firm of independent public accountants. In its notice to
you, the Company shall state whether the change of accountants was recommended
or approved by the Board of Directors or any committee thereof.
7.11 Compliance with Requirements of Governmental Authorities. The
Company and all its subsidiaries shall duly observe and conform to all valid
requirements of governmental authorities relating to the conduct of their
businesses or to their properties or assets.
7.12 Maintenance of Corporate Existence, etc. The Company shall
maintain in full force and effect its corporate existence, rights and franchises
and all licenses and other rights to use patents, processes, licenses,
trademarks, trade names or copyrights owned or possessed by it or any subsidiary
and deemed by the Company to be necessary to the conduct of its business.
7.13 Availability of Common Stock for Conversion. The Company will
not issue or agree to issue any shares of
-19-
Common Stock or options, rights or warrants to purchase Common Stock or
securities convertible into or exchangeable for Common Stock or take any other
action if, after giving effect thereto, the number of shares of Common Stock
remaining unissued and duly reserved for issuance upon conversion of the Shares
shall be insufficient to permit conversion of all the then outstanding shares of
Preferred after giving effect to any adjustment in the Conversion Price as a
result of such action.
7.14 Notice of Record Dates. In the event of any making by the
Company of a record of the holders of any class of securities (other than the
Preferred) for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, the Company shall mail to you at
least ten days prior to such record date, specified herein, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend or distribution.
7.15 Proprietary Information and Inventions and Non-Competition
Agreements. The Company will require each person now or hereafter employed by it
or any subsidiary (other than clerical staff) who develops or has access to
Intellectual Property and proprietary information to enter into a Proprietary
Information and Inventions Agreement in substantially the form of Exhibit D
hereto. The Company will require all persons now or hereafter employed by the
Company or a subsidiary, and designated as a "key person" by the Company's Board
of Directors to execute an agreement in substantially the form annexed hereto as
Exhibit E as a condition precedent to the employment of such individuals.
7.16 Employee Stock Purchase Agreement. The Company will not issue
or grant or agree to issue or grant any shares of its capital stock or any
option, right or warrant to purchase shares of its capital stock or securities
convertible into or exchangeable for shares of its capital stock to any employee
or officer of the Company or a subsidiary except pursuant to a plan adopted by
the Board of on the Board of Directorshaving (a "Plan"); provided, however, no
such issuance or grant shall be made without the approval of a majority of the
members of the Board of Directors. Each such purchase or the exercise of any
such option will be subject to proportionate vesting over at least three years.
7.17 [Not Used.]
-20-
7.18 [Not Used.]
7.19 [Not Used.]
7.20 [Not Used.]
7.21 Termination. The provisions of Sections 7.3 through 7.19 shall
terminate immediately prior to the first sale of Common Stock of the Company in
an underwritten registered (as defined in Section 8.2) public offering with an
offering price per share of at least the then effective Conversion Price, with
net proceeds to the Company of not less than $20 million.
SECTION 8
Restrictions on Transferability of
Securities; Compliance with Securities Act
8.1 Restrictions on Transferability. The Shares shall not be
transferable, except upon the conditions specified in this Section 8, which
conditions are intended to insure compliance with the provisions of the
Securities Act or, in the case of Section 8.15 hereof, to assist in an orderly
distribution. You will cause any proposed transferee of Shares held by you to
agree to take and hold those securities subject to the provisions and upon the
conditions specified in this Section 8.
8.2 Certain Definitions. As used in this Section 8, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Holder" shall mean any holder of the outstanding Shares or
Registrable Securities which have not been sold to the public.
"Initiating Holders" shall mean you or your assignees under Section
8.14 hereof who in the aggregate are Holders of more than 50% of the Registrable
Securities which have not been sold to the public.
"Registrable Securities" shall mean (i) Common Stock issued or
issuable upon conversion of the Preferred
-21-
and (ii) any Common Stock issued in respect of securities issued pursuant to the
conversion of the Shares upon any stock split, stock dividend, recapitalization
or similar event.
The terms "register", "registered" and "registration" shall refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by the
Company in compliance with Sections 8.5 and 8.6 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, reasonable
fees and disbursements of one counsel for all the selling Holders and other
security holders, and the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
the Company, which shall be paid in any event by the Company).
"Restricted Securities" shall mean the securities of the Company
required to bear or bearing the legend set forth in Section 8.3 hereof.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and transfer taxes applicable to the sale of Registrable Securities.
8.3 Restrictive Legend. Each certificate representing (i) the
Preferred, or (ii) the Company's Common Stock issued upon conversion of the
Preferred, or (iii) any other securities issued in respect of the Preferred or
the Common Stock issued upon conversion of the Preferred, upon any stock split,
stock dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted or unless the securities evidenced by such
certificate shall have been registered under the Securities Act or sold pursuant
to Rule 144 or Regulation A thereunder) be stamped or otherwise imprinted with a
legend in the following form (in addition to any legend required under
applicable state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN
-22-
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN EXEMPTION
FROM SUCH REGISTRATION UNDER SAID ACT.
Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Company shall have received either the opinion referred to in Section 8.4(i) or
the "no-action" letter referred to in Section 8.4(ii) to the effect that any
transfer by such holder of the securities evidenced by such certificate will not
violate the Securities Act and applicable state securities laws.
8.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 8.4. Prior to any proposed transfer
of any Restricted Securities (other than under circumstances described in
Sections 8.5, 8.6 and 8.8 hereof), the holder thereof shall give written notice
to the Company of such holder's intention to effect such transfer. Each such
notice shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall be accompanied (except in transactions in
compliance with Rule 144) by either (i) a written opinion of ▇▇▇▇ & ▇▇▇▇, LLP or
legal counsel who shall be reasonably satisfactory to the Company, addressed to
the Company and reasonably satisfactory in form and substance to the Company's
counsel, to the effect that the proposed transfer of the Restricted Securities
may be effected without registration under the Securities Act, or (ii) a "no
action" letter from the Commission to the effect that the proposed transfer of
such securities without registration will not result in a recommendation by the
staff of the Commission that action be taken with respect thereto, whereupon the
holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company. Each certificate evidencing the Restricted Securities
transferred as above provided shall bear the appropriate restrictive legend set
forth in Section 8.3 above, except that such certificate shall not bear such
restrictive legend if the opinion of counsel or "no-action" letter referred to
above is to the further effect that such legend is not required in order to
establish compliance with any provisions of the Securities Act.
-23-
8.5 Requested Registration.
(a) Request for Registration. At any time after the Company has
effected a public offering of its securities under the Securities Act, if the
Company shall receive from Initiating Holders a written request that the Company
effect any registration with respect to all or a part of the Registrable
Securities, the Company will:
(i) promptly give written notice of the proposed registration to all
other Holders; and
(ii) as soon as practicable, use its diligent best efforts to effect
such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws, appropriate compliance with
applicable regulations issued under the Securities Act and listing on
appropriate exchanges) as may be so requested and as would permit or facilitate
the sale and distribution of all or such portion of such Registrable Securities
as are specified in such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in such request as are
specified in a written request given within thirty days after receipt of such
written notice from the Company; provided that the Company shall not be
obligated to effect, or to take any action to effect, any such registration
pursuant to this Section 8.5:
(A) In any jurisdiction in which the Company would be required to
execute a general consent to service of process in effecting such
registration, qualification or compliance, or in which the cost of the
foregoing is unreasonable in light of the number of Registrable Securities
requested to be sold in such jurisdiction, unless the Company is already
subject to service in such jurisdiction and except as may be required by
the Securities Act or applicable rules or regulations thereunder; or
(B) After the Company has effected two such registrations pursuant
to this Section 8.5(a) and such registrations have been declared or
ordered effective and the sales of such Registrable Securities shall have
closed.
Subject to the foregoing clauses (A) and (B), the Company shall file a
registration statement covering the Registrable
-24-
Securities so requested to be registered as soon as practicable, after receipt
of the request or requests of the Initiating Holders.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 8.5(b) below,
include other securities of the Company which are held by officers or directors
of the Company or which are held by persons who, by virtue of agreements with
the Company, are entitled to include their securities in any such registration,
but except as provided in the last sentence of Section 8.5(b) below the Company
shall have no right to include any of its securities in any such registration.
(b) Underwriting. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 8.5 and the Company shall include such information in the written notice
referred to in Section 8.5(a) (i) above. The right of any Holder to registration
pursuant to Section 8.5 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities he holds.
If officers or directors of the Company holding other securities of
the Company shall request inclusion in any registration pursuant to Section 8.5,
or if holders of securities of the Company who are entitled, by contract with
the Company, to have securities included in such a registration (the "Other
Shareholders") request such inclusion, the Initiating Holders shall, on behalf
of all Holders, offer to include the securities of such officers, directors and
Other Shareholders in the underwriting and may condition such offer on their
acceptance of the further applicable provisions of this Section 8. The Company
shall (together with all Holders, officers, directors and Other Shareholders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form (including, without limitation,
customary indemnification and contribution provisions on the part of the
Company) with the representative of the
-25-
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders and reasonably acceptable to the Company;
provided that such underwriting agreement shall not provide for indemnification
or contribution obligations on the part of Holders greater than the obligations
of the Holders pursuant to Section 8.10(b). Notwithstanding any other provision
of this Section 8.5, if the representative advises the Initiating Holders in
writing that marketing factors require a limitation on the number of shares to
be underwritten, the securities of the Company held by officers or directors of
the Company (other than Registrable Securities) and the securities held by Other
Shareholders (other than Registrable Securities) shall be excluded from such
registration to the extent so required by such limitation and if a limitation of
the number of shares is still required, the Initiating Holders shall so advise
all Holders of Registrable Securities whose securities would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be allocated
among all such Holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities and other securities which they
held at the time of the request for registration made by the Initiating Holders
pursuant to Section 8.5(a). No Registrable Securities or any other securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. If any Holder of Registrable
Securities, officer, director or Other Shareholder who has requested inclusion
in such registration as provided above disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the underwriter and the Initiating Holders. The securities so
withdrawn shall also be withdrawn from registration. If the underwriter has not
limited the number of Registrable Securities or other securities to be
underwritten, the Company may include its securities for its own account in such
registration if the underwriter so agrees and if the number of Registrable
Securities and other securities which would otherwise have been included in such
registration and underwriting will not thereby be limited.
8.6 Company Registration.
(a) If the Company shall determine to register any of its securities
either for its own account or the account of a security holder or holders
exercising their respective demand registration rights, other than a
-26-
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction or a registration on any
registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other
state securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by any Holder within fifteen days after receipt of the
written notice from the Company described in clause (i) above, except as
set forth in Section 8.6(b) below. Such written request may specify all or
a part of a Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 8.6(a) (i), In such event the right of any Holder to
registration pursuant to Section 8.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the Other Shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for underwriting by
the Company, provided that such underwriting agreement shall not provide for
indemnification or contribution obligations on the part of Holders greater than
the obligations of the Holders pursuant to Section 8.10(b). Notwithstanding any
other provision of this Section 8.6, if the underwriter determines that
marketing factors require a limitation on the number of shares to be
underwritten, and (a) if such registration is the first registered offering of
the Company's securities to the public and is for the Company's own account, the
underwriter may (subject to the allocation priority set forth below)
-27-
exclude from such registration and underwriting some or all of the Registrable
Securities which would otherwise be underwritten pursuant hereto, and (b) if
such registration is other than the first registered offering of the sale of the
Company's securities to the public for the Company's account, the underwriter
may limit the number of Registrable Securities to be included in the
registration and underwriting to not less than 50% of the securities included
therein (based on aggregate market values). The Company shall so advise all
holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated in the following manner. The securities of the Company held
by officers and directors of the Company (other than Registrable Securities)
shall be excluded from such registration and underwriting to the extent required
by such limitation, and, if a limitation on the number of shares is still
required, the number of shares that may be included in the registration and
underwriting shall be allocated among all such Holders and Other Shareholders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities and other securities which they held at the time the Company gives
the notice specified in Section 8.6(a)(i), provided that if such registration is
other than the first registered offering of the sale of the Company's securities
to the public for the Company's account, the number of Registrable Securities
permitted to be included therein shall in any event be at least 50% of the
securities included therein (based on aggregate market values). If any Holder of
Registrable Securities or any officer, director or Other Shareholder disapproves
of the terms of any such underwriting, he may elect to withdraw therefrom by
written notice to the Company and the underwriter. Any Registrable Securities or
other securities excluded or withdrawn from such underwriting shall be withdrawn
from such registration.
8.7 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Section 8 shall be borne by the Company, and all Selling Expenses shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of their shares so registered; provided, however, that the Company shall
not be required to Pay any Registration Expenses if, as a result of the
withdrawal of a request for registration by Initiating Holders (other than due
to a material adverse change in the business of the Company or any refusal to
proceed based upon the advice of counsel that the registration statement, or
-28-
any prospectus contained therein, contains an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing), the registration statement does not become
effective, in which case the Holders and Other Shareholders requesting
registration shall bear such Registration Expenses pro rata on the basis of the
number of their shares so included in the registration request, and provided,
further, that such registration shall not be counted as a registration pursuant
to Section 8.5(a) (ii) (B).
8.8 Registration on Form S-2 or Form S-3. The Company shall use its
best efforts to qualify for registration on Form S-2 and Form S-3 or any
comparable or successor form or forms; and to that end the Company shall
register (whether or not required by law to do so) the Common Stock under the
Exchange Act in accordance with the provisions of that Act following the
effective date of the first registration of any securities of the Company on
Form S-1 or any comparable or successor form or forms. After the Company has
qualified for the use of either Form S-2 or Form S-3 or both, in addition to the
rights contained in the foregoing provisions of this Section 8, the Holders of
Registrable Securities shall have the right to request registrations on Form S-2
or Form S-3 (such requests shall be in writing and shall state the number of
shares of Registrable Securities to be disposed of and the intended methods of
disposition of such shares by such Holder or Holders) provided that the Company
shall not be obligated to effect any such registration pursuant to this Section
8.8 more than twice in any one year.
8.9 Registration Procedures. In the case of each registration
effected by the Company pursuant to Section 8, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will:
(a) Keep such registration effective for a period of one hundred
twenty days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (i) such 120-day period shall be extended
for a period of time equal to the period the Holder refrains from selling
any securities included in such registration in accordance with provisions
in Section 8.15 hereof; and (ii) in the case of any registration of
Registrable Securities on
-29-
Form S-3 which are intended to be offered on a continuous or delayed
basis, such 120-day period shall be extended, if necessary, to keep the
registration statement effective until all such Registrable Securities are
sold, provided that Rule 415, or any successor rule under the Securities
Act, permits an offering on a continuous or delayed basis, and provided,
further, that applicable rules under the Securities Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which includes any prospectus required by Section
10(a) (3) of the Securities Act, the incorporation by reference of
information contained in periodic reports filed pursuant to Section 13 or
15(d) of the Exchange Act in the registration statement;
(b) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request;
(c) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 8.5 hereof, enter into an
underwriting agreement reasonably necessary to effect the offer and sale
of Common Stock, provided such underwriting agreement contains customary
underwriting provisions and provided further that if the underwriter so
requests the underwriting agreement will contain customary contribution
provisions on the part of the Company; and
(d) obtain a comfort letter from the Company's independent public
accountants in customary form and covering such matters of the type
customarily covered by comfort letters and an opinion from the Company's
counsel in customary form and covering such matters of the type
customarily covered in a public issuance of securities, in each case
addressed to the Holders.
8.10 Indemnification.
(a) The Company will, and hereby does, indemnify each Holder, each
of its officers, directors and partners, and each person controlling such
Holder, with respect to which registration, qualification or compliance has been
effected pursuant to this Section 8, and each underwriter, if any, and each
person who controls any underwriter, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
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untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each such Holder, each of its officers, directors and partners, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by such Holder or underwriter and stated to
be specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable
Securities held by him are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of the Securities
Act and the rules and regulations thereunder, each other such Holder and Other
Shareholder and each of their officers, directors and partners, and each person
controlling such Holder or Other Shareholder, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders, Other
Shareholders, directors, officers, partners, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage,
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liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder or Other Shareholder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holders and Other Shareholders hereunder shall be limited to an amount equal to
the proceeds to each such Holder or Other Shareholder of securities sold as
contemplated herein.
(c) Each party entitled to indemnification under this Section 8.10
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
failure of any Indemnified Party to give notice shall not relieve the
Indemnifying Party of its obligation under this Section 8.10. The Indemnifying
Party will be entitled to participate in, and to the extent that it may elect by
written notice delivered to the Indemnified Party promptly after receiving the
aforesaid notice from such Indemnified Party, at its expense to assume, the
defense of any such claim or any litigation resulting therefrom, with counsel
reasonably satisfactory to such Indemnified Party, provided that the Indemnified
Party may participate in such defense at its expense, notwithstanding the
assumption of such defense by the Indemnifying Party, and provided, further,
that if the defendants in any such action shall include both the Indemnified
Party and the Indemnifying Party and the Indemnified Party shall have reasonably
concluded that there may be legal defenses available to it and/or other
Indemnified Parties which are different from or additional to those available to
the Indemnifying Party, the Indemnified Party or Parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified Party or
Parties and the fees and expenses of such counsel shall be paid by the
Indemnifying Party. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying
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Party may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
8.11 Information by Holder. Each Holder of Registrable Securities,
and each Other Shareholder holding securities included in any registration,
shall furnish to the Company such information regarding such Holder or Other
Shareholder and the distribution proposed by such Holder or Other Shareholder as
the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Section 8.
8.12 Limitations on Registration of Issues of Securities. From and
after the date of this Agreement, the Company shall not enter into any agreement
with any holder or prospective holder of any securities of the Company giving
such holder or prospective holder the right to require the Company to initiate
any registration of any securities of the Company, provided that this Section
8.12 shall not limit the right of the Company to enter into any agreements with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder the right to require the Company, upon any
registration of any of its securities, to include, among the securities which
the Company is then registering, securities owned by such holder. Any right
given by the Company to any holder or prospective holder of the Company's
securities in connection with the registration of securities shall be
conditioned such that it shall be subordinate to the rights of the Holders
provided in this Agreement.
8.13 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
from and after ninety days following the effective date of the first
registration under the Securities Act filed by the Company for an offering
of its securities to the general public;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company
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under the Securities Act and the Exchange Act at any time after it has
become subject to such reporting requirements; and
(c) so long as you own any Restricted Securities, furnish to you
forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from
and after ninety days following the effective date of the first
registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as you may
reasonably request in availing yourself of any rule or regulation of the
Commission allowing you to sell any such securities without registration.
8.14 Transfer or Assignment of Registration Rights. The rights to
cause the Company to register your securities granted to you by the Company
under Sections 8.6 and 8.8 may be transferred or assigned by you to a transferee
or assignee of any of your Restricted Securities, provided that the Company is
given written notice by you at the time of or within a reasonable time after
such transfer or assignment, stating the name and address of such transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and provided, further, that the
transferee or assignee of such rights is not deemed by the board of directors of
the Company, in its reasonable judgment, to be a competitor of the Company; and
provided, further, that the transferee or assignee of such rights assumes your
obligations under this Section 8.
8.15 "Market Stand-off" Agreement. You agree, if requested by the
Company and an underwriter of Common Stock (or other equity securities) of the
Company, not to sell or otherwise transfer or dispose of any Common Stock (or
other equity securities) of the Company held by you during the ninety-day period
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that:
(a) such agreement only applies to the first such registration
statement of the Company including
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securities to be sold on its behalf to the public in an underwritten
offering; and
(b) all Holders, Other Shareholders and officers and directors and
other shareholders of the Company holding in excess of 1% of the
outstanding Common Stock (on an as converted basis) of the Company enter
into similar agreements.
Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the shares (or securities) subject to the foregoing restriction
until the end of such ninety-day period.
SECTION 9
Miscellaneous
9.1 Governing Law. This Agreement shall be governed in all respects
by the laws of the state of Massachusetts.
9.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive (i) any investigation made by you and (ii)
the Closing.
9.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto; provided, however, the Company may not assign its rights
hereunder.
9.4 Entire Agreement; Amendment. This Agreement (including the
Schedules and Exhibits hereto) and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof. Neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated, except by a
written instrument signed by the Company and you, but in no event shall your
obligations hereunder be increased, except upon your written consent.
9.5 Notices, etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed
by first-class mail, postage
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prepaid, or delivered either by hand or by messenger, addressed to the addresses
set forth at the beginning of this Agreement, or at such other address as you
shall have furnished to the Company in writing, or if to any other holder of any
Shares or any Common Stock issued upon conversion of Shares, at such address as
such holder shall have furnished the Company in writing, or, until any such
holder so furnishes an address to the Company, then to and at the address of the
last holder thereof who has so furnished an address to the Company.
9.6 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Shares, upon any breach or default
of the Company under this Agreement, shall impair any such right, power or
remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any `provisions or
conditions of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
9.7 Rights; Separability. In case any provision of the Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
9.8 Agent's Fees.
(a) Except for your obligation to transfer to Thhomas ▇. ▇▇▇▇▇▇▇▇▇▇
175,000 shares of the Company's Common Stock held by you, the Company hereby
agrees to indemnify and to hold you harmless from and against any liability for
commission or compensation in the nature of an agent's fee to any broker or
other person or firm (and the costs and expenses of defending against such
liability or asserted liability) arising from any act by the Company or any of
its employees or representatives.
(b) You (i) represent and warrant that you have retained no finder
or broker in connection with the
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transactions contemplated by this Agreement, except as set forth in section
9.8(a) and (ii) hereby agree to indemnify and to hold the Company harmless from
any liability for any commission or compensation in the nature of an agent's fee
to any broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which you, or any of your
employees or representatives, are responsible.
9.9 Expenses. The Company shall bear its own expenses and legal fees
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby.
9.10 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
9.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument. Confirmation of execution by
electronic transmission of a facsimile signature page shall be binding upon any
party so confirming.
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If you are in agreement with the foregoing, please sign where
indicated below and thereupon this letter shall become a binding agreement
between you and the Company. Very truly yours,
Very truly yours,
CENTURY ELECTRONICS MANUFACTURING, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
ACCEPTED AND AGREED TO:
CENTENNIAL TECHNOLOGIES, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Secretary, Treasurer and General Counsel
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SCHEDULES AND EXHIBITS
Schedule of Exceptions
Exhibit A -- Restated Certificate of Incorporation
Exhibit B -- Form of Opinion
Exhibit C -- Reconciliation of Cash Consideration
Exhibit D -- Proprietary Information and Inventions Agreement
Exhibit E -- Agreement Not to Compete