Exhibit 4.1
TEGAL CORPORATION
UNIT SUBSCRIPTION AGREEMENT
CONVERTIBLE DEBENTURES
AND WARRANTS
UNIT SUBSCRIPTION AGREEMENT (the "AGREEMENT") dated as of ____
__, 2003 among TEGAL CORPORATION, a Delaware corporation ("COMPANY"), and the
persons who execute this agreement as investors (the "INVESTORS").
BACKGROUND: The Company desires to sell to the Investors, and the Investors
desire to purchase up to $7,200,000 in principal amount of 2% Convertible
Secured Debentures, in substantially the form attached hereto as Exhibit 1 (the
"DEBENTURES") and up to 4,114,224 eight-year warrants (equivalent to
approximately 20% of the Debenture Underlying Shares), each exercisable to
purchase one share of common stock, $.01 par value per share, of the Company
(the "Common Stock"), in substantially the form attached hereto as EXHIBIT 2
(the "WARRANTS"). It is anticipated there will be two closings since the Company
is unable to issue more than 19.9% of its outstanding shares without stockholder
approval. The proceeds are necessary for the development and continuance of the
business of the Company and each of its Subsidiaries.
CERTAIN DEFINITIONS:
"COMMON STOCK" shall mean stock of the Company of any class (however
designated) whether now or hereafter authorized, which generally has the right
to participate in the voting and in the distribution of earnings and assets of
the Company without limit as to amount or percentage, including the Company's
Common Stock, $.01 par value per share.
"COMPANY" includes the Company and any corporation or other entity
which shall succeed to or assume, directly or indirectly, the obligations of the
Company hereunder. The term "CORPORATION" shall include an association, joint
stock company, business trust, limited liability company or other similar
organization.
"COMPANY DISCLOSURE LETTER" means the disclosure letter delivered to
the Investors prior to the execution of this Agreement, which letter is
incorporated in this Agreement.
"FIRST CLOSING FACTOR" shall be equal to the quotient of (i) the
product of (x) .199 multiplied by (y) 16,091,762, the number of shares of Common
Stock outstanding as on the Subscription Date divided by (ii) the number of
Underlying Shares of the Securities for which Agreements have been entered into
on the Subscription Date.
"MATERIAL ADVERSE CHANGE" shall mean any change in the facts
represented by the Company in the Agreement or the business, financial
condition, results of operation, prospects, properties or operations of the
Company and its Subsidiaries taken as a whole which may have a material adverse
effect on the value of the Common Stock of the Company.
"OWN" means own beneficially, as that term is defined in the rules and
regulations of the SEC.
"PERSON" means any individual, sole proprietorship, partnership,
corporation, limited liability company, business trust, unincorporated
association, joint stock corporation, trust, joint venture or other entity, any
university or similar institution, or any government or any agency or
instrumentality or political subdivision thereof.
"SEC" means the Securities and Exchange Commission.
"SECOND CLOSING CONDITIONS" shall mean: (i) the receipt of approval of
the stockholders of the Company to the issuance of all the Securities and the
Second Closing as required by the applicable rules of The Nasdaq Stock Market,
(ii) the amendment of the Company's Certificate of Incorporation to provide for
an increase of the Company's authorized Common Stock to 100,000,000 shares (the
"AMENDMENT"), (iii) the receipt of approval of the stockholders of the Company
to effect a reverse stock split of Tegal's common stock, whereby each
outstanding 2, 3, 5, 10 or 15 shares would be combined, converted and changed
into one share of common stock, provided that Tegal's board of directors will
retain discretion as to which amendment will be filed superseding the action of
the stockholders on April 28, 2003 and as to when and whether any amendment is
filed and (iv) the absence of any Material Adverse Change since the First
Closing Date.
"SUBSIDIARY" shall mean any corporation of which stock or other
interest having ordinary power to elect a majority of the Board of Directors (or
other governing body) of such entity (regardless of whether or not at the time
stock or interests of any other class or classes of such corporation shall have
or may have voting power by reason of the happening of any contingency) is at
the time directly or indirectly owned by the Company or by one or more
Subsidiaries.
"SUBSCRIPTION DATE" shall mean the date, but no later than June 25,
2003 (unless extended up to 15 days by written consent of the Company and
Investors who have entered into Agreements providing for the purchase of at
least 140 Units), as of which the Company has executed the Agreement with
Investors for the purchase of at least $3 million of Securities and has notified
the Investors in writing that it is no longer accepting subscription to the
Agreement from additional potential Investors.
"UNDERLYING SHARES" shall mean the shares of Common Stock issued or
from time to time issuable upon conversion of the Debentures and exercise of the
Warrants.
In consideration of the mutual covenants contained herein, the
parties agree as follows:
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1. PURCHASE AND SALE OF STOCK.
1.1. SALE AND ISSUANCE OF SECURITIES. The Company
shall sell to the Investors and the Investors shall purchase from the
Company, up to 144 units (the "UNITS"), each Unit consisting of (i)
$50,000 in principal amount of Debentures and (ii) Warrants to purchase
28,571 shares of Common Stock, at a price of $50,000 per Unit, or a
total of at least $7,000,000 in principal amount of Debentures (the
"PURCHASED DEBENTURES") and Warrants to purchase up to 4,114,224 shares
of Common Stock (the "PURCHASED WARRANTS"), for an aggregate purchase
price of at least $7,000,000, up to $7,200,000. The Purchased
Debentures and Purchased Warrants are referred to herein collectively
as the "SECURITIES". The number of Purchased Debentures and Purchased
Warrants to be purchased by each Investor from the Company is set forth
opposite the name of such Investor on the signature page hereof,
subject to acceptance, in whole or in part, by the Company.
1.2. CLOSINGS. The closings of the purchase and sale
of the Securities hereunder (each a "CLOSING") shall take place on (x)
within three business days after the Subscription Date, but no later
than June 30, 2003, unless extended up to 15 days by written consent of
the Company and Investors who have entered into Agreements providing
for the purchase of at least 140 Units (the "FIRST CLOSING"), and (y) a
date within three business days of notice by the Company of
satisfaction of the Second Closing Conditions, but no later than August
29, 2003, unless extended up to 15 days by written consent of the
Company and Investors who have entered into Agreements providing for
the purchase of at least 70 Units (the "SECOND CLOSING"). Any date on
which a Closing occurs is referred to herein as the "CLOSING DATE." The
date on which the First Closing takes place is referred to herein as
the "FIRST CLOSING DATE." The date on which the Second Closing takes
place is referred to herein as the "SECOND CLOSING DATE." Each Closing
shall take place at the offices of ▇▇▇▇ & Hessen LLP, the Investors'
counsel, in New York, New York, or at such other location as is
mutually acceptable to the Investors and the Company.
(a) The First Closing shall take place
within three business days after the Subscription Date,
subject to fulfillment of the conditions of closing set forth
in the Agreement. At the First Closing:
(i) each Investor purchasing
Securities at the First Closing shall deliver to the
Company or its designees by wire transfer or such
other method of payment as the Company shall approve,
an amount equal to the product of (A) the purchase
price of the Securities purchased by such Investor
hereunder, as set forth opposite such Investor's name
on the signature pages hereof, multiplied by the (B)
First Closing Factor;
(ii) the Company shall issue and
deliver to each Investor purchasing Securities at the
First Closing (x) Debentures in principal amount
equal to the amount paid pursuant to Section
1.2(a)(i) above, and (y) Warrants for the product of
(A) the portion of the Purchased Warrants to be
issued by the Company and purchased by such Investor,
as set forth opposite such Investor's name on the
signature pages hereof, multiplied by (B) the First
Closing Factor.
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(b) The Second Closing shall take place
within five business days after the Company's notice to the
Investors of satisfaction of the Second Closing Conditions. At
the Second Closing:
(i) each Investor purchasing
Securities at the Second Closing shall deliver to the
Company or its designees by wire transfer or such
other method of payment as the Company shall approve,
an amount equal to the difference between (A) the
purchase price of the Securities purchased by such
Investor hereunder, as set forth opposite such
Investor's name on the signature pages hereof, less
(B) the amount paid for Securities by such Investor
at the First Closing;
(ii) the Company shall issue and
deliver to each Investor purchasing Securities at the
Closing (x) Debentures in principal amount equal to
the amount paid pursuant to Section 1.2(b)(i) above,
and (y) Warrants for the product of (A) the portion
of the Purchased Warrants to be issued by the Company
and purchased by such Investor, as set forth opposite
such Investor's name on the signature pages hereof,
multiplied by (B) the First Closing Factor.
(c) The Company has determined that
each of the Purchased Warrants will have a value of $0.1175.
1.3. CONDITIONS OF FIRST CLOSING. The obligations of
the Investors to complete the purchase of the Securities at the First
Closing is subject to fulfillment of the following conditions:
(a) the Company and the Investors shall
execute and deliver a Registration Rights Agreement, dated the
First Closing Date, in the form attached as EXHIBIT 3 with
respect to the Underlying Shares (the "REGISTRATION RIGHTS
AGREEMENT");
(b) the Company and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall
execute and deliver a Financial Advisory Agreement, dated the
First Closing Date, in the form attached as EXHIBIT 4 (the
"FINANCIAL ADVISORY AGREEMENT");
(c) each Subsidiary shall execute and
deliver to the Investors a Guaranty Agreement, dated the First
Closing Date, in the form attached as EXHIBIT 5 (the
"SUBSIDIARY GUARANTY");
(d) the Company, the Subsidiaries and the
Investors shall enter into the Security Agreement, dated the
First Closing Date, in the form attached hereto as EXHIBIT 6
(the "SECURITY AGREEMENT", and with the Agreement, the
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Debentures, the Warrants, the Registration Rights Agreements,
the Financial Advisory Agreement, the Subsidiary Guaranties
and other documents required in connection with the
transactions contemplated in the Agreement, the "TRANSACTION
DOCUMENTS");
(e) the Company shall deliver to the
Investors an Opinion of Counsel, dated the First Closing Date
and reasonably satisfactory to counsel for the Investors, with
respect to the matters set forth on EXHIBIT 7;
(f) the Company shall have obtained all
consents to the Transaction Documents required under its
existing credit facilities in form and substance satisfactory
to the investors (including, without limitation, as to lack of
contractual subordination and standstill requirements with
respect to remedies and the collateral under the Security
Agreement) and a related release of any security interest in
the Collateral (as defined in the Security Agreement);
(g) the representation and warranties of the
Company set forth in this Agreement shall be true and correct
as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier
date) as of the First Closing Date as though made on and as of
the First Closing Date, and the Company shall have performed
in all material respects all covenants and other obligations
required to be performed by it under this Agreement at or
prior to the First Closing Date, and the Investors shall have
received a certificate signed on behalf of the Company by the
President and Secretary of the Company, in such capacities, to
such effect;
(h) the Company shall have executed and
delivered all documents, such as financing statements and
assignments, reasonably requested by counsel for the
Investors; and
(i) All Securities delivered at the First
Closing shall have all necessary stock transfer tax stamps
(purchased at the expense of the Company) affixed.
(j) The Company shall have entered into
agreements with the Investors for the sale of Securities with
an aggregate purchase price of at least $7,000,000.
1.4. CONDITIONS OF SECOND CLOSING. The obligations of
the Investors to complete the purchase of the Securities at the Second
Closing is subject to fulfillment of the following conditions:
(a) the Company shall pay the Investors'
expenses to the extent set forth in Section 6.9 hereof;
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(b) the Investors shall have received a
certificate signed on behalf of the Company by the President
and Secretary of the Company, in such capacities, to the
effect that the Second Closing Conditions have been met;
(c) the Company shall deliver to the
Investors an Opinion of Counsel, dated the Second Closing Date
and reasonably satisfactory to counsel for the Investors, with
respect to the matters set forth on EXHIBIT 7; and
(d) All Securities delivered at the Second
Closing shall have all necessary stock transfer tax stamps
(purchased at the expense of the Company) affixed.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to each of the Investors as follows:
2.1. CORPORATE ORGANIZATION; AUTHORITY; DUE
AUTHORIZATION.
(a) The Company (i) is a corporation duly
organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, (ii) has the
corporate power and authority to own or lease its properties
as and in the places where such business is now conducted and
to carry on its business as now conducted and (iii) is duly
qualified and in good standing as a foreign corporation
authorized to do business in every jurisdiction where the
failure to so qualify, individually or in the aggregate, would
have a material adverse effect on the operations, prospects,
assets, liabilities, financial condition or business of the
Company (a "MATERIAL ADVERSE EFFECT"). Set forth in the
Company Disclosure Letter is a complete and correct list of
all Subsidiaries. Each Subsidiary is duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and is qualified to do business
as a foreign corporation in each jurisdiction in which
qualification is required, except where failure to so qualify
would not have a Material Adverse Effect.
(b) Each of the Company and each Subsidiary
(i) has the requisite corporate power and authority to
execute, deliver and perform the Amendment, this Agreement and
the other Transaction Documents to which it is a party and to
incur the obligations herein and therein and (ii) has been
authorized by all necessary corporate action to execute,
deliver and perform the Amendment, this Agreement and the
other Transaction Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby
(the "CONTEMPLATED TRANSACTIONS"). Each of the Amendment, this
Agreement and the other Transaction Documents is a valid and
binding obligation of the Company and the applicable
Subsidiaries enforceable in accordance with its terms except
as limited by applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting the
enforcement of creditors' rights and the availability of
equitable remedies (regardless of whether such enforceability
is considered in a proceeding at law or equity).
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2.2. CAPITALIZATION. As of June 6, 2003, the
authorized capital stock of the Company consisted of (i) 35,000,000
shares of Common Stock, $.01 par value, of which 16,091,762 shares of
Common Stock are outstanding and (ii) 5,000,000 shares of Preferred
Stock, $.01 par value, authorized of which none are outstanding. All
outstanding shares were issued in compliance with all applicable
Federal and state securities laws, and the issuance of such shares was
duly authorized. Except as contemplated by this Agreement or as set
forth in the Company Disclosure Letter, there are (i) no outstanding
subscriptions, warrants, options, conversion privileges or other rights
or agreements obligating the Company to purchase or otherwise acquire
or issue any shares of capital stock of the Company (or shares reserved
for such purpose), (ii) no preemptive rights contained in the Company's
Certificate of Incorporation, as amended (the "CERTIFICATE OF
INCORPORATION"), By-Laws of the Company or contracts to which the
Company is a party or rights of first refusal with respect to the
issuance of additional shares of capital stock of the Company,
including without limitation the Securities and the Underlying Shares,
and (iii) no commitments or understandings (oral or written) of the
Company to issue any shares, warrants, options or other rights. Except
as set forth in the Company Disclosure Letter, none of the shares of
Common Stock are subject to any stockholders' agreement, voting trust
agreement or similar arrangement or understanding. Except as set forth
in the Company Disclosure Letter, the Company has no outstanding bonds,
debentures, notes or other obligations the holders of which have the
right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the stockholders of the
Company on any matter. The Company currently shall not within the next
twelve months take any action or agree to take any action providing for
an increase in the number of shares reserved for issuance for equity
incentives under the Company's Amended 1998 Equity Participation Plan
(the "PLAN") or any other employee incentive plan, or any new such
plan, by an aggregate of more than 4,000,000 shares of Common Stock.
With respect to each Subsidiary, (i) all the issued and outstanding
shares of the Subsidiary's capital stock have been duly authorized and
validly issued, are fully paid and nonassessable, have been issued in
compliance with applicable federal and state securities laws, were not
issued in violation of or subject to any preemptive rights or other
rights to subscribe for or purchase securities, and (ii) there are no
outstanding options to purchase, or any preemptive rights or other
rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell,
shares of the Subsidiary's capital stock or any such options, rights,
convertible securities or obligations. Except as disclosed in the
Company Disclosure Letter, the Company owns 100% of the outstanding
equity of each Subsidiary.
2.3. VALIDITY OF SECURITIES. The issuance of the
Securities has been duly authorized.
2.4. UNDERLYING SHARES. The issuance of the
Underlying Shares upon conversion of the Purchased Debentures or
exercise of the Purchased Warrants has been duly authorized, and the
Underlying Shares have been, and at all times prior to such exercise
will have been, duly reserved for issuance upon such exercise and, when
so issued, will be validly issued, fully paid and non-assessable.
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2.5. PRIVATE OFFERING. Neither the Company nor anyone
acting on its behalf has within the last 12 months issued, sold or
offered any security of the Company (including, without limitation, any
Securities) to any Person under circumstances that would cause the
issuance and sale of the Securities, as contemplated by this Agreement,
to be subject to the registration requirements of the Securities Act of
1933, as amended (the "SECURITIES ACT"). The Company agrees that
neither the Company nor anyone acting on its behalf will offer the
Securities or any part thereof or any similar securities for issuance
or sale to, or solicit any offer to acquire any of the same from,
anyone so as to make the issuance and sale of the Securities subject to
the registration requirements of Section 5 of the Securities Act.
2.6. BROKERS AND FINDERS. The Company has not
retained any investment banker, broker or finder in connection with the
Contemplated Transactions, except that (i) Bentley Securities
Corporation shall be entitled to a cash fee of up to 5% of the gross
proceeds of the Contemplated Transactions, and (ii) TSD Trading, LLC
shall be entitled to a cash fee of up to 1.65% of the gross proceeds of
the Contemplated Transactions, plus cash or warrants with an exercise
price of $0.35 representing up to 3.75% of the gross proceeds of the
Contemplated Transactions and actual expenses plus $75,000 (not to
exceed $100,000 in the aggregate); provided that the Company shall not
be obliged to make any payment of any fees or expenses to any
investment banker, broker or finder in connection with the Contemplated
Transactions (including the fees mentioned above) unless and until the
Second Closing has been consummated.
2.7. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution, delivery and performance
of the Amendment, this Agreement and the other Transaction
Documents by the Company and its Subsidiaries do not, and the
consummation by the Company of the Contemplated Transactions
will not, (i) conflict with or violate the Certificate of
Incorporation or By-Laws of the Company or such Subsidiaries,
(ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to the Company or such
subsidiaries or by which any property or asset of the Company
or such Subsidiaries is bound or affected, (iii) result in any
breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under,
result in the loss of a material benefit under, or give to
others any right of purchase or sale, or any right of
termination, amendment, acceleration, increased payments or
cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of the Company or of any
of its Subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the
Company or of any of its Subsidiaries is a party or by which
the Company or of any of its Subsidiaries or any property or
asset of the Company or of any of its Subsidiaries is bound or
affected (other than the lien under the Security Agreement) or
(iv) cause any or all of the Investors to be deemed an
Acquiring Person within the meaning of the Company's Preferred
Shares Rights Agreement with ChaseMellon Shareholder Services,
L.L.C., dated June 11, 1996 and amended on January 15, 1999,
or in any way trigger the distribution of Rights
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thereunder or other such event thereunder which may be deemed
adverse to the interest of the Investors; except, in the case
of clauses (ii) and (iii) above, for any such conflicts,
violations, breaches, defaults or other occurrences which
would not prevent or delay consummation of any of the
Contemplated Transactions in any material respect, have a
material adverse effect on the liens and security intended to
be granted pursuant to the Security Agreement or otherwise
prevent the Company from performing its obligations under this
Agreement or any of the other Transaction Documents in any
material respect, and would not, individually or in the
aggregate, have a Material Adverse Effect.
(b) The execution and delivery of this
Agreement and the other Transaction Documents by the Company
and its Subsidiaries do not, and the performance of this
Agreement and the other Transaction Documents and the
consummation by the Company and its Subsidiaries of the
Contemplated Transactions will not, require any consent,
approval, authorization or permit of, or filing with or
notification to, any Governmental Body (as hereinafter
defined) except for the filing of a Form D with the Securities
and Exchange Commission and applicable requirements, if any,
of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT") or any state securities or "blue sky" laws
("BLUE SKY LAWS"), any approval required by applicable rules
of The Nasdaq Stock Market with respect to the Second Closing,
filings of Uniform Commercial Code financing statements and
filings with the Patent and Trademark Office and the Copyright
Office to perfect the liens granted under the Security
Agreement. For purposes of this Agreement, "GOVERNMENTAL BODY"
shall mean any: (a) nation, state, commonwealth, province,
territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local,
municipal, foreign or other government; or (c) governmental or
quasi-governmental authority of any nature (including any
governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or entity
and any court or other tribunal).
2.8. COMPLIANCE. Except as set forth in the Company
Disclosure Letter, neither the Company nor any Subsidiary is in
conflict with, or in default or violation of (i) any law, rule,
regulation, order, judgment or decree applicable to the Company or such
subsidiary or by which any property or asset of the Company or such
subsidiary is bound or affected ("LEGAL REQUIREMENT"), or (ii) any
note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the
Company or such subsidiary is a party or by which the Company or such
subsidiary or any property or asset of the Company or such subsidiary
is bound or affected, in each case except for any such conflicts,
defaults or violations that would not, individually or in the
aggregate, have a Material Adverse Effect. Neither the Company nor any
Subsidiary has received any notice or other communication from any
Governmental Body regarding any actual or possible violation of, or
failure to comply with, any Legal Requirement.
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2.9. SEC DOCUMENTS; FINANCIAL STATEMENTS.
(a) The information contained in the
following documents, did not, as of the date of the applicable
document, include any untrue statement of a material fact or
omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of
the circumstances in which they were made, not misleading, as
of their respective filing dates or, if amended, as so amended
(the following documents, collectively, the "SEC DOCUMENTS"),
provided that the representation in this sentence shall not
apply to any misstatement or omission in any SEC Document
filed prior to the date of this Agreement which was superseded
by a subsequent SEC Document filed prior to the date of this
Agreement:
(i) the Company's Annual Report
on Form 10-K for the year ended March 31, 2003; and
(ii) the Company's definitive Proxy
Statement with respect to its 2003 Special Meeting
of Stockholders, filed with the Commission on April
3, 2003; and
(b) In addition, as of the date of this
Agreement, the Company Disclosure Letter, when read together
with the information, qualifications and exceptions contained
in this Agreement, does not include any untrue statement of a
material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances
in which they were made, not misleading.
(c) The Company has filed all forms, reports
and documents required to be filed by it with the SEC since
March 31, 2001, including without limitation the SEC
Documents. As of their respective dates, the SEC Documents
filed prior to the date hereof complied as to form in all
material respects with the applicable requirements of the
Securities Act, the Exchange Act, and the rules and
regulations thereunder.
(d) The Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 2002, includes
consolidated balance sheets as of December 31, 2001 and 2002
and consolidated statements of income for the three month and
nine month periods then ended (collectively, the "FINANCIAL
STATEMENTS").
(e) Each of the consolidated balance sheets
of the Company included in or incorporated by reference into
the SEC Documents (including the related notes and schedules)
and the Financial Statements fairly presents in all material
respects the consolidated financial position of the Company as
of the date of such, and each of the consolidated statements
of income, retained earnings and cash flows of Company
included in or incorporated by reference into the SEC
Documents (including any related notes and schedules) and the
Financial Statements fairly presents in all material respects
the results of operations, retained earnings or cash flows, as
the case may be, of the Company for the periods set forth
therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments that would not be material
in amount or effect), in each case in accordance with
generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein.
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2.10. LITIGATION. Except as set forth in the SEC
Documents or the Company Disclosure Letter, there are no claims,
actions, suits, investigations, inquiries or proceedings (each, an
"ACTION") pending against the Company or any of its Subsidiaries or, to
the knowledge of the Company, threatened against the Company or any of
its Subsidiaries, at law or in equity, or before or by any court,
tribunal, arbitrator, mediator or any federal or state commission,
board, bureau, agency or instrumentality, that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is a party to
or subject to the provisions of any order, writ, injunction, judgment
or decree of any court or government agency or instrumentality.
2.11. ABSENCE OF CERTAIN CHANGES. Except as
specifically contemplated by this Agreement or set forth in the Company
Disclosure Letter, the SEC Documents, or the Financial Statements,
since December 31, 2002, there has not been (i) any Material Adverse
Change; (ii) any return of any capital or other distribution of assets
to stockholders of Company (except to Company); (iii) any acquisition
(by merger, consolidation, acquisition of stock and/or assets or
otherwise) of any Person; or (iv) any transactions, other than in the
ordinary course of business, consistent with past practices and
reasonable business operations ("ORDINARY COURSE OF BUSINESS"), with
any of its officers, directors, principal stockholders or employees or
any Person affiliated with any of such persons.
2.12. PROPRIETARY ASSETS.
(a) For purposes of this Agreement,
"PROPRIETARY ASSETS" shall mean all right, title and interest
of the Company and the Subsidiaries party to the Security
Agreement in and to the following items or types of property:
(i) every patent, patent application, trademark (whether
registered or unregistered), trademark application, trade
name, fictitious business name, service ▇▇▇▇ (whether
registered or unregistered), service ▇▇▇▇ application,
copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret,
know-how, customer list, franchise, system, computer software,
computer program, invention, design, blueprint, engineering
drawing, proprietary product, technology, proprietary right or
other intellectual property right or intangible asset; and
(ii) all licenses and other rights to use or exploit any of
the foregoing.
(b) The Company Disclosure Letter sets
forth, with respect to each Proprietary Asset of the Company
and the Subsidiaries party to the Security Agreement
registered with any Governmental Body in the U.S., or for
which an application has been filed with any Governmental Body
in the U.S., (i) a brief description of such Proprietary Asset
and (ii) the names of the jurisdictions covered by the
applicable registration or application. The Company Disclosure
Letter identifies and provides a brief description of all
other material Proprietary Assets owned by the Company and the
Subsidiaries party to the Security Agreement, and identifies
and provides a brief description of each material Proprietary
Asset that is
11
registered with any Governmental Body in the U.S., or each
material asset for which an application has been filed with
any Governmental Body in the U.S., or source code version of
any software licensed to the Company or any Subsidiary party
to the Security Agreement by any Person (except for any
Proprietary Asset that is licensed to the Company or any
Subsidiary party to the Security Agreement under any third
party software license generally available to the public at a
cost of less than $10,000), and identifies such license
agreement under which such Proprietary Asset is being licensed
to the Company or any Subsidiary party to the Security
Agreement. Except as set forth in the Company Disclosure
Letter, the Company or its Subsidiaries have good, valid and
marketable title to each of the Proprietary Assets identified
in the Company Disclosure Letter as owned by it, free and
clear of all liens and other encumbrances (other than the
liens under the Company's existing credit facility (which
shall be cleared at the First Closing) and under the Security
Agreement); has a valid right to use all Proprietary Assets of
third parties identified in the Company Disclosure Letter; and
is not obligated to make any payment to any Person for the use
of any Proprietary Asset except as set forth in the applicable
license agreement. Except as set forth in the Company
Disclosure Letter, neither the Company nor any of its
Subsidiaries has developed jointly with any other Person any
material Proprietary Asset with respect to which such other
Person has any rights.
(c) Each of the Company and the Subsidiaries
party to the Security Agreement has taken commercially
reasonable and customary measures and precautions to protect
and maintain the confidentiality and secrecy of all
Proprietary Assets of the Company and its Subsidiaries (except
Proprietary Assets whose value would be unimpaired by public
disclosure) and otherwise to maintain and protect the value of
all Proprietary Assets of the Company and its Subsidiaries.
Except as set forth in the Company Disclosure Letter, neither
the Company nor any of its Subsidiaries has (other than
pursuant to license agreements identified in the Company
Disclosure Letter) disclosed or delivered to any Person, or
permitted the disclosure or delivery to any Person of, (i) the
source code, or any portion or aspect of the source code, of
any Proprietary Asset, (ii) the object code, or any portion or
aspect of the object code, of any Proprietary Asset of the
Company and its Subsidiaries, except in the ordinary course of
its business or (iii) any patent applications (except as
required by law).
(d) To the knowledge of the Company, (i)
none of the Proprietary Assets of the Company and its
Subsidiaries infringes or conflicts with any Proprietary Asset
owned or used by any other Person; (ii) neither the Company
nor any Subsidiary is infringing, misappropriating or making
any unlawful use of any Proprietary Asset owned or used by any
other Person; and (iii) no other Person is infringing,
misappropriating or making any unlawful use of, and no
Proprietary Asset owned or used by any other Person infringes
or conflicts with, any Proprietary Asset of the Company or any
of its Subsidiaries.
12
(e) Except as set forth in the Company
Disclosure Letter, excluding warranty claims received by
Company or any of its Subsidiaries in the ordinary course of
business, there has not been any claim by any customer or
other Person alleging that any Proprietary Asset of the
Company or any of its Subsidiaries (including each version
thereof that has ever been licensed or otherwise made
available by the Company to any Person) does not conform in
all material respects with any specification, documentation,
performance standard, representation or statement made or
provided by or on behalf of the Company.
(f) To the knowledge of the Company, the
Proprietary Assets of the Company and its Subsidiaries
constitute all the Proprietary Assets necessary to enable the
Company and its Subsidiaries to conduct their respective
businesses in the manner in which such businesses have been
and are being conducted. Except as set forth in the Company
Disclosure Letter (i) neither the Company nor any Subsidiary
has licensed any of its Proprietary Assets to any Person on an
exclusive, semi-exclusive or royalty-free basis, and (ii)
neither the Company nor any Subsidiary has entered into any
covenant not to compete or contract limiting such entity's
ability to exploit fully any of such entity's material
Proprietary Assets or to transact business in any material
market or geographical area or with any Person.
(g) Except as set forth in the Company
Disclosure Letter, neither the Company nor any of its
Subsidiaries has at any time received any notice or other
communication (in writing or otherwise) of any actual,
alleged, possible or potential infringement, misappropriation
or unlawful use of, any Proprietary Asset owned or used by any
other Person.
2.13. NO ADVERSE ACTIONS. Except as set forth in the
Company Disclosure Letter, there is no existing, pending or, to the
knowledge of the Company, threatened termination, cancellation,
limitation, modification or change in the business relationship of the
Company or any of its Subsidiaries, with any supplier, customer or
other Person except such as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
2.14. REGISTRATION RIGHTS. Except as set forth in the
Registration Rights Agreement, the SEC Documents, or in the Company
Disclosure Letter, the Company is not under any obligation to register
under the Securities Act any of its currently outstanding securities or
any securities issuable upon exercise or conversion of its currently
outstanding securities nor is the Company obligated to register or
qualify any such securities under any state securities or blue sky
laws.
2.15. CORPORATE DOCUMENTS. The Company's Certificate
of Incorporation and Bylaws, each as amended to date, which have been
requested and previously provided to the Investors are true, correct
and complete and contain all amendments thereto; provided that the
Amendment will be filed prior to the Second Closing Date.
2.16. DISCLOSURE. No representation or warranty of
the Company herein, no exhibit or schedule hereto, and no information
contained or referenced in the SEC Documents, when read together,
contains or will contain any untrue statement of a material fact or
omits or will omit to state a material
13
fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. On or before 9:00 a.m., New York City Time, on the first
business day after the First Closing, the Company shall file a Current
Report on Form 8-K describing the material terms of the transactions
contemplated by this Agreement, and disclosing such portions of the
Transaction Documents as contain material nonpublic information with
respect to the Company that has not previously been publicly disclosed
by the Company, and attaching as an exhibit to such Form 8-K a form of
this Agreement.
2.17. USE OF PROCEEDS. The net proceeds received by
the Company from the sale of the Securities shall be used by the
Company for working capital and general corporate purposes, including
without limitation to support the operations of each of the
Subsidiaries.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each
Investor represents and warrants to the Company as follows:
3.1. AUTHORIZATION. Such Investor (i) has full power
and authority to execute, deliver and perform this Agreement and the
other Transaction Documents to which it is a party and to incur the
obligations herein and therein and (ii) if applicable has been
authorized by all necessary corporate or equivalent action to execute,
deliver and perform the Amendment, this Agreement and the other
Transaction Documents and to consummate the Contemplated Transactions.
Each of the Amendment, this Agreement and the other Transaction
Documents is a valid and binding obligation of such Investor
enforceable in accordance with its terms, except as limited by
applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights and the
availability of equitable remedies (regardless of whether such
enforceability is considered in a proceeding at law or equity).
3.2. BROKERS AND FINDERS. Such Investor has not
retained any investment banker, broker or finder in connection with the
Contemplated Transactions.
4. SECURITIES LAWS.
4.1. SECURITIES LAWS REPRESENTATIONS AND COVENANTS OF
INVESTORS.
(a) This Agreement is made with each
Investor in reliance upon such Investor's representation to
the Company, which by such Investor's execution of this
Agreement such Investor hereby confirms, that the Securities
to be received by such Investor will be acquired for
investment for such Investor's own account, not as a nominee
or agent, and not with a view to the resale or distribution of
any part thereof such that such Investors would constitute an
"underwriter" under the
14
Securities Act; provided that this representation and warranty
shall not limit the Investor's right to sell the Underlying
Shares pursuant to the Registration Rights Agreement or in
compliance with an exemption from registration under the
Securities Act or the Investor's right to indemnification
under this Agreement or the Registration Rights Agreement.
(b) Each Investor understands and
acknowledges that the offering of the Securities pursuant to
this Agreement will not be registered under the Securities Act
or qualified under any Blue Sky Laws on the grounds that the
offering and sale of the Securities are exempt from
registration and qualification, respectively, under the
Securities Act and the Blue Sky Laws.
(c) Each Investor covenants that, unless the
Purchased Debentures, the Purchased Warrants, the Underlying
Shares or any other shares of capital stock of the Company
received in respect of the foregoing have been registered
pursuant to the Registration Rights Agreement being entered
into among the Company and the Investors, such Investor will
not dispose of such securities unless and until such Investor
shall have notified the Company of the proposed disposition
and shall have furnished the Company with an opinion of
counsel reasonably satisfactory in form and substance to the
Company to the effect that (x) such disposition will not
require registration under the Securities Act and (y)
appropriate action necessary for compliance with the
Securities Act and any applicable state, local or foreign law
has been taken; PROVIDED, HOWEVER, that an Investor may
dispose of such securities without providing the opinion
referred to above if the Company has been provided with
adequate assurance that such disposition has been made in
compliance with Rule 144 under the Securities Act (or any
similar rule).
(d) Each Investor represents that (i) such
Investor is able to fend for itself in the Contemplated
Transactions; (ii) such Investor has such knowledge and
experience in financial and business matters as to be capable
of evaluating the merits and risks of such Investor's
prospective investment in the Securities; (iii) such Investor
has the ability to bear the economic risks of such Investor's
prospective investment and can afford the complete loss of
such investment; (iv) such Investor has been furnished with
and has had access to such information as is in the Company
Disclosure Letter together with the opportunity to obtain such
additional information as it requested to verify the accuracy
of the information supplied; (v) such Investor has had access
to officers of the Company and an opportunity to ask questions
of and receive answers from such officers and has had all
questions that have been asked by such Investor satisfactorily
answered by the Company; and (vi) such Investor has read and
understands the Risk Factors set forth on Exhibit 8.
(e) Each Investor further represents by
execution of this Agreement that such Investor qualifies as an
"accredited investor" as such term is defined under Rule 501
promulgated under the Securities Act. Any Investor that is a
corporation, a partnership, a limited liability company, a
trust or other business entity further represents by execution
of this Agreement that it has not been organized for the
purpose of purchasing the Securities.
15
(f) By acceptance hereof, each Investor
agrees that the Purchased Debentures, the Purchased Warrants,
the Underlying Shares and any shares of capital stock of the
Company received in respect of the foregoing held by it may
not be sold by such Investor without registration under the
Securities Act or an exemption therefrom, and therefore such
Investor may be required to hold such securities for an
indeterminate period.
4.2. LEGENDS. All certificates for the Purchased
Debentures, Purchased Warrants and the Underlying Shares, and each
certificate representing any shares of capital stock of the Company
received in respect of the foregoing, whether by reason of a stock
split or share reclassification thereof, a stock dividend thereon or
otherwise and each certificate for any such securities issued to
subsequent transferees of any such certificate (unless otherwise
permitted herein) shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT."
5. ADDITIONAL COVENANTS OF THE COMPANY.
5.1. REPORTS, INFORMATION, SHARES.
(a) The Company shall cooperate with each
Investor in supplying such information as may be reasonably
requested by such Investor to complete and file any
information reporting forms presently or hereafter required by
the SEC as a condition to the availability of an exemption,
presently existing or hereafter adopted, from the Securities
Act for the sale of any of the Purchased Debentures, the
Purchased Warrants, the Underlying Shares and shares of
capital stock of the Company received in respect of the
foregoing.
(b) For so long as an Investor (or the
successor or assign of such Investor) holds either Securities
or Underlying Shares, the Company shall deliver to such
Investor (or the successor or assign of such Investor),
contemporaneously with delivery to other holders of Common
Stock, a copy of each report of the Company delivered to
holders of Common Stock.
(c) The Company shall keep reserved for
issuance a sufficient number of authorized but unissued shares
of Common Stock (or other securities into which the Purchased
Debentures are convertible or for which the Purchased Warrants
are then exercisable) so that the Purchased Debentures and
Purchased Warrants may be converted or exercised to purchase
Common Stock (or such other securities) at any time.
16
5.2. EXPENSES; INDEMNIFICATION.
(a) The Company agrees to pay on each
Closing Date and save the Investors harmless against liability
for the payment of any stamp or similar taxes (including
interest and penalties, if any) that may be determined to be
payable in respect of the execution and delivery of this
Agreement, the issue and sale of any Securities and the
Underlying Shares, the expense of preparing and issuing the
Securities and the Underlying Shares, the cost of delivering
the Securities and the Underlying Shares of each Investor to
such Investor's address, insured in accordance with customary
practice, and the costs and expenses incurred in the
preparation of all certificates and letters on behalf of the
Company and of the Company's performance and compliance with
all agreements and conditions contained herein on its part to
be performed or complied with. Each Investor shall be
responsible for its out-of-pocket expenses arising in
connection with the Contemplated Transactions, except that, at
the Second Closing, the Company shall pay fees and
disbursements of counsel to the Investors as set forth in
Section 6.9.
(b) The Company hereby agrees and
acknowledges that the Investors have been induced to enter
into this Agreement and to purchase the Securities hereunder,
in part, based upon the representations, warranties and
covenants of the Company contained herein. The Company hereby
agrees to pay, indemnify and hold harmless the Investors and
any director, officer or employee of any Investor against all
claims, losses and damages resulting from any and all legal or
administrative proceedings, including without limitation,
reasonable attorneys' fees and expenses incurred in connection
therewith (collectively, "LOSS"), resulting from a breach by
the Company of any representation or warranty of the Company
contained herein or the failure of the Company to perform any
covenant made herein.
(c) As soon as reasonably practicable after
receipt by an Investor of notice of any Loss in respect of
which the Company may be liable under this Section 5.2, the
Investor shall give notice thereof to the Company. Each
Investor may, at its option, claim indemnity under this
Section 5.2 as soon as a claim has been threatened by a third
party, regardless of whether an actual Loss has been suffered,
so long as counsel for such Investor shall in good faith
determine that such claim is not frivolous and that such
Investor may be liable or otherwise incur a Loss as a result
thereof and shall give notice of such determination to the
Company. Each Investor shall permit the Company, at the
Company's option and expense, to assume the defense of any
such claim by counsel mutually and reasonably satisfactory to
the Company and the Investors who are subject to such claim,
and to settle or otherwise dispose of the same; PROVIDED,
HOWEVER, that each Investor may at all times participate in
such defense at such Investor's expense; and PROVIDED,
FURTHER, that the Company shall not, in defense of any such
claim, except with the prior written consent of each Investor
subject to such claim, (i) consent to the entry of any
judgment that does not include as an unconditional term
thereof the giving by the claimant or plaintiff in question to
each Investor and its affiliates of a release of all
liabilities in respect of such claims, or (ii) consent to any
settlement of such claim. If
17
the Company does not promptly assume the defense of such claim
irrespective of whether such inability is due to the inability
of the afore-described Investors and the Company to mutually
agree as to the choice of counsel, or if any such counsel is
unable to represent one or more of the Investors due to a
conflict or potential conflict of interest, then an Investor
may assume such defense and be entitled to indemnification and
prompt reimbursement from the Company for such Investor's
costs and expenses incurred in connection therewith, including
without limitation, reasonable attorneys' fees and expenses.
Such fees and expenses shall be reimbursed to the Investors as
soon as practicable after submission of invoices to the
Company.
5.3. CONDUCT OF BUSINESS OF THE COMPANY. From the
date of the execution of this Agreement until the Second Closing Date,
the Company, unless otherwise expressly contemplated by this Agreement
or consented to in writing by the Investors, will, and will cause its
Subsidiaries to, carry on their respective businesses only in the
Ordinary Course of Business, use their respective reasonable best
efforts to preserve intact their business organizations and assets,
retain the services of their officers and employees and maintain their
relationships with customers, suppliers, licensors, licensees and
others having business dealings with them. Without limiting the
generality of the foregoing, from the date of the execution of this
Agreement until the Second Closing Date, the Company shall not, and
shall not permit its Subsidiaries to:
(a) (i) increase in any manner the
compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee, except for increases or bonuses
in the Ordinary Course of Business to employees who are not
directors or officers and except pursuant to existing
arrangements previously disclosed to or approved in writing by
the Investors; (ii) grant any severance or termination pay
(other than pursuant to the normal severance practices or
existing agreements of the Company or its subsidiary in effect
on the date of this Agreement) to, or enter into any severance
agreement with, any director, officer or employee, or enter
into any employment agreement with any director, officer or
employee; (iii) establish, adopt, enter into or amend any plan
or other arrangement, except as may be required to comply with
applicable law (except the execution and delivery of the
Amendment ); (iv) pay any benefit not provided for under any
plan or other arrangement; (v) grant any awards under any
bonus, incentive, performance or other compensation plan or
arrangement or plan or other arrangement (including the grant
of stock options, stock appreciation rights, stock-based or
stock-related awards, performance units or restricted stock,
or the removal of existing restrictions in any plan or other
arrangement or agreement or awards made thereunder), except
for grants in the Ordinary Course of Business;
(b) declare, set aside or pay any dividend
on, or make any other distribution in respect of, outstanding
shares of capital stock;
(c) (i) redeem, purchase or otherwise
acquire any shares of capital stock of the Company or any
securities or obligations convertible into or exchangeable for
any shares of capital stock of the Company, or any options,
18
warrants or conversion or other rights to acquire any shares
of capital stock of the Company or any such securities or
obligations, or any other securities thereof, other than
redemption and purchases from departing employees in the
Ordinary Course of Business; (ii) effect any reorganization or
recapitalization; or (iii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or
in substitution for, shares of its capital stock;
(d) except upon the exercise of Company
stock options in accordance with their terms, issue, deliver,
award, grant or sell, or authorize the issuance, delivery,
award, grant or sale (including the grant of any limitations
in voting rights or other encumbrances) of, any shares of any
class of its capital stock (including shares held in
treasury), any securities convertible into or exercisable or
exchangeable for any such shares, or any rights, warrants or
options to acquire, any such shares, or amend or otherwise
modify the terms of any such rights, warrants or options the
effect of which shall be to make such terms more favorable to
the holders thereof;
(e) acquire or agree to acquire, by merging
or consolidating with, by purchasing an equity interest in or
a portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof, or otherwise
acquire or agree to acquire any assets of any other person
(other than the purchase of assets from suppliers or vendors
in the Ordinary Course of Business);
(f) sell, lease, exchange, mortgage, pledge,
transfer or otherwise subject to any encumbrance or dispose
of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise subject to any encumbrance or dispose
of, any of its assets, except for sales, dispositions or
transfers in the Ordinary Course of Business;
(g) adopt any amendments to its articles or
certificate of incorporation, bylaws or other comparable
charter or organizational documents (except the execution and
delivery of the Amendment );
(h) pay, discharge, settle or satisfy any
claims, liabilities or obligations (whether absolute or
contingent, matured or unmatured, known or unknown), other
than the payment, discharge or satisfaction, in the Ordinary
Course of Business or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated
by, the most recent financial statement or incurred in the
Ordinary Course of Business, or waive any material benefits
of, or agree to modify in any material respect, any
confidentiality, standstill or similar agreements to which the
Company is a party (except in connection with the consent of
Silicon Valley Bank to the Contemplated Transactions);
19
(i) except in the Ordinary Course of
Business, waive, release or assign any rights or claims, or
modify, amend or terminate any agreement to which the Company
is a party;
(j) make any change in any method of
accounting or accounting practice or policy other than those
required by GAAP or a governmental entity; or
(k) authorize, or commit or agree to do any
of the foregoing.
5.4. PROXY STATEMENT; STOCKHOLDERS MEETING.
(a) Promptly following the execution and
delivery of this Agreement, the Company shall take all action
necessary to call a meeting of its stockholders (together with
any adjournments or postponements thereof, the "Stockholders
Meeting") for the purpose of seeking approval of the Company's
stockholders (the "Stockholder Approvals") for the issuance
and sale to the Investors of the Securities and any other
actions necessary to meet the Second Closing Conditions (the
"Proposal"). In connection therewith, the Company will
promptly prepare and file with the SEC proxy materials
(including a proxy statement(as amended or supplemented, the
"Proxy Statement") and form of proxy) for use at the
Stockholders Meeting and, after receiving and promptly
responding to any comments of the SEC thereon, shall promptly
mail such proxy materials to the stockholders of the Company.
Each Investor shall promptly furnish in writing to the Company
such information relating to such Investor and its investment
in the Company as the Company may reasonably request for
inclusion in such proxy materials; provided that no Investor
shall be obliged to furnish any such information if there has
been no change in such Investor's beneficial ownership (as
defined under the Exchange Act) of Common Stock since the date
of this Agreement. The Company will comply with Section 14(a)
of the Exchange Act and the rules promulgated thereunder in
relation to any proxy statement and any form of proxy to be
sent to the stockholders of the Company in connection with the
Stockholders Meeting, and the Proxy Statement shall not, on
the date the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to stockholders or at the
time of the Stockholders Meeting, contain any statement which,
at the time and in the light of the circumstances under which
it is made, is false or misleading with respect to any
material fact, or which omits to state any material fact
necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any
earlier communication with respect to the solicitation of a
proxy for the Stockholders Meeting or the subject matter
thereof which has become false or misleading. If the Company
should discover at any time prior to the Second Closing any
event relating to the Company or any of its Subsidiaries or
any of their respective affiliates, officers or directors that
is required to be set forth in a supplement or amendment to
the Proxy Statement, in addition to the Company's obligations
under the Exchange Act, the Company will promptly inform its
stockholders and the Investors thereof.
20
(b) Subject to their fiduciary obligations
under applicable law (as determined in good faith by the
Company's Board of Directors after consultation with the
Company's outside counsel), the Company's Board of Directors
shall recommend to the Company's stockholders (and not revoke
or amend such recommendation) that the stockholders vote in
favor of the Proposal and shall cause the Company to take all
commercially reasonable action (including, without limitation,
the hiring of a proxy solicitation firm of nationally
recognized standing) to solicit the Stockholder Approvals.
Whether or not the Company's Board of Directors determines at
any time after the date hereof that, due to its fiduciary
duties, it must revoke or amend its recommendation to the
Company's stockholders, the Company is required to, and will
take, in accordance with applicable law and its Certificate of
Incorporation and Bylaws, all action necessary to convene the
Stockholders Meeting as promptly as practicable to consider
and vote upon the approval of the Proposal.
(c) In the event that the Company's Board of
Directors has withdrawn or modified its recommendation to
stockholders pursuant to the provisions of Section 5.4(b),
upon termination of the Agreement in accordance with its terms
the Company shall pay to the Investors, pro rata based on
their pro rata share of the aggregate purchase price, a
breakup fee equal to the aggregate amount invested by the
Investors at the First Closing in cash.
5.5 DESIGNATED DIRECTOR.
(a) So long as Special Situations Fund III, L.P., and
its affiliates ("SSF") continue to beneficially own at least
5,500,000 shares of Common Stock (appropriately adjusted for
any stock split, reverse stock split, stock dividend or other
reclassification or combination of the Common Stock occurring
after the date hereof) SSF shall have the right to designate
one individual, reasonably acceptable to the Company, as a
member of the Company's Board of Directors (such person,
subject to replacement by SSF in the event of such
individual's death, resignation or removal, the "SSF
Designee"), and the Company will use its best efforts to cause
the SSF Designee to be elected to the Board of Directors of
the Company and agrees that it will recommend that the SSF
Designee be elected at each meeting of stockholders in which
the Company's stockholders elect directors.
(b) Subject to any limitations imposed by
applicable law, the SSF Designee shall be entitled to the same
notices, voting rights, information and perquisites, including
without limitation stock options, indemnification by the
Company, reimbursement of expenses and other similar rights in
connection with such person's membership on the Board of
Directors of the Company, as every other non-executive member
of the Board of Directors of the Company.
(c) The Company shall use its best efforts
to cause the removal forthwith of the SSF Designee when (and
only when) such removal is requested for any reason, with or
without cause, by SSF.
21
6. MISCELLANEOUS.
6.1. ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This
Agreement and the other Transaction Documents constitute the entire
contract between the parties relative to the subject matter hereof and
thereof, and no party shall be liable or bound to the other in any
manner by any warranties, representations or covenants except as
specifically set forth herein or therein. This Agreement and the other
Transaction Documents supersede any previous agreement among the
parties with respect to the Securities. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the
respective executors, administrators, heirs, successors and assigns of
the parties. Except as expressly provided herein, nothing in this
Agreement, expressed or implied, is intended to confer upon any party,
other than the parties hereto, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
6.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Notwithstanding any right of the Investors fully to investigate the
affairs of the Company and notwithstanding any knowledge of facts
determined or determinable by any Investor pursuant to such right of
investigation, each Investor has the right to rely fully upon the
representations, warranties, covenants and agreements of the Company
contained in this Agreement or in any documents delivered pursuant to
this Agreement. All such representations and warranties of the Company
shall survive the execution and delivery of this Agreement and the
Closing hereunder and shall continue in full force and effect for one
year after the Second Closing. The covenants of the Company set forth
in Section 5 shall remain in effect as set forth therein.
6.3. GOVERNING LAW; JURISDICTION. This Agreement
shall be governed by and construed in accordance with the laws of the
State of New York without regard to principles of conflicts of law.
Each party hereby irrevocably consents and submits to the jurisdiction
of any New York State or United States Federal Court sitting in the
State of New York, County of New York, over any action or proceeding
arising out of or relating to this Agreement and irrevocably consents
to the service of any and all process in any such action or proceeding
by registered mail addressed to such party at its address specified in
Section 6.6 (or as otherwise noticed to the other party). Each party
further waives any objection to venue in New York and any objection to
an action or proceeding in such state and county on the basis of FORUM
NON conveniens. Each party also waives any right to trial by jury.
6.4. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
6.5. HEADINGS. The headings of the sections of this
Agreement are for convenience and shall not by themselves determine the
interpretation of this Agreement.
22
6.6. NOTICES. Any notice required or permitted
hereunder shall be given in writing and shall be deemed effectively
given upon personal delivery, (ii) delivery by fax (with answer back
confirmed) or (iii) delivery by electronic mail (with reception
confirmed), addressed to a party at its address or sent to the fax
number or e-mail address shown below or at such other address, fax
number or e-mail address as such party may designate by three days
advance notice to the other party.
Any notice to the Investors shall be sent to the addresses set forth on
the signature pages hereof, with a copy to:
▇▇▇▇ & Hessen LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
e-mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇
Any notice to the Company shall be sent to:
Tegal Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Taitt Sato, Esq.
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇.▇▇▇▇@▇▇.▇▇▇
6.7. RIGHTS OF TRANSFEREES. Any and all rights and
obligations of each of the Investors herein incident to the ownership
of Securities or the Underlying Shares shall pass successively to all
subsequent transferees of such securities until extinguished pursuant
to the terms hereof.
6.8. SEVERABILITY. Whenever possible, each provision
of this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this
Agreement shall be deemed prohibited or invalid under such applicable
law, such provision shall be ineffective to the extent of such
prohibition or invalidity, and such prohibition or invalidity shall not
invalidate the remainder of such provision or any other provision of
this Agreement.
23
6.9. EXPENSES. Irrespective of whether any Closing is
effected, the Company shall pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of
this Agreement. Each Investor shall be responsible for all costs
incurred by such Investor in connection with the negotiation,
execution, delivery and performance of this Agreement including, but
not limited to, legal fees and expenses, except that, at the Second
Closing, the Company shall pay legal fees and expenses of $60,000 to
▇▇▇▇ & Hessen LLP, as counsel to the Investors.
6.10. AMENDMENTS AND WAIVERS. Unless a particular
provision or section of this Agreement requires otherwise explicitly in
a particular instance, any provision of this Agreement may be amended
and the observance of any provision of this Agreement may be waived
(either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and the
holders of Securities convertible or exercisable into at least 75% of
the Underlying Shares (not including for this purpose any Underlying
Shares which have been sold to the public pursuant to a registration
statement under the Securities Act or an exemption therefrom). Any
amendment or waiver effected in accordance with this Section 6.10 shall
be binding upon each holder of any Securities at the time outstanding
(including securities into which such Securities are convertible), each
future holder of all such Securities, and the Company.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
24
SIGNATURE PAGE
TO
TEGAL CORPORATION
SUBSCRIPTION AGREEMENT
Dated _________, 2003
IF the PURCHASER is an INDIVIDUAL, please complete the following:
IN WITNESS WHEREOF, the undersigned has executed this Agreement this
____ day of ____, 2003.
Amount of Subscription:
$ ------------------------------
------------------
Print Name
Number of Units to be Purchased:
, including ------------------------------
-------------------
$____________ principal amount of Purchased Debentures Signature of Investor
and ________ Purchased Warrants
------------------------------
Social Security Number
------------------------------
Address and Fax Number
------------------------------
E-mail Address
ACCEPTED AND AGREED:
TEGAL CORPORATION
By:
---------------------------------
Dated:
------------------------------
25
SIGNATURE PAGE
TO
TEGAL CORPORATION
SUBSCRIPTION AGREEMENT
Dated _______, 2003
IF the INTERESTS will be held as JOINT TENANTS, as TENANTS IN COMMON,
or as COMMUNITY PROPERTY, please complete the following:
IN WITNESS WHEREOF, the undersigned has executed this Agreement this
___ day of ____, 2003.
Amount of Subscription: ----------------------------------
$ Print Name of Purchaser
------------------
Number of Units to be Purchased: ----------------------------------
, including Signature of a Purchaser
$____________ principal amount of Purchased Debentures
and ________ Purchased Warrants
-----------------------------------
Social Security Number
-----------------------------------
Print Name of Spouse or Other Purchaser
-----------------------------------
Signature of Spouse or Other Purchaser
-----------------------------------
Social Security Number
-----------------------------------
Address
-----------------------------------
Fax Number
------------------------------------
E-mail Address
ACCEPTED AND AGREED:
TEGAL CORPORATION
By:
--------------------------------------------------
Dated:
--------------------------------------
26
SIGNATURE PAGE
TO
TEGAL CORPORATION
SUBSCRIPTION AGREEMENT
Dated ______, 2003
IF the PURCHASER is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY
COMPANY, TRUST or OTHER ENTITY, please complete the following:
IN WITNESS WHEREOF, the undersigned has executed this Agreement this
____ day of ____, 2003.
Number of Units to be Purchased:
, including
$____________ principal amount of Purchased Debentures
and ________ Purchased Warrants
-----------------------------------
Print Full Legal Name of Partnership,
Company, Limited Liability Company,
Trust or Other Entity
By:
-------------------------------
(Authorized Signatory)
Name:
------------------------------
Title:
----------------------------
Address and Fax Number:
------------
-----------------------------------
Taxpayer Identification Number:
--------------
Date and State of Incorporation or Organization:
------------------------------
Date on which Taxable Year Ends:
-----------------------------------------------
E-mail Address:
-------------------------------
ACCEPTED AND AGREED:
TEGAL CORPORATION
By:
--------------------------------------------------
Name:
-----------------------------------------------
Title:
-----------------------------------------------
Dated:
----------------------------------------------
EXHIBITS AND SCHEDULES
TO THE UNIT SUBSCRIPTION AGREEMENT
Exhibit 1: Form of Debentures
Exhibit 2: Form of Warrants
Exhibit 3: Form of Registration Rights Agreement
Exhibit 4: Form of Financial Advisory Agreement
Exhibit 5: Form of Subsidiary Guaranty
Exhibit 6: Form of Security Agreement
Exhibit 7: Legal Opinion
Exhibit 8: Risk Factors
Exhibit 9: Company Disclosure Letter
EXHIBIT 5
Form of
SUBSIDIARY GUARANTY
New York, New York _______, 2003
FOR VALUE RECEIVED, and in consideration of the purchase of the
Debentures by the Holders (as those terms are defined below) from TEGAL
CORPORATION (the "Corporation") and for other good and valuable consideration,
and to induce the Holders to purchase the Debentures, the undersigned (and each
of them if more than one, the liability under this Guaranty being joint and
several) (jointly and severally referred to as "Guarantor" or "the undersigned")
unconditionally guarantee to the Holders, their appointed representative or
collateral agent (the "Agent"), their successors, endorsees and assigns, the
prompt payment and performance when due (whether by acceleration or otherwise)
of all present and future obligations and liabilities of any and all kinds of
the Corporation to Agent and the Holders and of all instruments of any nature
evidencing or relating to any such obligations and liabilities upon which the
Corporation is or may become liable to Agent and the Holders, whether due or to
become due, secured or unsecured, absolute or contingent, joint or several, and
however or whenever acquired by Agent and the Holders, arising under, out of, or
in connection with those certain 2% Convertible Secured Debentures due June __,
2011 dated as of June __, 2003 (as amended, modified, restated or supplemented
from time to time, collectively, the "Debentures") made by the Corporation to
the holders listed therein (collectively, the "Holders") or any documents,
instruments or agreements relating to or executed in connection with the
Debentures (together with the Debentures, as each may be amended, modified,
restated or supplemented from time to time, the "Debenture Documents"; all of
such obligations and liabilities are herein collectively referred to as the
"Obligations"), and irrespective of the genuineness, validity, regularity or
enforceability of such Obligations, or of any instrument evidencing any of the
Obligations or of any collateral therefor or of the existence or extent of such
collateral, and irrespective of the allowability, allowance or disallowance of
any or all of the Obligations in any case commenced by or against the
Corporation under ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code, including, without limitation,
obligations or indebtedness of the Corporation for post-petition interest, fees,
costs and charges that would have accrued or been added to the Obligations but
for the commencement of such case. In furtherance of the foregoing, the
undersigned hereby agree as follows:
1. NO IMPAIRMENT. Agent and Holders may at any time and from time to
time, either before or after the maturity thereof, without notice to or further
consent of the undersigned, extend the time of payment of, exchange or surrender
any collateral for, renew or extend any of the Obligations or increase or
decrease the interest rate thereon, and may also make any agreement with the
Corporation or with any other party to or person liable on any of the
Obligations, or interested therein, for the extension, renewal, payment,
compromise, discharge or release thereof, in whole or in part, or for any
modification of the terms thereof or of any agreement among Agent and/or Holders
and the Corporation, or make any election of rights Agent and/or Holders may
deem desirable under the United States Bankruptcy Code, as amended, or any other
federal or state bankruptcy, reorganization, moratorium or insolvency law
relating to or affecting the enforcement of creditors' rights generally (any of
the foregoing, an "Insolvency Law") without in any way impairing or affecting
this Guaranty. This instrument shall be effective regardless of the subsequent
reincorporation, merger or consolidation of the Corporation, or any change in
the composition, nature, personnel or location of the Corporation and shall
extend to any successor entity to the Corporation, including a debtor in
possession or the like under any Insolvency Law.
2. GUARANTY ABSOLUTE. The undersigned guarantees that the Obligations
will be paid strictly in accordance with the terms of the Debenture and/or any
other document, instrument or agreement creating or evidencing the Obligations,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the Corporation with
respect thereto. Guarantor hereby knowingly accepts the full range of risk
encompassed within a contract of "continuing guaranty" which risk includes the
possibility that the Corporation will contract additional indebtedness for which
Guarantor may be liable hereunder after the Corporation's financial condition or
ability to pay its lawful debts when they fall due has deteriorated, whether or
not the Corporation has properly authorized incurring such additional
indebtedness. The undersigned acknowledge that no oral representations have been
made by Agent or Holders to induce the undersigned to enter into this Guaranty.
The liability of the undersigned under this Guaranty shall be absolute and
unconditional, in accordance with its terms, and shall remain in full force and
effect without regard to, and shall not be released, suspended, discharged,
terminated or otherwise affected by, any circumstance or occurrence whatsoever,
including, without limitation: (a) any waiver, indulgence, renewal, extension,
amendment or modification of or addition, consent or supplement to or deletion
from or any other action or inaction under or in respect of the Debentures or
any other instruments or agreements relating to the Obligations or any
assignment or transfer of any thereof, (b) any lack of validity or
enforceability of any Debenture Document or other documents, instruments or
agreements relating to the Obligations or any assignment or transfer of any
thereof, (c) any furnishing of any additional security to Agent or Holders or
their assignees or any acceptance thereof or any release of any security by
Agent or Holders or their assignees, (d) any limitation on any party's liability
or obligation under the Debenture Documents or any other documents, instruments
or agreements relating to the Obligations or any assignment or transfer of any
thereof or any invalidity or unenforceability, in whole or in part, of any such
document, instrument or agreement or any term thereof, (e) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceeding relating to the Corporation, or any action taken with
respect to this Guaranty by any trustee or receiver, or by any court, in any
such proceeding, whether or not the undersigned shall have notice or knowledge
of any of the foregoing, (f) any exchange, release or nonperfection of any
collateral, or any release, or amendment or waiver of or consent to departure
from any guaranty or security, for all or any of the Obligations or (g) any
other circumstance (other than payment and satisfaction in full of all
Obligations) which might otherwise constitute a defense available to, or a
discharge of, the undersigned. Any amounts due from the undersigned to Agent or
Holders shall bear interest until such amounts are paid in full at the highest
rate then applicable to the Obligations. Obligations include post-petition
interest whether or not allowed or allowable.
3. WAIVERS. (a) This Guaranty is a guaranty of payment and not of
collection. Neither Agent nor Holders shall be under any obligation to institute
suit, exercise rights or remedies or take any other action against the
Corporation or any other person liable with respect to any of the Obligations or
resort to any collateral security held by it to secure any of the Obligations as
a condition precedent to the undersigned being obligated to perform as agreed
herein and Guarantor hereby waives any and all rights which the undersigned may
have by statute or otherwise which would require Agent or Holders to do any of
the foregoing. Guarantor further consents and agrees that Agent and Holders
shall be under no obligation to marshal any assets in favor of Guarantor, or
against or in payment of any or all of the Obligations. The undersigned hereby
waives all suretyship defenses and any rights to interpose any defense,
counterclaim or offset of any nature and description which it may have or which
may exist between and among Agent, Holders, the Corporation and/or the
undersigned with respect to the undersigned's obligations under this Guaranty,
or which the Corporation may assert on the underlying debt, including but not
limited to failure of consideration, breach of warranty, fraud, payment (other
than cash payment in full of the Obligations), statute of frauds, bankruptcy,
infancy, statute of limitations, accord and satisfaction, and usury.
(b) The undersigned further waives (i) notice of the
acceptance of this Guaranty, of the purchase or issuance of any Debentures, and
of all notices and demands of any kind to which the undersigned may be entitled,
including, without limitation, notice of adverse change in the Company's
financial condition or of any other fact which might materially increase the
risk of the undersigned and (ii) presentment to or demand of payment from anyone
whomsoever liable upon any of the Obligations, protest, notices of presentment,
non-payment or protest and notice of any sale of collateral security or any
default of any sort.
(c) Notwithstanding any payment or payments made by the
undersigned hereunder, or any setoff or application of funds of the undersigned
by Agent or any Holder, the undersigned shall not be entitled to be subrogated
to any of the rights of Holders against the Corporation or against any
collateral or guarantee or right of offset held by Holders for the payment of
the Obligations, nor shall the undersigned seek or be entitled to seek any
contribution or reimbursement from the Corporation in respect of payments made
by the undersigned hereunder, until all amounts owing to Agent and Holders by
the Corporation on account of the Obligations are paid in full and the
Debentures have been terminated. If, notwithstanding the foregoing, any amount
shall be paid to the undersigned on account of such subrogation rights at any
time when all of the Obligations shall not have been paid in full and the
Debentures shall not have been terminated, such amount shall be held by the
undersigned in trust for Agent and Holders, segregated from other funds of the
undersigned, and shall forthwith upon, and in any event within two (2) business
days of, receipt by the undersigned, be turned over to Agent in the exact form
received by the undersigned (duly endorsed by the undersigned to Agent, if
required), to be applied against the Obligations, whether matured or unmatured,
in such order as Agent and the Holders may determine, subject to the provisions
of the Debentures. Any and all present and future debts and obligations of the
Corporation to any of the undersigned are hereby waived and postponed in favor
of, and subordinated to the full payment and performance of, all present and
future Obligations of the Corporation to Agent and Holders.
4. SECURITY. The Obligations are secured by a pledge of all
intellectual property of Guarantor pursuant to the terms of a Security
Agreement, dated as of the date hereof, made by the Corporation and Guarantor in
favor of Agent. In addition, all sums at any time to the credit of the
undersigned and any property of the undersigned in Agent's or any Holder's
possession or in the possession of any bank, financial institution or other
entity that directly or indirectly, through one or more intermediaries, controls
or is controlled by, or is under common control with, Agent or any Holder (each
such entity, an "Affiliate") shall be deemed held by Agent, such Holder or such
Affiliate, as the case may be, as security for any and all of the undersigned's
obligations to Agent and the Holders and to any Affiliate of Agent and Holders,
no matter how or when arising and whether under this or any other instrument,
agreement or otherwise.
5. REPRESENTATIONS AND WARRANTIES. The undersigned hereby represent and
warrant (all of which representations and warranties shall survive until all
Obligations are indefeasibly satisfied in full and the Debentures have been
irrevocably terminated), that:
(a) CORPORATE STATUS. Each of the undersigned is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization or formation and has full power, authority and
legal right to own its property and assets and to transact the business in which
it is engaged.
(b) AUTHORITY AND EXECUTION. The undersigned has full power,
authority and legal right to execute and deliver, and to perform its obligations
under, this Guaranty and has taken all necessary corporate and legal action to
authorize the execution, delivery and performance of this Guaranty.
(c) LEGAL, VALID AND BINDING CHARACTER. This Guaranty
constitutes the legal, valid and binding obligation of the undersigned
enforceable in accordance with its terms, except as enforceability may be
limited by applicable Insolvency Law.
(d) VIOLATIONS. The execution, delivery and performance of
this Guaranty will not violate any requirement of law applicable to the
undersigned or any material contract, agreement or instrument to which the
undersigned is a party or by which the undersigned or any property of the
undersigned is bound or result in the creation or imposition of any mortgage,
lien or other encumbrance other than to Agent and Holders on any of the property
or assets of the undersigned pursuant to the provisions of any of the foregoing.
(e) CONSENTS OR APPROVALS. No consent of any other person or
entity (including, without limitation, any creditor of the undersigned) and no
consent, license, permit, approval or authorization of, exemption by, notice or
report to, or registration, filing or declaration with, any governmental
authority is required in connection with the execution, delivery, performance,
validity or enforceability of this Guaranty.
(f) LITIGATION. No litigation, arbitration, investigation or
administrative proceeding of or before any court, arbitrator or governmental
authority, bureau or agency is currently pending or, to the best knowledge of
the undersigned, threatened (i) with respect to this Guaranty or any of the
transactions contemplated by this Guaranty or (ii) against or affecting the
undersigned, or any property or assets of the undersigned, which, if adversely
determined, would have a material adverse effect on the business, operations,
assets or condition, financial or otherwise, of the undersigned.
(g) FINANCIAL BENEFIT. The undersigned has derived or expects
to derive a financial or other advantage from each and every purchase and
issuance of Debentures between the Corporation and the Holders.
6. ACCELERATION. It shall be an event of default hereunder if any Event
of Default under the Debentures shall have occurred and be continuing. Upon the
occurrence and during the continuance of any event of default, any and all
Obligations shall for purposes hereof be deemed due and payable without notice,
at Agent's option (or automatically without any action of Agent with respect to
any event of default relating to any Insolvency Law), notwithstanding that any
such Obligation is not then due and payable by the Corporation.
7. PAYMENTS FROM GUARANTOR. Agent, in its sole and absolute discretion,
with or without notice to the undersigned, may apply on account of the
Obligations any payment from the undersigned or any other guarantor, or amounts
realized from any security for the Obligations, or may deposit any and all such
amounts realized in a non-interest bearing cash collateral deposit account to be
maintained as security for the Obligations.
8. COSTS. The undersigned shall pay on demand all costs, fees and
expenses (including expenses for legal services of every kind) relating or
incidental to the enforcement or protection of the rights of Agent and Holders
hereunder or under any of the Obligations.
9. NO TERMINATION. This is a continuing irrevocable guaranty and shall
remain in full force and effect and be binding upon the undersigned, and the
undersigned's successors and assigns, until all of the Obligations have been
paid in full and the Debentures have been irrevocably terminated. If any of the
present or future Obligations are guarantied by persons, partnerships or
corporations in addition to the undersigned, the death, release or discharge in
whole or in part or the bankruptcy, merger, consolidation, incorporation,
liquidation or dissolution of one or more of them shall not discharge or affect
the liabilities of the undersigned under this Guaranty.
10. RECAPTURE. Anything in this Guaranty to the contrary
notwithstanding, if Agent or any Holder receives any payment or payments on
account of the Obligations guaranteed hereby, which payment or payments or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver, or
any other party under any Insolvency Law, common law or equitable doctrine, then
to the extent of any sum not finally retained by Agent and Holders, the
undersigned's obligations to Agent and Holders shall be reinstated and this
Guaranty shall remain in full force and effect (or be reinstated) until payment
shall have been made to Agent and Holders, which payment shall be due on demand.
11. BOOKS AND RECORDS. The books and records of Agent and Holders
showing the account among Agent, Holders and the Corporation shall be admissible
in evidence in any action or proceeding, shall be binding upon the undersigned
for the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof.
12. NO WAIVER. No failure on the part of Agent or Holders to exercise,
and no delay in exercising, any right, remedy or power hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise by Agent of any
right, remedy or power hereunder preclude any other or future exercise of any
other legal right, remedy or power. Each and every right, remedy and power
hereby granted to Agent or Holders or allowed it by law or other agreement shall
be cumulative and not exclusive of any other, and may be exercised by Agent or
Holders at any time and from time to time.
13. WAIVER OF JURY TRIAL. THE UNDERSIGNED DO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED ON OR WITH RESPECT TO THIS GUARANTY OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR RELATING OR INCIDENTAL HERETO. THE UNDERSIGNED DO HEREBY
CERTIFY THAT NO REPRESENTATIVE OR AGENT OF AGENT OR ANY HOLDER HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT AGENT OR ANY HOLDER WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
14. GOVERNING LAW; JURISDICTION; AMENDMENTS. THIS INSTRUMENT CANNOT BE
CHANGED OR TERMINATED ORALLY, AND SHALL BE GOVERNED, CONSTRUED AND INTERPRETED
AS TO VALIDITY, ENFORCEMENT AND IN ALL OTHER RESPECTS IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. THE UNDERSIGNED EXPRESSLY CONSENT TO THE
JURISDICTION AND VENUE OF THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK, AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK FOR ALL PURPOSES IN CONNECTION HEREWITH. ANY JUDICIAL PROCEEDING BY THE
UNDERSIGNED AGAINST AGENT OR ANY HOLDER INVOLVING, DIRECTLY OR INDIRECTLY ANY
MATTER OR CLAIM IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED HEREWITH
SHALL BE BROUGHT ONLY IN THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK. THE UNDERSIGNED FURTHER CONSENT THAT ANY SUMMONS, SUBPOENA OR OTHER
PROCESS OR PAPERS (INCLUDING, WITHOUT LIMITATION, ANY NOTICE OR MOTION OR OTHER
APPLICATION TO EITHER OF THE AFOREMENTIONED COURTS OR A JUDGE THEREOF) OR ANY
NOTICE IN CONNECTION WITH ANY PROCEEDINGS HEREUNDER, MAY BE SERVED INSIDE OR
OUTSIDE OF THE STATE OF NEW YORK OR THE SOUTHERN DISTRICT OF NEW YORK BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY PERSONAL SERVICE
PROVIDED A REASONABLE TIME FOR APPEARANCE IS PERMITTED, OR IN SUCH OTHER MANNER
AS MAY BE PERMISSIBLE UNDER THE RULES OF SAID COURTS. THE UNDERSIGNED WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREON AND SHALL
NOT ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE OR BASED UPON
FORUM NON CONVENIENS.
15. SEVERABILITY. To the extent permitted by applicable law, any
provision of this Guaranty which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
16. AMENDMENTS, WAIVERS. No amendment or waiver of any provision of
this Guaranty nor consent to any departure by the undersigned therefrom shall in
any event be effective unless the same shall be in writing executed by the
undersigned and Agent.
17. NOTICE. All notices, requests and demands to or upon the
undersigned shall be given in the manner set forth in the Debentures, as to each
Guarantor, at its address set forth on the signature pages hereof, and as to the
Holders and the Agent, at their address appearing on the books of the
Corporation.
18. SUCCESSORS. Agent and Holders may, from time to time, without
notice to the undersigned, sell, assign, transfer or otherwise dispose of all or
any part of the Obligations. Agent may, from time to time, without notice to the
undersigned, sell, transfer or otherwise dispose of its rights under this
Guaranty. In each such event, Agent, its Affiliates and each and every immediate
and successive purchaser, assignee, transferee or holder of all or any part of
the Obligations shall have the right to enforce this Guaranty, by legal action
or otherwise, for its own benefit as fully as if such purchaser, assignee,
transferee or holder were herein by name specifically given such right.
19. RELEASE. Nothing except cash payment in full of the Obligations
shall release the undersigned from liability under this Guaranty.
IN WITNESS WHEREOF, this Guaranty has been executed by the undersigned
this ___ day of ____, 2003.
SPUTTERED FILMS, INC.
By:________________________
Name:
Title:
Address:
Sputtered Films, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
TEGAL GERMANY
By:________________________
Name:
Title:
Address:
c/o Tegal Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
TEGAL JAPAN, INC.
By:________________________
Name:
Title:
Address:
c/o Tegal Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
TEGAL ITALY, SRL
By:________________________
Name:
Title:
Address:
c/o Tegal Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
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In each case with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Taitt Sato, Esq.
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇.▇▇▇▇@▇▇.▇▇▇
EXHIBIT 7
FORM OF LEGAL OPINION
The opinion will be subject to standard qualifications and exceptions, the
standard form of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP and review and approval by the firm's
opinions committee.
1. The Company is a corporation duly incorporated under the Delaware General
Corporation Law with corporate power and authority to enter into the
Transaction Documents to which it is a party and to perform its obligations
thereunder.
2. Sputtered Films, Inc. is a corporation duly incorporated under the laws of
the state of California, with corporate power to execute and deliver the
Transaction Documents to which it is a party and to perform its obligations
thereunder.
3. Immediately prior to the [First/Second] Closing, the total authorized
capital stock of the Company consists of 35,000,000 shares of Common Stock
and 5,000,000 shares of Preferred Stock.
4. The Securities to be issued and sold by the Company pursuant to the
Agreement have been duly authorized by all necessary corporate action on
the part of the Company and, when issued to and paid for by you, upon
conversion of the Purchased Debentures or exercise of the Purchased
Warrants in accordance with the Agreement, the Underlying Shares will be
validly issued, fully paid and non-assessable.
5. The execution, delivery and performance of each of the Amendment and the
Transaction Documents have been duly authorized by all necessary corporate
action of the Company and the Subsidiaries party thereto, and each of the
Transaction Documents have been duly executed and delivered by the Company
and the Subsidiaries party thereto.
6. Each of the Transaction Documents constitutes a valid and binding
obligation of the Company and the applicable Subsidiaries party thereto,
enforceable against the Company and the subsidiaries party thereto in
accordance with its terms, except as limited by applicable bankruptcy,
reorganization, insolvency moratorium or similar laws affecting the
enforcement of creditors' rights and the availability of equitable remedies
(regardless of whether such enforceability is considered in a proceeding at
law or equity).
7. The Company's and each Subsidiary's execution and delivery of, and the
consummation by the Company and each Subsidiary of the transactions
contemplated thereunder, each of the Amendment and the Transaction
Documents on the date hereof do not (i) violate the current Delaware
General Corporation Law, (ii) result in the breach or default under any of
the Material Agreements or (iii) violate any current federal or New York
statute, rule or regulation applicable to the Company or any Subsidiary
party to the Transaction Documents, except that we express no opinion
regarding the indemnification section of the Registration Rights Agreement.
1
8. With your consent based solely on a certificate of an officer of the
Company as to factual matters, the Company is not, and immediately after
giving effect to the sale of the Purchased Debentures and Purchased
Warrants in accordance with the Transaction Documents and the application
of the proceeds as described in Section 2.17 of the Agreement, will not be
required to be registered as an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
9. Assuming that the representations and warranties of the Company and the
Investors contained in the Agreement are true and correct, the issuance of
the (i) Purchased Debentures, (ii) shares of Common Stock issuable upon
conversion of the Purchased Debentures, assuming conversion on the date
hereof, (iii) Purchased Warrants and (iv) shares of Common Stock issuable
upon exercise of the Purchased Warrants, assuming exercise on the date
hereof, upon issuance and delivery and payment therefor in the manner
described in the Agreement, are exempt from the registration requirements
of the Securities Act. We express no opinion as to the securities laws of
any other jurisdiction or to the effect of subsequent issuances of
securities of the Company or transfers of the Securities to the extent that
such issuances or transfers may be integrated with the issuance of the
Securities under Section 4(2) of, or Rule 502 or Regulation D promulgated
under, the Securities Act.
10. The Security Agreement creates a valid security interest in favor of ▇▇▇▇
▇▇▇▇▇▇▇▇▇ as agent for the Investors, in all right title and interest of
the Company and the Subsidiaries in the Collateral thereunder to the extent
that a security interest therein can be executed under Article 9 of the
Uniform Commercial Code of the State of New York (the "Article 9
Collateral"). Upon filing of the attached UCC filings with the Secretary of
State of the State of Delaware, the security interest in the Article 9
Collateral identified in the attached UCC filings shall be perfected to the
extent that it can be perfected by the filing of a UCC filing with the
Secretary of State of Delaware. Upon filing of the attached recordation
forms with the United States Patent and Trademark Office and the United
States Copyright Office, the security interest in the registered U.S.
patents, trademarks, and copyrights identified in the attached recordation
forms shall be perfected to the extent that it can be perfected by the
filing of a form with the United States Patent and Trademark Office and the
United States Copyright Office.
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EXHIBIT 8
RISKS RELATED TO THIS OFFERING
SECURITIES PURCHASED IN THIS OFFERING ARE SUBJECT TO RESTRICTIONS WHICH MAY
LIMIT YOUR ABILITY TO TRANSFER SUCH SHARES AND LIQUIDATE YOUR INVESTMENT.
In connection with your purchase of Securities in this offering, you
will be required to represent and warrant that you:
o are acquiring the Securities for investment and not with a
view to distribution or resale;
o understand that you must bear the economic risk of an
investment in our securities for an indefinite period of time
because the common stock has not been registered with the SEC
or any state or other governmental agency, and
o understand and agree that the Securities may not be
transferred or sold unless the Securities are registered or an
exemption from such registration is available.
You will be prohibited from transferring Securities purchased in this
offering if such transfer would violate the Securities Act or any other
applicable federal or state securities laws, rules or regulations. You may be
prohibited from transferring the Securities purchased in the offering in the
event that a registration statement to be filed by us under the Registration
Rights Agreement is not declared effective by the SEC. In addition, you may be
prevented from transferring such Securities pursuant to such registration
statement if there is a delay in achieving the effectiveness of the registration
statement, if the SEC imposes a stop order with respect to the registration
statement, or we invoke our right to delay or suspend the effectiveness of the
registration statement.
THE OFFERING PRICE OF SHARES OF OUR COMMON STOCK SHOULD NOT BE REGARDED AS AN
INDICATION OF ANY FUTURE MARKET PRICE OF OUR COMMON STOCK, WHICH COULD DECLINE.
The offering price of shares of our common stock (which underlie the
Securities offered hereby) has been determined by us, the Placement Agents and
certain Investors based on a number of factors, such as an assessment of our
management, our present operations and our earnings prospects, the present state
of our development, the general condition of the securities markets at the time
of the offering and the price of our common stock on the Nasdaq National Market
at the time of the offering. The price of the shares of our common stock should
not be regarded as an indication of any future market price for shares of our
common stock.
WE CANNOT ASSURE YOU THAT OUR STOCK PRICE WILL NOT DECLINE.
The market price of our common stock could be subject to significant
fluctuations. Among the factors that could affect our stock price are:
o quarterly variations in our operating results;
o changes in revenue or earnings estimates or publication of
research reports by analysts;
o failure to meet analysts' revenue or earnings estimates;
o speculation in the press or investment community;
o strategic actions by us or our competitors, such as
acquisitions or restructurings;
o actions by institutional stockholders;
o general market conditions; and
o domestic and international economic factors unrelated to our
performance.
The stock markets in general, and the markets for technology stocks in
particular, have experienced extreme volatility that has often been unrelated to
the operating performance of particular companies. These broad market
fluctuations may adversely affect the trading price of our common stock. In
particular, we cannot assure you that you will be able to resell your shares at
any particular price, or at all.
SHARES ELIGIBLE FOR SALE IN THE FUTURE COULD NEGATIVELY AFFECT OUR STOCK PRICE.
The market price of our common stock could decline as a result of sales
of a large number of shares of our common stock or the perception that these
sales could occur. This might also make it more difficult for us to raise funds
through the issuance of securities. As of June 18, 2003, we had outstanding
16,091,762 shares of common stock of which 12,705,358 shares are freely
tradeable. The remaining 3,386,404 shares of common stock outstanding are
"restricted securities" as defined in Rule 144. These shares include 642,200
issued to the ▇▇▇▇▇▇ Family Trust and 596,327 shares issued to the ▇▇▇▇▇▇ ▇▇▇▇▇▇
1997 Trust, both in connection with our acquisition of Sputtered Films. These
restricted securities may be sold in the future pursuant to registration
statements filed with the SEC or without registration under the Securities Act
to the extent permitted by Rule 144 or other exemptions under the Securities
Act.
As of June 18, 2003, there were an aggregate of 4,945,018 shares of
common stock issuable upon exercise of outstanding stock options and warrants,
including 3,246,466 shares issuable upon exercise of options outstanding under
our option plans and 1,698,552 shares of common stock issuable upon exercise of
outstanding warrants (including 537,500 shares issued to Polar Global Technology
upon exercise of an outstanding warrant). In addition we have agreed to register
for resale the 1,499,987 shares of common stock issued through the Sputtered
Films acquisition. We have not entered into any agreements or understanding
regarding any future acquisitions and cannot ensure that we will be able to
identify or complete any acquisition in the future.
SHARES ELIGIBLE FOR INCLUSION IN THE INVESTORS' REGISTRATION STATEMENT COULD
NEGATIVELY AFFECT OUR STOCK PRICE.
Approximately 5,084,956 shares of our common stock will be included in
the registration statement to be filed under your Registration Rights Agreement
covering the shares of common stock underlying the Securities. These shares may
adversely affect the price of our common stock.
THE SALE OF THE SECURITIES MAY RESULT IN SUBSTANTIAL DEFERRAL OF APPLICATION OF
OUR NET OPERATING LOSS
The sale of the Securities may adversely affect the timing of the
application of existing net operating losses to future taxable earnings, if any.
Special Note Regarding Forward Looking Statements
These risk factors include or incorporate by reference forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Forward-looking statements, which are based on
assumptions and describe our future plans, strategies and expectations, are
generally identifiable by the use of the words "anticipate," "believe,"
"estimate," "expect," "intend," "project," or similar expressions. These
forward-looking statements are subject to risks, uncertainties and assumptions
about us. If one or more of these risks or uncertainties materialize, or if any
underlying assumptions prove incorrect, our actual results, performance or
achievements may vary materially from any future results, performance or
achievements expressed or implied by these forward-looking statements. All
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirely by the cautionary statements in this
paragraph. Certain aspects of the transaction may have tax consequences.
Investors must consult their own tax advisors.