Exhibit 10.13
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") dated as of November 10,
1997, is entered into by and among GateField Corporation, a Delaware corporation
with offices at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Company"), and the entities listed on Exhibit A hereto (the "Purchasers"), in
connection with the purchase of (i) 1,000,000 shares of the Company's Series B
Convertible Preferred Stock, par value $.10 (the "Preferred Stock"), convertible
into up to 6,110,000 shares of the Company's common stock, $.10 par value (the
"Common Stock"), to be sold to the Purchasers at the First Closing (as defined
below), (ii) Common Stock Purchase Warrants in the form attached hereto as
Exhibit B, to purchase an aggregate of 997,751 shares of Common Stock at a
purchase price of $1.00 per share (collectively, the "Warrants"), to be sold to
the Purchasers at the First Closing (as defined below), and (iii) 4,582,500
shares of Common Stock to be sold to the Purchasers at the Second Closing (as
defined below). The shares of Common Stock issuable upon conversion of the
Preferred Stock, the shares of Common Stock issuable upon exercise of the
Warrants, and the Common Stock sold to the Purchasers at the Second Closing are
collectively referred to herein as the "Shares". The Certificate of Designation
setting forth the rights, restrictions, privileges and preferences of the
Preferred Stock (the "Certificate of Designation") is attached hereto as
Exhibit C. The solicitation of this Agreement and the offer and sale of the
Preferred Stock, the Warrants and the Shares, are being made in reliance upon
the provisions of Regulation D ("Regulation D") promulgated by the Securities
and Exchange Commission ("SEC") under the United States Securities Act of
1933, as amended (the "Securities Act") or upon the provisions of Section 4(2)
of the Securities Act. The Preferred Stock, the Warrants and the Shares are
sometimes collectively referred to herein as the "Securities." The Common
Stock issuable upon conversion of the Preferred Stock and the Common Stock
issuable upon exercise of the Warrants are sometimes collectively referred to
herein as the "Underlying Stock."
In consideration of the mutual promises, representations, warranties and
conditions set forth herein, and intending to be legally bounded hereby, the
Company and the Purchasers agree as follows:
1. PURCHASE AND SALE OF SECURITIES; CLOSING CONDITIONS
1.1 PURCHASE AND SALE OF SECURITIES.
(a) PURCHASE OF PREFERRED STOCK AND THE WARRANTS. Each of the
Purchasers hereby agrees to purchase and the Company agrees to sell to each
of the Purchasers (i) the number of shares of Preferred Stock set forth
opposite such Purchaser's name on Exhibit A and (ii) a Warrant to purchase
the number of shares of Common Stock set forth opposite such Purchaser's
name on Exhibit A, for the aggregate purchase price set forth opposite such
Purchaser's name on Exhibit A. The closing of the purchase of such Preferred
Stock and the Warrants shall take place on the "First Closing," subject to
the satisfaction (or waiver) of the conditions thereto set forth in Sections
1.2 and 1.3 below:
(b) PURCHASE OF COMMON STOCK. Each of the Purchasers hereby agrees to
purchase and the Company agrees to sell to each of the Purchasers the number
of shares of Common Stock set forth opposite such Purchaser's name on
Exhibit A for the purchase price of $1.00 per share. The closing of the
purchase of such Common Stock shall take place on the "Second Closing,"
subject to the satisfaction (or the waiver) of the conditions set forth in
Sections 1.2 and 1.3 below. Notwithstanding the foregoing, if the
stockholders of the Company do not approve the proposals to be submitted to
them at the 1997 Annual Meeting of Stockholders to be held on or prior to
December 19, 1997, as set forth in Section 1.3(a)(x), each of the Purchasers
shall be relieved of its obligation to purchase Common Stock at the Second
Closing.
(c) PAYMENT AND DELIVERY OF STOCK CERTIFICATES. On each Closing Date
(as defined below), (i) each of the Purchasers shall pay the portion of the
purchase price for the Securities to be issued and sold at the applicable
Closing to such Purchaser by check or wire transfer to the Company, in
accordance with the Company's written instructions, against delivery of duly
executed stock certificates and the warrant which each such Purchaser is
then purchasing and (ii) the Company shall deliver to each such Purchaser
such stock certificates and the warrant against delivery of such purchase
price.
(d) CLOSING DATES. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Sections 1.2 and 1.3 below, the date and
time of the issuance and sale of the Preferred Stock, the Warrants and
Common Stock pursuant to this Agreement (the "Closing Dates") shall be (i)
in the case of the First Closing, 10:00 a.m. Pacific Standard Time on
November 10, 1997 (the "First Closing Date"), and (ii) in the case of the
Second Closing, 10:00 a.m. Pacific Standard Time, three business days
following notification of the satisfaction (or waiver) of the condition to
such Closing set forth in Section 1.3(b)(vii) (the "Second Closing Date")
or, in each case, at such mutually agreed upon time.
1.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE AND SELL
THE PREFERRED STOCK, WARRANTS AND COMMON STOCK. The obligation hereunder of the
Company to issue and sell the Preferred Stock, Warrants and Common Stock to each
of the Purchasers at each respective Closing is subject to the satisfaction, at
or before such Closing, of each of the conditions set forth below. These
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion.
(a) ACCURACY OF THE PURCHASER'S REPRESENTATION AND WARRANTIES. The
representations and warranties of the Purchasers contained in this Agreement
shall be true and correct as of the date when made and as of the applicable
Closing Date as though made at each such time.
(b) PERFORMANCE BY THE PURCHASER. The Purchasers shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the applicable Closing.
(c) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent jurisdiction
which prohibits or adversely affects any of the transactions contemplated by
this Agreement, and no proceeding shall have been commenced which may have
the effect of prohibiting or adversely affecting any of the transactions
contemplated by this Agreement.
1.3 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO ACQUIRE THE
PREFERRED STOCK, WARRANTS AND COMMON STOCK. The obligation of the Purchasers
hereunder to acquire and pay for the Preferred Stock, Warrants and Common Stock
at each of the First Closing and the Second Closing, as applicable, is subject
to the satisfaction, at or before the Closing Date in respect of such Closing,
of each of the following conditions. Each of these conditions is for each of the
Purchaser's sole benefit and may be waived by a Purchaser at any time in its
sole discretion.
(a) As to the First Closing:
(i) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained in this Agreement
shall be true and correct as of the date when made and as of the First
Closing Date as though made at each such time.
(ii) PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions contained in this Agreement and in all other agreements
related to this Agreement to be performed, satisfied or complied with by
the Company at or prior to the First Closing.
(iii) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits or adversely effects any of the
transactions
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contemplated by this Agreement, and no proceeding shall have been
commenced which may have the effect of prohibiting or adversely affecting
any of the transactions contemplated by this Agreement.
(iv) ADVERSE CHANGES. Since December 31, 1996, no event which had
or is likely to have a Material Adverse Effect has occurred, except as
described in the Company's Form 10-Qs filed with the SEC for the
quarterly periods ended March 31, and June 30, 1997. For purposes of this
Agreement, "Material Adverse Effect" means any effect on the business,
operations, properties, prospects, condition, financial or otherwise, net
worth, or results of operations of the Company and which is material and
adverse to the Company or to other entities controlled by the Company,
taken as a whole, and/or any condition or situation which would prohibit
or otherwise interfere with the ability of the Company or other entity
controlled by the Company to enter into and perform its obligations under
this Agreement.
(v) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. As
of the First Closing Date, (A) the trading of the Common Stock shall not
have been suspended by the SEC, The Nasdaq Stock Market, Inc. ("Nasdaq
Inc.") or the National Association of Securities Dealers, Inc. (the
"NASD"), (B) the Common Stock shall not have been delisted from the
Nasdaq National Market (the "Exchange"), and (C) the Company shall not
have been advised in writing that the Common Stock will be delisted from
the Exchange.
(vi) THE LEGAL OPINION. The Company shall have delivered to each
of the Purchasers the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
Professional Corporation, independent counsel to the Company, with
respect to the matters set forth in Exhibit D attached hereto, dated as
of the First Closing Date.
(vii) OFFICER'S CERTIFICATE. The Company shall have delivered to
the Purchasers a certificate in such form and substance as shall be
reasonably satisfactory to the Purchasers, executed by an executive
officer of the Company as of the First Closing Date, to the effect that
all of the conditions to the First Closing shall have been satisfied.
(viii) REGISTRATION RIGHTS AGREEMENT. The Company and the Purchasers
shall have executed and delivered the Registration Rights Agreement
attached hereto as Exhibit E.
(ix) IRREVOCABLE LETTER OF INSTRUCTION. The Company shall have
issued to the transfer agent for the Common Stock (and to any substitute
or replacement transfer agent for its Common Stock coterminous with the
Company's appointment of any such substitute or replacement transfer
agent) irrevocable instructions regarding the issuance of certificates
representing the Securities in such form and substance as shall be
reasonably satisfactory to the Purchasers.
(x) PROXY STATEMENT. The Company shall have filed with the SEC and
Nasdaq Inc., a Notice of 1997 Annual Meeting of Stockholders to be held
on or prior to December 19, 1997, together with a preliminary Proxy
Statement requesting stockholder approval (A) of an amendment to the
Company's Certificate of Incorporation providing for the classification
of the Board of Directors into three classes, with members of each class
serving staggered three-year terms, (B) of an amendment to the Company's
Certificate of Incorporation providing for the increase in the number of
shares of authorized Common Stock from 40,000,000 to 65,000,000 and
(C) to sell securities of the Company to the Purchasers which prior to
such sale represent more than 20% of the Company's outstanding voting
stock; and nominating a four (4) person Board of Directors with ▇▇.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ being nominated as a Class I Director for an initial
term of one year, Messrs. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇ being
nominated as Class II Directors for an initial term of two years, and
▇▇. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ being nominated as a Class III Director for an
initial term of three years.
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(xi) CERTIFICATE AND DOCUMENTS. The Company shall have delivered
to the Purchasers:
(A) the Certificate of Incorporation of the Company, as amended
and in effect as of the date of the First Closing, certified
by the Secretary of State of the State of Delaware;
(B) certificates, as of the most recent practicable dates, as to
the corporate good standing of the Company issued by the
Secretary of State of the State of Delaware and the
Secretary of State of the State of California;
(C) the By-laws of the Company, as amended and in effect as of
the date of the First Closing, certified by the Secretary of
the Company; and
(D) resolutions of the Board of Directors of the Company
authorizing and approving all matters in connection with this
Agreement and the transactions contemplated hereby and
authorizing and approving the amendments to the Company's
Certificate of Incorporation and the other matters described
in Section 1.3(a)(x) of this Agreement, certified by the
Secretary of the Company as of the First Closing Date.
(xii) OTHER MATTERS. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchasers and their
counsel, and the Purchasers and their counsel shall have received all
such counterpart originals or certified or other copies of such documents
as they may reasonably request.
(b) As to the Second Closing:
(i) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained in this Agreement
shall be true and correct as of the date when made and as of the Second
Closing Date as though made at each such time.
(ii) PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions contained in this Agreement and in all other agreements
related to this Agreement to be performed, satisfied or complied with by
the Company at or prior to the Second Closing.
(iii) ADVERSE CHANGES. Since December 31, 1996, no event which had
or is likely to have a Material Adverse Effect has occurred, except as
described in the Company's Form 10-Qs filed with the SEC for the
quarterly periods ended March 31, and June 30, 1997.
(iv) NO SUSPENSION OF TRADING OR DELISTING OF COMMON STOCK. As of
the Second Closing Date, (A) the trading of the Common Stock shall not
have been suspended by the SEC, Nasdaq Inc. or the NASD, (B) the Common
Stock shall not have been delisted from the Exchange, and (C) the Company
shall not have been advised in writing that the Common Stock will be
delisted from the Exchange.
(v) THE LEGAL OPINION. The Company shall have delivered to each of
the Purchasers the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
Professional Corporation, independent counsel to the Company, dated as of
the Second Closing Date, with respect to the matters set forth in
Exhibit D attached hereto, dated as of the Second Closing Date.
(vi) OFFICER'S CERTIFICATE. The Company shall have delivered to
the Purchasers a certificate in such form and substance as shall be
reasonably satisfactory to the Purchasers, executed by an executive
officer of the Company as of the Second Closing Date, to the effect that
all the conditions to the Second Closing shall have been satisfied.
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(vii) STOCKHOLDER'S MEETING. The stockholders of the Company shall
have approved the amendments to the Company's Certificate of
Incorporation and other matters specified in Section 1.3(a)(x).
(viii) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT. All applicable waiting periods (and
any extensions thereof) under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have
expired or otherwise been terminated.
(ix) AMENDMENT TO BYLAWS. The Board of Directors of the Company
shall have amended the Bylaws of the Company to include a provision with
respect to the matters specified in Section 4.10.
(x) CERTIFICATE AND DOCUMENTS. The Company shall have delivered to
the Purchasers:
(A) the Certificate of Incorporation of the Company, as amended
and in effect as of the date of the Second Closing, certified
by the Secretary of State of the State of Delaware;
(B) certificates, as of the most recent practicable dates, as to
the corporate good standing of the Company issued by the
Secretary of State of the State of Delaware and the
Secretary of State of the State of California;
(C) the By-laws of the Company, as amended and in effect as of
the date of the Second Closing, certified by the Secretary
of the Company; and
(D) resolutions of the Board of Directors of the Company
authorizing and approving all matters in connection with this
Agreement and the transactions contemplated hereby, certified
by the Secretary of the Company as of the Second Closing
Date.
(xi) OTHER MATTERS. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchasers and their
counsel, and the Purchasers and their counsel shall have received all
such counterpart originals or certified or other copies of such documents
as they may reasonably request.
1.4 CONVERSION OF PREFERRED STOCK. In the event the stockholders of the
Company fail to approve the proposals specified in Section 1.3(a)(x) at the 1997
Annual Meeting of Stockholders to be held on or prior to December 19, 1997, the
Purchasers holding at least 51% of the then outstanding shares of Preferred
Stock shall have the right, upon fifteen (15) days prior written notice to the
Company, to redeem the Preferred Stock, in whole or in part, for a cash payment
from the Company equal to $4.5825 per share plus accrued and unpaid dividends
thereon (subject to adjustment for stock splits, stock dividends, combination or
similar recapitalizations affecting such shares); provided, however, that if the
Purchasers do not elect to redeem the Preferred Stock, as provided above, the
Conversion Price (as defined in the Certificate of Designation of the Preferred
Stock) of all shares of the Preferred Stock shall be reduced from $1.00 to $.75
per share.
2. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Each of the Purchasers severally represents and warrants to the Company
that:
2.1 NO GOVERNMENT RECOMMENDATION OR APPROVAL. Such Purchaser
understands that no United States federal or state agency, or similar agency
of any other country, has passed upon or made any recommendation or
endorsement of the Company or the offering of the Securities.
2.2 INTENT. Such Purchaser is purchasing the Securities for its own
account and not with a view towards distribution and such Purchaser has no
present arrangement (whether or not legally binding) at any time to sell the
Securities to or through any person or entity; provided, however, that by
making the representations herein, such Purchaser does not agree to hold the
Securities for any minimum or
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other specific term and reserves the right to dispose of the Securities at
any time in accordance with Federal and state securities laws applicable to
such disposition. Such Purchaser understands that the Securities must be
held indefinitely unless such Securities are subsequently registered under
the Securities Act or an exemption from registration is available. Such
Purchaser has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act.
2.3 SOPHISTICATED INVESTOR. Such Purchaser is a sophisticated investor
(as described in Rule 506(b)(2)(ii) of Regulation D) and, except for the
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Trust, an accredited investor (as defined in Rule 501 of
Regulation D), and such Purchaser has such experience in business and
financial matters that it is capable of evaluating the merits and risks of
an investment in the Securities. Such Purchaser acknowledges that the
Securities are speculative and involve a high degree of risk.
2.4 INDEPENDENT INVESTIGATION. Such Purchaser, in making its decision
to purchase the Securities subscribed for hereunder, has relied upon an
independent investigation made by it and/or its representatives and has not
relied on any oral or written representations or assurances from the Company
or any representative or agent of the Company, other than as set forth in
this Agreement, in the public filings of the Company and in the documents
described herein. Prior to the date hereof, such Purchaser has been
furnished with and has reviewed the Company's latest proxy statement and
Annual Report on Form 10-K sent to the Company's stockholders and all
documents filed by the Company since December 31, 1996 pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (such documents are collectively referred to in this
Agreement as the "Exchange Act Reports"). Such Purchaser has had a
reasonable opportunity to ask questions of and receive answers from the
Company concerning the Company and the offering of securities and has
received satisfactory answers to all inquiries it has made with respect to
the Company and the Securities. Such Purchaser acknowledges the price and
terms of the Securities offered hereby have been determined by negotiation
based, in part, on the market price for the Common Stock, and does not
necessarily bear any relationship to the assets, book value or potential
performance of the Company or any other recognized criteria of value.
2.5 AUTHORITY. This Agreement has been duly authorized and validly
executed, and delivered by such Purchaser and is a valid and binding
agreement enforceable in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally.
2.6 NO LEGAL ADVICE FROM COMPANY. Such Purchaser acknowledges that it
has had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal counsel and tax
advisors. Except for any statements or representations of the Company made
in this Agreement and in the Exchange Act Reports, the Purchaser is relying
solely on such counsel and advisors and not on any statements or
representations of the Company or any of its representative or agents for
legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any
jurisdiction.
2.7 NO BROKERS. Such Purchaser has taken no action which would give
rise to any claim by any person for brokerage commission, finder's fees or
similar payments by the Company relating to this Agreement or the
transactions contemplated hereby.
2.8 NOT AN AFFILIATE. Prior to the First Closing, such Purchaser has
not been an officer, director or "affiliate" (as that term is defined in
Rule 405 of the Securities Act) of the Company.
2.9 RELIANCE ON REPRESENTATIONS AND WARRANTIES. Such Purchaser
understands that the Securities are being offered and sold to it in reliance
on specific provisions of United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgements and understandings
of such Purchaser set forth in this Agreement in order to determine the
applicability of such provisions.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to and except as disclosed by the Company in APPENDIX A annexed
hereto (the "Disclosure Schedule"), the Company represents and warrants to each
of the Purchasers that:
3.1 COMPANY STATUS. The Company has registered the Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act, is in full
compliance with all reporting requirements of the Exchange Act, and the
Company has maintained all requirements for the continued listing of the
Common Stock, and the Common Stock is currently listed on the Exchange. The
Company has not been advised that the Common Stock will be delisted from the
Exchange.
3.2 CURRENT PUBLIC INFORMATION. The Exchange Act Reports are the only
filings made by the Company since December 31, 1996 pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act.
3.3 NO DIRECTED SELLING EFFORTS OR GENERAL SOLICITATION IN REGARD TO
THIS TRANSACTION. Neither the Company nor any of its affiliates nor any
distributor or any person acting on its or their behalf has conducted any
"directed selling efforts" with respect to the Preferred Stock, the Warrants
or the Common Stock nor has the Company conducted any general solicitation
(as that term is used in Regulation D) with respect to any of the
Securities, nor have they made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would
require registration of the Securities under the Securities Act.
3.4 CAPITALIZATION; ISSUANCE OF SECURITIES.
(a) As of the date of this Agreement, the authorized capital stock of
the Company consists of 40,000,000 shares of Common Stock, of which
35,538,756 shares are issued and outstanding, and 2,000,000 shares of series
preferred stock, of which 1,000,000 shares have been designated Preferred
Stock, none of which shares are issued or outstanding. The Company has
adopted and filed the Certificate of Designation with the Secretary of State
of the State of Delaware. As of the date of the Second Closing, the
authorized capital stock of the Company consists of 65,000,000 shares of
Common Stock and 2,000,000 shares of series preferred stock, of which
1,000,000 shares have been designated Preferred Stock, all of which are
issued and outstanding. All of the issued and outstanding shares of Common
Stock have been duly and validly issued and are fully paid and
non-assessable. Except as set forth in Section 3.4 of the Disclosure
Schedule (i) no subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any shares of capital
stock of the Company is authorized or outstanding, (ii) the Company has no
obligation (contingent or otherwise) to issue any subscription, warrant,
option, convertible security or other such right or to issue or distribute
to holders of any shares of its capital stock any evidences of indebtedness
or assets of the Company, and (iii) the Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any
shares of its capital stock or any interest therein or to pay any dividend
or make any other distribution in respect thereof. All of the issued and
outstanding shares of capital stock of the Company have been offered, issued
and sold by the Company in compliance with applicable Federal and state
securities laws.
(b) The issuance, sale and delivery of the Securities in accordance with
this Agreement, the issuance and delivery of the shares of Common Stock
issuable upon conversion of the Preferred Stock and the issuance and
delivery of the shares of Common Stock upon exercise of the Warrants, have
been duly authorized by all necessary corporate action on the part of the
Company, and after the approval by the Company's stockholders of an
amendment to the Company's Certificate of Incorporation increasing the
number of authorized shares of Common Stock, all such shares shall be duly
reserved for issuance. Upon issuance of the Securities (other than the
Underlying Stock), the Securities (other than the Underlying Stock) will be
duly and validly issued, fully paid and non-assessable; after the approval
by the Company's stockholders of an amendment to the Company's
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Certificate of Incorporation increasing the number of authorized shares of
Common Stock, the shares of Common Stock issuable upon conversion of the
Preferred Stock shall be duly reserved by the Company for issuance, and when
issued and delivered in accordance with the terms of the Preferred Stock,
will be duly and validly issued, fully paid and non-assessable; and after
the approval by the Company's stockholders of an amendment to the Company's
Certificate of Incorporation increasing the number of authorized shares of
Common Stock, the shares of Common Stock issuable upon exercise of the
Warrants have been duly reserved by the Company for issuance, and when
issued and delivered in accordance with the terms of the Warrants, will be
duly and validly issued, fully paid and non-assessable.
(c) There are no agreements, written or oral, between the Company and
any holder of its capital stock or any security convertible into its capital
stock, or to the best of the Company's knowledge, among any such holders,
relating to the acquisition (including, without limitation, rights of first
refusal or pre-emptive rights), disposition, registration under the
Securities Act, or voting of the capital stock of the Company.
3.5 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries, except for those listed on its Form 10-K filed with the SEC
for the year ended December 31, 1996. The Company and each such subsidiary
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary other than those
in which the failure so to qualify would not have a Material Adverse Effect.
References to the "Company" in this Agreement shall also include each
subsidiary of the Company, except where the context otherwise requires.
3.6 AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and
to issue the Securities in accordance with the terms hereof and thereof,
(ii) the execution, issuance and delivery of this Agreement, the Preferred
Stock, the Warrants and the Common Stock by the Company and all other
agreements, including without limitation, the Registration Rights Agreement,
required to be executed by the Company as provided herein (collectively, the
"Ancillary Agreements"), and the consummation by the Company of the
transactions contemplated hereby and thereby, including without limitation,
the issuance of Common Stock upon the conversion or exercise thereof, have
been duly authorized by all necessary corporate action, and no further
consent or authorization of the Company or its Board of Directors or
stockholders is required, (iii) this Agreement and the Ancillary Agreements
have been duly executed and delivered by the Company, and (iv) this
Agreement, the Ancillary Agreements, the Preferred Stock and the Warrants
constitute, and upon execution, issuance and delivery thereof the Preferred
Stock and the Warrants shall be, valid and binding obligations of the
Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable
principles of general application.
3.7 CORPORATE DOCUMENTS. The Company has furnished or made available
to the Purchaser true and correct copies of the Company's Certificate of
Incorporation, as in effect on the date hereof (the "Certificate"), and the
Company's By-Laws, as in effect on the date hereof (the "By-Laws").
3.8 NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Preferred Stock, the Warrants and Common Stock by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby, including without limitation the issuance of common
stock upon the conversion or exercise thereof, do not and will not (i)
result in a violation of or conflict with the Certificate or By-Laws or (ii)
violate, conflict with, or constitute a
8
breach of or default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any Federal, state, local or foreign law,
rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries is bound or affected, except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as
would not, individually or in the aggregate, have a Material Adverse Effect.
The business of the Company is not being conducted in violation of any law,
ordinance or regulations of any governmental entity, except for possible
violations which either singly or in the aggregate do not and will not have
a Material Adverse Effect. The Company is not required under Federal, state
or local law, rule or regulation in the United States to obtain any consent,
authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform
any of its obligations under this Agreement or issue and sell the Securities
in accordance with the terms hereof and thereof (other than (i) compliance
with the applicable requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act") and (ii)
any SEC, NASD, Nasdaq Inc. or state securities filings which may be required
to be made by the Company subsequent to either the First Closing or the
Second Closing, and any registration statement which may be filed pursuant
hereto); provided that, for purposes of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of the Purchasers herein.
3.9 EXCHANGE ACT REPORTS; FINANCIAL STATEMENTS. The Company has
delivered or made available to the Purchasers true and complete copies of
the Exchange Act Reports (including, without limitation, proxy information
and solicitation materials). As of their respective dates, the Exchange Act
Reports complied in all material respects with the requirements of the
Exchange Act and rules and regulations of the SEC promulgated thereunder and
other Federal, state and local laws, rules and regulations applicable to
such Exchange Act Reports, and none of the Exchange Act Reports contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the Exchange
Act Reports comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed
or summary statements) and fairly present the financial condition of the
Company as of the dates thereof and the results of operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments which in the aggregate will not be
material).
3.10 NO MATERIAL ADVERSE CHANGE. Since December 31, 1996, the date
through which the most recent annual report of the Company on Form 10-K
which has been prepared and filed with the SEC, a copy of which is included
in the Exchange Act Reports, there has been no material adverse change in
the business, operations, properties, prospects, condition, financial or
otherwise, net worth, or results of operations of the Company or its
subsidiaries, except as described in the Company's Form 10-Qs filed with the
SEC for the quarterly periods ended March 31, and June 30, 1997, and the
Disclosure Schedule.
3.11 NO UNDISCLOSED LIABILITIES. The Company and its subsidiaries have
no liabilities or obligations of any type, which in the aggregate exceed
$100,000, that are not fully reflected or disclosed in
9
the Exchange Act Reports, other than those incurred in the ordinary course
of the Company's or its subsidiaries' respective businesses since June 30,
1997.
3.12 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event or circumstance
has occurred or exists with respect to the Company or its subsidiaries or
their respective businesses, properties, prospects, operations or condition,
financial or otherwise, which, under applicable law, rule or regulation,
requires disclosure in the Exchange Act Reports or public disclosure prior
to the date hereof by the Company and which has not been so disclosed.
3.13 NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would require registration
under the Securities Act of the offer, issuance and sale of the Securities
to the Purchasers.
3.14 NO BROKERS. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Purchasers relating to this Agreement or the
transactions contemplated hereby.
3.15 PROFORMA SEPTEMBER 30, 1997 FINANCIAL STATEMENTS. The proforma
balance sheet and financial statements of the Company as of September 30,
1997 (the "Pro Forma Financials") which have been furnished to the
Purchasers are true and correct in all material respects. The Pro Forma
Financials have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present the financial condition
of the Company as of the dates thereof and the results of operations and
cash flows for the periods then ended (subject to normal year-end audit
adjustments which in the aggregate will not be material).
3.16 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration
or filing with, any governmental authority is required on the part of the
Company in connection with the execution and delivery of this Agreement, the
offer, issuance, sale and delivery of the Securities, or the other
transactions to be consummated at the First and Second Closings (other than
the stockholder approval with respect to the Second Closing in accordance
with Section 1.3(b)(vii)), as contemplated by this Agreement, except such
filings as shall have been made prior to and shall be effective on and as of
such Closing. Based on the representations made by the Purchasers in Section
2 of this Agreement, the offer and sale of the Securities to the Purchasers
will be in compliance with applicable Federal and state securities laws.
3.17 LITIGATION. There is no action, suit or proceeding, or
governmental inquiry or investigation, pending, or, to the best of the
Company's knowledge, any basis therefor or threat thereof, against the
Company, which questions the validity of this Agreement or the right of the
Company to enter into it, or which might result, either individually or in
the aggregate, in a Material Adverse Effect.
3.18 INTELLECTUAL PROPERTY. Set forth in the Disclosure Schedule is a
true and complete list of all patents, patent applications, trademarks,
service marks, trademark and service ▇▇▇▇ applications, trade names,
copyright registrations and licenses presently used by the Company or
necessary for the conduct of the Company's business as conducted and as
proposed to be conducted, as well as any agreement under which the Company
has access to any confidential information used by the Company in its
business (collectively, the "Intellectual Property Rights"). The Company
owns, or has the right to use under the agreements or upon the terms
described in the Disclosure Schedule, all of the Intellectual Property
Rights, and has taken all actions reasonably necessary to protect the
Intellectual Property Rights. The business conducted or proposed by the
Company does not and will not cause the Company to infringe or violate any
of the patents, trademarks, service marks, trade names, copyrights,
licenses, trade secrets or other intellectual property rights of any other
person or entity. The Company is not aware that any employee is obligated
under any contract (including any license, covenant or
10
commitment of any nature), or subject to any judgment, decree or order of
any court or administrative agency, that would conflict or interfere with
(i) the performance of employee's duties as an officer, employee or director
of the Company, (ii) the use of such employee's best efforts to promote the
interests of the Company or (iii) the Company's business as conducted or
proposed to be conducted. No other person or entity (including without
limitation any prior employer of any employee of the Company) has any right
to or interest in any inventions, improvements, discoveries or other
confidential information utilized by the Company in its business.
3.19 MATERIAL CONTRACTS AND OBLIGATIONS. Section 3.19 of the
Disclosure Schedule lists each material agreement to which the Company is a
party or subject, including without limitation all material employment and
consulting agreements, employee benefit, bonus, pension, profit-sharing,
stock option, stock purchase and similar plans and arrangements, and
distributor and sales representative agreements. The Disclosure Schedule
lists each agreement with any stockholder, officer or director of the
Company, or any "affiliate" or "associate" of such persons (as such terms
are defined in the rules and regulations promulgated under the Securities
Act), including without limitation any agreement or other arrangement
providing for the furnishing of services by, rental of real or personal
property from, or otherwise requiring payments to, any such person or entity
and any agreement relating to the Intellectual Property Rights. The Company
has delivered to counsel to the Purchasers copies of all of the foregoing
agreements. All of such agreements and contracts are valid, binding and in
full force and effect.
3.20 EMPLOYEES. All employees of the Company whose employment
responsibility requires access to confidential or proprietary information of
the Company have executed and delivered nondisclosure and assignment of
invention agreements in the form attached hereto as Exhibit F, and all of
such agreements are in full force and effect.
3.21 ERISA. The Company does not have or otherwise contribute to or
participate in any employee benefit plan subject to the Employee Retirement
Income Security Act of 1974.
3.22 BOOKS AND RECORDS. The minute books of the Company contain
complete and accurate records of all meetings and other corporate actions of
its stockholders and its Board of Directors and committees thereof. The
Company has delivered to counsel to the Purchasers copies of all of the
minutes of all meetings and other corporate actions of its stockholders and
its Board of Directors and committees thereof held or taken since October 1,
1995.
3.23 SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW. The
transactions contemplated by this Agreement have been approved by the Board
of Directors of the Company for purposes of Section 203 of the Delaware
General Corporation Law.
3.24 DISCLOSURES. Neither this Agreement nor any Attachment or Exhibit
hereto, nor any report, certificate or instrument furnished to any Purchaser
or its counsel in connection with the transactions contemplated by this
Agreement, when read together, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary
in order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. The Company knows
of no information or fact which has or would have a Material Adverse Effect
which has not been disclosed in the Disclosure Schedule.
4. COVENANTS
4.1 REGISTRATION RIGHTS. The Company agrees that, at the First Closing, it
will enter into a Registration Rights Agreement with the Purchasers, in the form
and substance of Exhibit E attached hereto.
11
4.2 RESERVATION OF COMMON STOCK.
(a) As of the date hereof, the Company has reserved and the Company shall
continue to reserve and keep available at all times, free of preemptive rights,
250,000 shares of Common Stock for the purpose of enabling the Company to
satisfy any obligation to issue shares of its Common Stock upon conversion of
the Preferred Stock and exercise of the Warrants, and to sell to each of the
Purchasers shares of its Common Stock at the Second Closing. The number of
shares so reserved shall be increased to reflect stock splits and stock
dividends and distributions.
(b) From and after the date of stockholder approval of an amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock, the Company shall reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to satisfy any obligation to issue shares of its Common
Stock upon conversion of the Preferred Stock and exercise of the Warrants, and
to sell to each of the Purchasers shares of its Common Stock at the Second
Closing. The number of shares so reserved shall be increased to reflect stock
splits and stock dividends and distributions.
4.3 LISTING OF SHARES. The Company hereby agrees, promptly following the
First Closing, to take such action to cause the Shares to be listed on the
Exchange as promptly as possible but no later than 90 days following the First
Closing Date. The Company further agrees, if the Company applies to have its
Common Stock traded on any principal stock exchange or market, it will include
the Shares in such application and will take such other action as is necessary
or desirable to cause the Shares to be listed on such other exchange or market
as promptly as possible.
4.4 EXCHANGE ACT REGISTRATION. The Company will cause its Common Stock to
continue to be registered under Section 12(g) or 12(b) of the Exchange Act, will
comply in all respects with its reporting and filing obligations under the
Exchange Act, and will not take any action or file any document (whether or not
permitted by the Exchange Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under the Exchange Act. The Company will take all action under its
control to continue the listing and trading of its Common Stock on the Exchange
and will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD, the Nasdaq Inc. and the
Exchange.
4.5 LEGENDS. The Shares, and certificates evidencing the same shall, upon
the effectiveness of the Registration Statement to be filed pursuant to the
Registration Rights Agreement described in Section 4.1 (the "Registration
Statement") be free of legends (except as provided in Section 5.1 below), "stop
transfers," so-called, "stock transfer restrictions," or other restrictions.
4.6 CORPORATE EXISTENCE. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.
4.7 BOARD OF DIRECTORS NOMINATIONS. The Company will cause ▇▇▇▇▇ ▇. ▇▇▇▇
and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, or their successors as designated by the Purchasers
(by action of the holders of at least 51% of the then outstanding Shares on
as-converted basis), to be nominated on the Company's management slate of
Directors for election to the Company's Board of Directors at the 1997 Annual
Meeting of Stockholders to be held on or prior to December 19, 1997, and for
re-election to the Company's Board of Directors on each Proxy Statement filed
for each subsequent Annual Meeting of Stockholders (or Special Meeting of
Stockholders where directors are elected) as their respective board seats come
up for re-election until the earlier of (a) the date that the Company first
reports Annual Net Income of at least Fifteen Million Dollars ($15,000,000) and
(b) the date that the Purchasers (including for this purpose each of the
Purchaser's general partners and members of their respective immediate families
to whom shares may have been distributed by a Purchaser) collectively own less
than the Minimum Holdings (as defined below). The "Minimum Holdings" shall be
the number of shares of Common Stock equal to 50% of the sum of (i) 4,582,500
(subject to appropriate adjustment for any stock dividend, stock split,
combination or other
12
similar recapitalization) (such number being the total number of shares of
Common Stock issuable, as of the First Closing, upon conversion of the Preferred
Stock issued to the Purchasers at the First Closing) and (ii) the total number
of shares of Common Stock, if any, issued to the Purchasers at the Second
Closing. For purposes of determining the total number of shares of Common Stock
owned by the Purchasers, each of the Purchaser's general partners and members of
their respective immediate families to whom shares may have been distributed by
a Purchaser, such holders shall be deemed to own the total number of shares of
Common Stock issuable upon conversion of the Preferred Stock. "Annual Net
Income", as used herein, means the net income of the Company for a full fiscal
year as reported in the Company's audited financial statements for such year,
adjusted, however, by excluding from revenue for such fiscal year any
extraordinary or non-recurring revenue and any up-front license fees which
entitle the licensee-payor to license rights for a period in excess of one year.
4.8 RIGHT OF FIRST REFUSAL.
(a) Until such time as the earlier of (i) the date that the Company first
reports Annual Net Income of Fifteen Million Dollars ($15,000,000) and (ii) the
date that the Purchasers and their respective affiliates described in Section
4.7 collectively own less than the Minimum Holdings, each of the Purchasers
shall have the right of first refusal to purchase all or part of its pro rata
share of any New Securities (as defined below) which the Company may, from time
to time, propose to sell and issue, subject to the terms and conditions set
forth below. Each Purchaser's pro rata share, for purposes of this Section 4.8,
shall equal a fraction, the numerator of which is the number of shares of Common
Stock then held by such Purchaser or issuable upon conversion or exercise of any
shares of Preferred Stock, the Warrants or other convertible securities,
options, rights or warrants then held by such Purchaser, and the denominator of
which is the total number of shares of Common Stock then outstanding plus the
number of shares of Common Stock issuable upon conversion or exercise of then
outstanding Preferred Stock or the Warrants or other convertible securities,
option, rights or warrants held by the Purchasers.
(b) "New Securities" shall mean any shares of capital stock of the Company
whether now authorized or not, and rights, options or warrants to purchase
capital stock, and securities of any type whatsoever which are, or may become,
convertible into capital stock; provided, however, that the term "New
Securities" does not include
(i) the shares of Preferred Stock and the Warrants issued or issuable to
the Purchasers pursuant to the terms of this Agreement or the shares of
Common Stock issued or issuable to the Purchasers upon conversion of such
securities;
(ii) securities issued for the acquisition of another corporation by the
Company by merger, purchase of substantially all the assets of such
corporation or another reorganization resulting in the ownership by the
Company of not less than a majority of the voting power of such corporation;
(iii) not more than 4,037,618 shares of Common Stock (such number being
subject to adjustment for any stock dividend, stock split, subdivision,
combination or other recapitalization of the Common Stock of the Company)
issued to directors or employees of or consultants to the Company pursuant
to the Company's stock option plans and such additional shares of Common
Stock that may be issued to employees of or consultants to the Company
pursuant to stock option plans approved by a majority of the members of the
Company's Board of Directors then in office;
(iv) not more than 117,433 shares of Common Stock (such number being
subject to adjustment for any stock dividend, stock split, subdivision,
combination or other recapitalization of the Common Stock of the Company)
issued to employees of the Company pursuant to the Company's employee stock
purchase plan;
(v) not more than 304,500 shares of Common Stock (such number being
subject to adjustment for any stock dividend, stock split, subdivision,
combination or other recapitalization of the Common
13
Stock of the Company) issued to Halifax Fund L.P. or Capital Ventures
International or their permitted transferees, pursuant to warrants issued to
such holders and outstanding on the date hereof;
(vi) not more than 202,595 shares of Common Stock (such number being
subject to adjustment for any stock dividend, stock split, subdivision,
combination or other recapitalization of the Common Stock of the Company)
issued to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Ton ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or
their permitted transferees, pursuant to warrants issued to such holders and
outstanding on the date hereof;
(vii) not more than 500,000 shares of Common Stock (such number being
subject to adjustment for any stock dividend, stock split, subdivision,
combination or other recapitalization of the Common Stock of the Company)
issued to Siemens Aktiengesellschaft ("Siemens"), pursuant to Section 5.1 of
that certain License Agreement between the Company and Siemens dated October
22, 1997; or
(viii) securities issued as a result of any stock split, stock dividend or
reclassification of Common Stock, distributable on a pro rata basis to all
holders of Common Stock.
(c) In the event the Company intends to issue New Securities, it shall give
each Purchaser written notice of such intention, describing the type of New
Securities to be issued, the price thereof and the general terms upon which the
Company proposes to effect such issuance. Each of the Purchasers shall have 20
days from the date of its receipt of any such notice to agree to purchase all or
part of its pro rata share of New Securities, and any additional New Securities
not purchased by the other Purchasers, for the price and upon the general terms
and conditions specified in the Company's notice by giving written notice to the
Company stating the quantity of New Securities to be so purchased. In the event
a Purchaser elects not to purchase all of its pro rata share of New Securities,
and if each of the other Purchasers has given written notice to the Company that
it does not desire to purchase the New Securities not being purchased, the
Company may issue the New Securities described in the Company's notice within 30
days after the expiration of such 20-day period, for the price and upon the
general terms and conditions specified in the Company's notice to the
Purchasers.
(d) For purposes of this Section 4.8, "Purchaser" shall include the general
partners, officers or other affiliates of the Purchaser and members of their
families, and the Purchasers may apportion, to the extent such apportionment
would not prevent the Company from issuing New Securities in satisfaction of its
obligations under this Section 4.8 pursuant to an exemption from registration
under the Securities Act, its pro rata share among itself and such general
partners, officers, affiliates and family members in such proportion as it deems
appropriate.
4.9 ABSENCE OF STOCKHOLDER APPROVAL. In the event the stockholders of the
Company do not approve the proposals described in Section 1.3(a)(x) of this
Agreement at the Company's 1997 Annual Meeting of Stockholders to be held on or
prior to December 19, 1997, the Company shall promptly reimburse each of the
Purchasers for the reasonable costs and expenses, including reasonable
attorneys' fees, incurred by such Purchaser in connection with this Agreement
and the transactions contemplated hereby; and the condition to exercise
contained in the second paragraph of the Warrants shall cease to apply with the
effect that such Warrants shall be irrevocably exercisable in accordance with
their terms.
4.10 BOARD OF DIRECTORS EXPANSION, ETC. The Company and the Purchasers
agree that the election of the Chairman of the Board of the Company, if any, and
the nomination of additional Directors to serve as members of the Board beyond
the number specified in Section 1.3(a)(x) of this Agreement shall require the
affirmative vote of three-fourths of the members of the Board of Directors then
in office, and the Company shall use its best efforts to cause its Board of
Directors to amend by the By-laws of the Company to include therein such a
provision. Any amendments to such bylaw provision shall require the affirmative
vote of three-fourths of the members of the Board of Directors then in office.
4.11 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT. The Company and the Purchasers shall each
promptly file any Notification and Report Forms and related material that it may
be required to file with the Federal Trade
14
Commission and the Antitrust Division of the United States Department of Justice
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, shall use its best efforts to obtain an early
termination of the applicable waiting period, and shall make any further filings
or information submissions pursuant thereto that may be necessary, proper or
advisable.
4.12 SALE OF SHARES UNDER RULE 144. From and after the First Closing, at
the request of any holder of Shares (or other Registrable Securities (as defined
in the Registration Rights Agreement) who proposes to sell the same in
compliance with Rule 144 under the Securities Act, the Company shall
(a) promptly furnish to such holder a written statement as to its compliance
with the filing requirements of the SEC as set forth in Rule 144, as the same
may be amended from time to time, and (b) make such additional filings of
reports with the SEC as will enable the holders of Registrable Securities to
make sales thereof pursuant to such Rule. The Company shall provide its
transfer agent with appropriate instructions and/or opinions of counsel in
order for any restrictive legend contained on the certificates for the Shares
(or other Registrable Securities) to be removed when appropriate and for such
holders to sell, transfer and/or dispose of the Registrable Securities in
accordance with Rule 144.
4.13 EXERCISE OF THE WARRANTS. Each of the Purchasers agrees that it
shall not exercise the Warrants, in whole or in part, on or prior to
December 19, 1997, PROVIDED, HOWEVER, each of the Purchasers may elect to
exercise Warrants, in whole or in part, prior to such date in the event of
any proposed (a) merger or consolidation of the Company into or with another
corporation or other entity, (b) sale or other transfer in one or more
transactions of 50% or more of the assets or earning power of the Company,
(c) tender or exchange offer for securities of the Company, (d) sale or other
transfer in one or more transactions of 20% or more of the securities of the
Company, or (e) liquidation, dissolution or winding up of the Company.
4.14 ABSENCE OF MATERIAL CHANGES. In addition to any other rights provided
by law or in the Certificate of Designations, prior to January 31, 1998, without
the prior written consent of the Purchasers holding at least 51% of the Shares
then outstanding, the Company shall not: (a) issue any stock, bonds or other
corporate securities or grant any option or issue any warrant to purchase or
subscribe for any of such securities or issue any securities convertible into
such securities, EXCLUDING, HOWEVER, options to purchase Common Stock issued to
employees of the Company in the ordinary course of business pursuant to the
Company's existing stock option plans; (b) declare or make any payment or
distribution to its stockholders with respect to its stock, including without
limitation a stock split or stock dividend, or purchase or redeem any shares of
its capital stock; (c) reclassify any shares of its capital stock; (d) merge or
consolidate with or into any corporation or other entity, or sell all or
substantially all of its assets; or (e) commit or agree to do any of the
foregoing in the future.
5. LEGENDS
5.1 LEGENDS. The certificates evidencing the Preferred Stock, the
certificates evidencing the Common Stock purchased by the Purchaser at the
Second Closing and certificates evidencing any shares of Common Stock issued
upon conversion of the Preferred Stock prior to the effectiveness of the
Registration Statement and, except as hereinafter provided in this Section 5.1,
after effectiveness of the Registration Statement, will bear the following
legend (the "Legend"):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
At the First Closing, the Company will issue to the transfer agent for its
Common Stock (and to any substitute or replacement transfer agent for its Common
Stock coterminous with the Company's appointment of any such substitute or
replacement transfer agent) irrevocable instructions in form and substance
reasonably satisfactory to the Purchasers. It is the intent and purpose of such
instructions to require the
15
transfer agent for the Common Stock from time to time to issue certificates
evidencing the Shares free of the Legend during the following periods and under
the following circumstances and without consultation by the transfer agent with
Company or its counsel and without the need for any further advice or
instruction to the transfer agent by or from the Company or its counsel:
(a) At any time from and after the effectiveness of the Registration
Statement, except during periods when use of the Registration Statement is
suspended (as described in Section 7 of the Registration Rights Agreement):
(i) Upon any surrender of one or more Preferred Stock certificates
for conversion into Underlying Stock, to the extent such surrender is
accompanied by a conversion notice requesting the issuance of
certificates evidencing Common Stock free of the Legend and either
containing or also accompanied by representations to the effect that the
holder of the surrendered securities intends to effect one or more sales
of such Shares pursuant to and in accordance with the Registration
Statement, including the prospectus delivery requirements applicable
thereto; and
(ii) upon any surrender of one or more certificates evidencing
Shares and which bear the Legend, to the extent accompanied by a notice
requesting the issuance of new certificates free of the Legend to replace
those surrendered and containing or also accompanied by representations
by the holder of the surrendered securities to the effect of those
described in Section 5.1(a)(i) above.
(b) At any time from and after the First Closing Date, upon any
surrender of one or more certificates evidencing Shares and which bear the
Legend, to the extent accompanied by a notice requesting the issuance of new
certificates free of the Legend to replace those surrendered and containing
or also accompanied by representations that (i) the holder thereof is
permitted to dispose thereof pursuant to Rule 144 promulgated under the
Securities Act or (ii) the holder intends to effect the sale or other
disposition of such securities, whether or not pursuant to the Registration
Statement, to a purchaser or purchasers who will not be subject to the
registration requirements of the Securities Act, or (iii) such holder is not
then subject to such requirements.
In addition, and if applicable, the Company shall reissue the Preferred
Stock, the Common Stock and the Underlying Stock without the Legend at such time
as (i) the holder thereof is permitted to dispose thereof pursuant to Rule 144
under the Securities Act or (ii) the holder intends to effect a sale thereof to
a purchaser or purchasers who will not be subject to the registration
requirements of the Securities Act, or (iii) the holder is not then subject to
such requirements.
5.2 NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend has been or
shall be placed on the share certificates representing the Securities and no
instructions or "stop transfers," so called, "stock transfer restrictions," so
called, or other restrictions have been or shall be given to the Company's
transfer agent with respect thereto, other than as set forth in this Section 5.
5.3 PURCHASER'S COMPLIANCE. Nothing in this section shall affect in any
way the Purchasers' obligations under and agreement to comply with all
applicable securities laws upon resale of the Securities.
6. CHOICE OF LAW AND VENUE
THIS AGREEMENT SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW, EXCEPT TO THE
EXTENT THAT THE LAW OF THE STATE OF DELAWARE REGULATES THE COMPANY'S ISSUANCE OF
SECURITIES.
16
7. ASSIGNMENT; ENTIRE AGREEMENT; AMENDMENT
7.1 ASSIGNMENT. This Agreement may not be assigned by the Purchasers or
the Company to any other person. Notwithstanding the foregoing, the provisions
of this Agreement shall inure to the benefit of, and be enforceable by, any
assignee of a Purchaser which is a general partner of such Purchaser and by any
transferee of any of the Securities purchased or acquired by such Purchaser
hereunder with respect to the Securities held by such person or entity.
7.2 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Preferred Stock, the
Warrants, the Common Stock, the Registration Rights Agreement, the Ancillary
Agreements and the other agreements and documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof and supersede all prior
agreements and understandings relating to such subject matter, and no party
shall be liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth in this Agreement
or therein. Except as expressly provided in this Agreement, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought.
8. PUBLICITY
The Company agrees that it will not disclose, and will not include in any
public announcement, the name of a Purchaser without its consent, unless and
until such disclosure is required by law or applicable regulation, and then only
to the extent of such requirement and subject to the prior review of the content
of such disclosure by each of the Purchasers.
9. NOTICES, ETC.; EXPENSES; INDEMNITY
9.1 NOTICES. Any notice, demand, request or other communication required
or permitted to be given by either the Company or a Purchaser pursuant to the
terms of this Agreement shall be in writing and shall be deemed to have been
duly given when delivered personally or by facsimile, with a hard copy to follow
by overnight delivery by a reputable courier:
If to the Company, at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: President, Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇, or at such other address
or addresses as may have been furnished in writing by the Company to the
Purchasers, with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, Professional Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇; or
If to a Purchaser, at its address set forth in Exhibit A, or at such
other address or addresses as may have been furnished to the Company in
writing by such Purchaser, with a copy to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., ▇▇▇▇ and
▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Facsimile No: (617)
526-5000.
9.2 INDEMNIFICATION. Each party ("Indemnifying Party") shall indemnify the
other party against any loss, liabilities, expenses, cost or damages (including
reasonable attorney's fees) incurred as a result of the Indemnifying Party's
breach of any representation, warranty, covenant or agreement in this Agreement.
In addition, if the Company fails for any reason to sell the Preferred Stock to
the Purchasers at the First Closing, the Company shall promptly pay the
Purchaser an amount equal to the Purchasers' reasonable expenses and costs
(including without limitation, reasonable attorneys' fees) incurred in
connection with this Agreement and the transactions contemplated hereby.
17
10.COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be enforceable against the parties actually executing such counterparts,
and all of which together shall constitute one instrument.
11.SURVIVAL; SEVERABILITY
The representations, warranties, covenants and agreements of the parties
hereto shall survive both the First Closing and the Second Closing. In the event
that any provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision; provided that
the absence of such provision does not materially change the economic benefit of
this Agreement to any party.
12.TITLE AND SUBTITLES
The titles and subtitles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.
IN WITNESS WHEREOF, the parties have signed this Agreement the day and year
first written above.
ATTEST GATEFIELD CORPORATION
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ --------------------------------------------
VICE PRESIDENT, GENERAL COUNSEL ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
AND CORPORATE SECRETARY ITS PRESIDENT AND CHIEF EXECUTIVE OFFICER
PURCHASERS:
IDANTA PARTNERS LTD.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, TRUSTEE
▇▇▇▇ FAMILY TRUST
GENERAL PARTNER
▇▇▇▇ FAMILY TRUST
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, TRUSTEE
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ TRUST
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, TRUSTEE
18
EXHIBIT A
LIST OF PURCHASERS
NO. OF SHARES NO. OF SHARES NO. OF SHARES
OF PREFERRED OF COMMON STOCK OF COMMON STOCK
STOCK ISSUABLE UPON AGGREGATE PURCHASE TO BE PURCHASED
TO BE PURCHASED EXERCISE OF PRICE TO BE PAID AT SECOND
NAME AND ADDRESS OF PURCHASER AT FIRST CLOSING WARRANT AT FIRST CLOSING CLOSING
------------------------------------ ----------------- ------------------ ------------------ ----------------
Idanta Partners Ltd. ............... 790,000 788,223 $ 3,620,175 3,620,175
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ Family Trust .................. 200,000 199,550 $ 916,500 916,500
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇, Trustee
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Trust .............. 10,000 9,978 $ 45,825 45,825
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Trustee
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
----------------- ---------- ------------------ ----------------
TOTAL........................... 1,000,000 997,751 $ 4,582,500 4,582,500
----------------- ---------- ------------------ ----------------
----------------- ---------- ------------------ ----------------
A-1