EXHIBIT 10.1
COMMON STOCK PURCHASE AGREEMENT
Dated as of December 21, 2001
by and between
TIVO INC.
and
ACQUA WELLINGTON NORTH AMERICAN EQUITIES FUND, LTD.
Table of Contents
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Page
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ARTICLE I Definitions................................................................................. 1
Section 1.1 Definitions.............................................................. 1
ARTICLE II Purchase and Sale of Common Stock.......................................................... 5
Section 2.1 Purchase and Sale of Stock............................................... 5
Section 2.2 The Shares............................................................... 5
Section 2.3 Registration Statements.................................................. 5
Section 2.4 Purchase Price and Closing............................................... 6
ARTICLE III Representations and Warranties............................................................ 6
Section 3.1 Representations and Warranties of the Company............................ 6
Section 3.2 Representations and Warranties of the Purchaser.......................... 13
ARTICLE IV Covenants.................................................................................. 14
Section 4.1 Securities Compliance.................................................... 15
Section 4.2 Registration and Listing................................................. 15
Section 4.3 Registration Statement................................................... 15
Section 4.4 Compliance with Laws..................................................... 15
Section 4.5 Keeping of Records and Books of Account.................................. 15
Section 4.6 Limitations on Holdings and Issuances.................................... 16
Section 4.7 Amendment to Registration Statement...................................... 16
Section 4.8 Other Agreements and Other Financings.................................... 16
Section 4.9 Stop Orders.............................................................. 17
Section 4.10 Amendments to the Registration Statement................................. 17
Section 4.11 Prospectus Delivery...................................................... 18
Section 4.12 Selling Restriction...................................................... 18
Section 4.13 Non-Public Information................................................... 18
Section 4.14 Effective Registration Statement......................................... 18
Section 4.15 Disclosure of Draw Down Notice........................................... 18
Section 4.16 Broker-Dealer............................................................ 19
ARTICLE V Conditions to Closing, Draw Downs and Call Options.......................................... 19
Section 5.1 Conditions Precedent to Closing by the Company and to the Company's
Obligation to Sell the Shares............................................ 19
Section 5.2 Conditions Precedent to the Closing by the Purchaser..................... 20
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to Accept a Draw
Down or Call Option Grant and Purchase the Shares........................ 21
ARTICLE VI Draw Down Terms; Call Option............................................................... 22
Section 6.1 Draw Down Terms.......................................................... 22
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Table of Contents
(continued)
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Section 6.2 Purchaser's Call Option.................................................. 25
Section 6.3 Aggregate Limit.......................................................... 26
ARTICLE VII Termination............................................................................... 26
Section 7.1 Term; Termination by Mutual Consent...................................... 26
Section 7.2 Other Termination........................................................ 26
Section 7.3 Effect of Termination.................................................... 26
ARTICLE VIII Indemnification.......................................................................... 27
Section 8.1 General Indemnity........................................................ 27
Section 8.2 Indemnification Procedures............................................... 28
ARTICLE IX Miscellaneous.............................................................................. 29
Section 9.1 Fees and Expenses........................................................ 29
Section 9.2 Specific Enforcement, Consent to Jurisdiction............................ 30
Section 9.3 Entire Agreement; Amendment.............................................. 30
Section 9.4 Notices.................................................................. 30
Section 9.5 Waivers.................................................................. 31
Section 9.6 Headings................................................................. 32
Section 9.7 Successors and Assigns................................................... 32
Section 9.8 Governing Law............................................................ 32
Section 9.9 Survival................................................................. 32
Section 9.10 Counterparts............................................................. 32
Section 9.11 Publicity................................................................ 32
Section 9.12 Severability............................................................. 32
Section 9.13 Further Assurances....................................................... 33
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement"), is dated as of
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December 21, 2001 by and between TiVo Inc., a Delaware corporation (the
"Company") and Acqua Wellington North American Equities Fund, Ltd., an
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international business company incorporated under the laws of the Commonwealth
of The Bahamas (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions.
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(a) "Acceptable Financing" shall have the meaning assigned to such term in
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Section 4.8(b) hereof.
(b) "Aggregate Limit" shall have the meaning assigned to such term in
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Section 2.1 hereof.
(c) "Alternate Market" shall mean the Nasdaq Small Cap Market, the
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American Stock Exchange, the New York Stock Exchange or the OTC Bulletin Board,
whichever is at the time the principal trading exchange or market for the Common
Stock.
(d) "Amendment" shall have the meaning assigned to such term in
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Section 4.7 hereof.
(e) "Articles" shall have the meaning assigned to such term in Section
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3.1(c) hereof.
(f) "Below Threshold Amount" shall have the meaning assigned to such term
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in Section 6.1(i) hereof.
(g) "Bylaws" shall have the meaning assigned to such term in Section
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3.1(c) hereof.
(h) "Call Option" means the transactions contemplated under Section 6.2 of
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this Agreement.
(i) "Call Option Amount" shall mean the actual amount of proceeds received
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by the Company by a Call Option under this Agreement.
(j) "Call Option Amount Requested" shall mean the amount of a Call Option
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requested by the Company as provided in Section 6.2 hereof.
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(k) "Call Option Notice" shall mean a notice sent to the Company on the
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Trading Day the Purchaser elects to exercise a Call Option, as provided in
Section 6.2(e) hereof, and substantially in the form attached hereto as
Exhibit F.
(l) "Closing" shall have the meaning assigned to such term in Section 2.4
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hereof.
(m) "Commission" shall mean the Securities and Exchange Commission or any
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successor entity.
(n) "Commission Documents" shall mean all reports, schedules, forms,
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statements and other documents filed by the Company with the Commission pursuant
to the reporting requirements of the Exchange Act, including material filed
pursuant to Section 13(a) or 15(d) of the Exchange Act, which have been
previously filed by the Company and which shall be filed by the Company in the
future during the Investment Period, including, without limitation the
Transition Report on Form 10-K filed by the Company for the one-month transition
period ended January 31, 2001, the Amended and Restated Annual Report on Form
10-K filed by the Company for the year ended December 31, 2000, the Quarterly
Report on Form 10-Q filed by the Company for the quarterly period ended April
30, 2001, the Quarterly Report on Form 10-Q for the quarterly period ended July
31, 2000 and all Current Reports on Form 8-K filed by the Company after December
31, 2000 and shall include all information contained in such filings and all
filings incorporated by reference therein.
(o) "Commission Filings" means the Registration Statement, as the same may
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be amended from time to time, and all other filings made by the Company with the
Commission prior to or after the date hereof pursuant to the Exchange Act.
(p) "Common Stock" means the Company's common stock, $.001 par value per
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share.
(q) "DTC" shall have the meaning assigned to such term in Section 6.1(l).
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(r) "DWAC" shall have the meaning assigned to such term in Section 6.1(l).
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(s) "Draw Down" means the transactions contemplated under Section 6.1 of
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this Agreement.
(t) "Draw Down Amount" means the actual amount of proceeds received by the
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Company by a Draw Down under this Agreement.
(u) "Draw Down Amount Requested" shall mean the amount of a Draw Down
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requested by the Company in its Draw Down Notice as provided in Section 6.1(j)
hereof.
(v) "Draw Down Discount Price" shall have the meaning assigned to such
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term in Section 6.1(b) hereof.
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(w) "Draw Down Exercise Date" shall have the meaning assigned to such term
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in Section 6.1(a) hereof.
(x) "Draw Down Notice" shall mean a notice sent by the Company to exercise
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a Draw Down as provided in Section 6.1(j) hereof.
(y) "Draw Down Pricing Period" shall mean a period of twenty (20)
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consecutive Trading Days commencing on the first Trading Day designated as the
start date of such draw down pricing period in the Draw Down Notice, or such
other period mutually agreed upon by the Purchaser and the Company.
(z) "Environmental Laws" shall have the meaning assigned to such term in
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Section 3.1(r) hereof.
(aa) "ERISA Affiliate" shall have the meaning assigned to such term in
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Section 3.1(y) hereof.
(bb) "Event Period" shall have the meaning assigned to such term in Section
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7.2 hereof.
(cc) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
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amended, and the rules and regulations of the Commission thereunder.
(dd) "GAAP" shall mean generally accepted accounting principles in the
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United States of America as applied by the Company.
(ee) "Indebtedness" shall have the meaning assigned to such term in Section
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3.1(k) hereof.
(ff) "Investment Period" shall have the meaning assigned to such term in
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Section 7.1 hereof.
(gg) "Material Adverse Effect" shall mean any effect on the business,
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prospects, operations, properties or financial condition of the Company that is
material and adverse to the Company and its subsidiaries and affiliates, taken
as a whole, and/or any condition, circumstance, or situation that would prohibit
or otherwise interfere with the ability of the Company to enter into and perform
any of its obligations under this Agreement in any material respect.
(hh) "Material Agreements" shall have the meaning assigned to such term in
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Section 3.1(s) hereof.
(ii) "Material Change in Ownership" shall mean that the officers, directors
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and significant investors of the Company shall beneficially own in the aggregate
less than 2% of the outstanding Common Stock.
(jj) "Nasdaq" means the NASDAQ National Market or any successor thereto.
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(kk) "Other Financing" shall have the meaning assigned to such term in
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Section 4.8(b) hereof.
(ll) "Other Financing Notice" shall have the meaning assigned to such term
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in Section 4.8(b) hereof.
(mm) "Permitted Transaction" shall have the meaning assigned to such term
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in Section 4.8(b) hereof.
(nn) "Pro-Rata Amount" a fraction, the numerator of which is one (1) and
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the denominator of which equals the number of Trading Days in the Draw Down
Pricing Period.
(oo) "Prospectus" as used in this Agreement means the prospectus in the
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form included in the Registration Statement as supplemented by any supplement to
the Prospectus filed with the Commission pursuant to Rule 424(b) promulgated
under Securities Act, or, if the prospectus included in the Registration
Statement omits information in reliance on Rule 430A under the Securities Act,
and such information is included in a prospectus filed with the Commission
pursuant to Rule 424(b) under the Securities Act, the term "Prospectus" as used
in this Agreement means the prospectus in the form included in the Registration
Statement, as amended, as supplemented by the addition of the Rule 430A
information contained in the Prospectus filed with the Commission pursuant to
Rule 424(b).
(pp) "Registration Statement" shall mean the registration statement on Form
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S-3, Commission File Number 333-53152 under the Securities Act, filed with the
Securities and Exchange Commission for the registration of the Shares, as such
Registration Statement may be amended from time to time, including by the
Amendment.
(qq) "Securities Act" shall mean the Securities Act of 1933, as amended,
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and the rules and regulations of the Commission thereunder.
(rr) "Settlement Date" shall have the meaning assigned to such term in
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Section 6.1(d) hereof.
(ss) "Shares" shall mean, collectively, the shares of Common Stock of the
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Company issuable to the Purchaser upon exercise of any Draw Down and those
shares of Common Stock issuable to the Purchaser upon exercise of any Call
Option.
(tt) "Threshold Price" is the lowest price at which the Company may set in
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the Draw Down Notice to sell Shares during each Draw Down Pricing Period (not
taking into account the Draw Down Discount Price during such Draw Down Pricing
Period); provided, however, that at no time shall the Threshold Price be set
below three dollars ($3.00) (as adjusted for stock splits, reverse stock splits,
recapitalizations and the like) per share unless the Company and the Purchaser
mutually agree.
(uu) "Trading Day" shall mean a trading day on the Nasdaq.
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(vv) "Trading Day Number" shall have the meaning assigned to such term in
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Section 6.1(m) hereof.
(ww) "Truncate Notice" shall have the meaning assigned to such term in
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Section 6.1(m) hereof.
(xx) "Truncated Draw Down Allocation Amount" shall mean the portion of the
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Draw Down Amount Requested that is allocated to the purchase of Shares in
accordance with Section 6.1 hereof for each Trading Day in a Truncated Pricing
Period (as provided in Section 6.1(m) hereof) that (i) the VWAP equals or
exceeds the Threshold Price, and (ii) the VWAP is below the Threshold Price and
the Purchaser elects to purchase the Common Stock at the Threshold Price in
accordance with clauses (i) and (m) of Section 6.1 hereof.
(yy) "Truncated Pricing Period" shall have the meaning assigned to such
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term in Section 6.1(m) hereof.
(zz) "Unallocated Day" shall have the meaning assigned to such term in
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Section 6.1 (i) hereof.
(aaa) "VWAP" shall mean the daily volume weighted average price (based on a
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Trading Day from 9:30 a.m. to 4:00 p.m. (New York time)) of the Company on the
Nasdaq National Market or an Alternate Market as reported by Bloomberg Financial
LP using the AQR function.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Purchase and Sale of Stock. Subject to the terms and
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conditions of this Agreement, the Company shall issue and sell to the Purchaser
and the Purchaser shall purchase from the Company during the Investment Period
up to a maximum of $14,000,000 of Common Stock (the "Aggregate Limit") through
(i) up to twelve (12) monthly Draw Downs during the Investment Period as
provided in Section 6.1 hereof and (ii) one (1) or more Call Options which the
Company may in its discretion grant to the Purchaser and which may be exercised
by the Purchaser during the applicable Draw Down Pricing Period, as provided in
Section 6.2 hereof. The aggregate dollar amount of all Draw Down Amounts and
Call Option Amounts pursuant to the terms and conditions of this Agreement shall
not exceed the Aggregate Limit.
Section 2.2 The Shares. The Company has authorized and has reserved and
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covenants to continue to reserve, subject to Section 4.4(b) hereof, free of
preemptive rights and other similar contractual rights of stockholders, a
sufficient number of its authorized but unissued shares of its Common Stock to
cover the Shares to be issued in connection with all Draw Downs and Call
Options.
Section 2.3 Registration Statements. The Company has prepared and filed
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with the Commission in accordance with the provisions of the Securities Act, the
Registration Statement, including a Prospectus. The Registration Statement was
declared effective by the Commission
5
on January 25, 2001. Pursuant to Section 4.7, the Company will file with the
Commission a post-effective amendment (the "Amendment") to the Registration
Statement relating to this Agreement.
Section 2.4 Purchase Price and Closing. In consideration of and in
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express reliance upon the representations, warranties, covenants, terms and
conditions of this Agreement, the Company agrees to issue and sell to the
Purchaser, and the Purchaser agrees to purchase, that number of the Shares to be
issued in connection with each Draw Down and exercise of each Call Option in
accordance with the terms and conditions of this Agreement. The closing under
this Agreement shall take place at the offices of Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ LLP, Chrysler Building, 405 Lexington Avenue, 9th Fl, New York, New York
(the "Closing") at 10:00 a.m. (New York time) on (i) December 21, 2001, or (ii)
such other time and place or on such date as the Purchaser and the Company may
agree upon (the "Closing Date"). Each party shall deliver all documents,
instruments and writings required to be delivered by such party pursuant to this
Agreement at or prior to the Closing.
ARTICLE III
Representations and Warranties
Section 3.1 Representations and Warranties of the Company. The Company
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hereby makes the following representations and warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is a corporation
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duly incorporated, validly existing and in good standing under the laws of
Delaware and has the requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
As of the date hereof, the Company does not have any subsidiaries (as defined in
Section 3.1(g)) except as set forth in the Commission Documents, the Commission
Filings or on Schedule 3.1(a) attached hereto. 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 except for
any jurisdiction in which the failure to be so qualified will not have a
Material Adverse Effect.
(b) Authorization; Enforcement. The Company has the requisite corporate
--------------------------
power and authority to enter into and perform this Agreement and to issue and
sell the Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action, and no further consent or authorization of the
Company or its Board of Directors or stockholders is required. This Agreement
has been duly executed and delivered by the Company. This Agreement constitutes,
or shall constitute when executed and delivered, a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditor's rights and remedies or by other equitable principles of general
application.
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(c) Capitalization. The authorized capital stock of the Company and the
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shares thereof issued and outstanding as of October 31, 2001 are set forth in
the Registration Statement or on Schedule 3.1(c) attached hereto. All of the
outstanding shares of Common Stock have been duly and validly authorized, and
are fully paid and nonassessable. Except as set forth in the Commission
Documents, the Commission Filings or on Schedule 3.1(c) attached hereto, as of
the date hereof, there are no outstanding options or warrants of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company. Furthermore, except as set forth in the Commission
Documents, the Commission Filings or Schedule 3.1(c) attached hereto, as of the
date hereof, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except for customary
transfer restrictions contained in agreements entered into by the Company in
order to sell restricted securities or as set forth in the Commission Documents,
the Commission Filings or Schedule 3.1(c) attached hereto, as of the date
hereof, the Company is not a party to, and it has no knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of the
Company. Except as set forth in the Commission Documents, the Commission Filings
or Schedule 3.1(c) attached hereto, as of the date hereof the Company is not a
party to any agreement granting registration rights, premptive rights or
subscription rights to any person with respect to any shares of its capital
stock. Except as set forth on Schedule 3.1(c) attached hereto, the offer and
sale of all capital stock, convertible securities, rights, warrants, or options
of the Company issued prior to the Closing complied with all applicable federal
and state securities laws, and no stockholder has a right of rescission or
damages with respect thereto which would have a Material Adverse Effect. 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 "Articles"), and the Company's Bylaws as in effect on the date hereof (the
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"Bylaws").
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(d) Issuance of Shares. The Shares to be issued under this Agreement have
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been duly authorized by all necessary corporate action and, when paid for and
issued in accordance with the terms hereof, the Shares shall be validly issued
and outstanding, fully paid and nonassessable, and the Purchaser shall be
entitled to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this
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Agreement by the Company and the consummation by the Company of the transactions
contemplated herein do not (i) violate any provision of the Company's Articles
or Bylaws, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party, (iii)
create or impose a lien, charge or encumbrance on any property of the Company
under any agreement or any commitment to which the Company is a party or by
which the Company is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of any federal, state, local or
foreign statute, 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 are bound or affected,
7
except, in all cases (other than violations of federal securities laws), for
such conflicts, defaults, terminations, amendments, acceleration, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The Company is not required under federal, state or local law,
rule or regulation 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 Shares to the Purchaser in accordance with the terms hereof
(other than any filings which may be required to be made by the Company with the
Commission or Nasdaq subsequent to the Closing and the Amendment); provided,
however, that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the representations,
warranties and agreements of the Purchaser herein.
(f) Commission Documents, Financial Statements. The Common Stock is
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registered pursuant to Section 12(b) or 12(g) of the Exchange Act and, except as
disclosed in the Commission Documents, the Commission Filings or on Schedule
3.1(f) attached hereto, as of the date hereof the Company has timely filed all
Commission Documents. The Company has not provided to the Purchaser any
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement. As
of their respective dates, the Commission Documents complied in all material
respects with the requirements of the Exchange Act and other federal, state and
local laws, rules and regulations applicable to them, and, as of their
respective dates, such Commission Documents did not contain any untrue statement
of a material fact or omit 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 Commission Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules and
regulations with respect thereto as of the date of filing. Such financial
statements have been prepared in accordance with GAAP 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 in all material respects
the financial position of the Company and its subsidiaries 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).
(g) Subsidiaries. The Commission Documents, the Commission Filings or
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Schedule 3.1(g) attached hereto set forth each subsidiary of the Company as of
the date hereof, showing the jurisdiction of its incorporation or organization
and showing the percentage of the Company's ownership of the outstanding stock
or other interests of such subsidiary. For the purposes of this Agreement,
"subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. Except as set
forth in the Commission Documents or the Commission Filings, none of such
subsidiaries is a "significant subsidiary" as defined in Regulation S-X.
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(h) No Material Adverse Effect. Since July 31, 2001, the Company has not
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experienced or suffered any Material Adverse Effect.
(i) No Undisclosed Liabilities. Except as disclosed in the Commission
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Documents, the Commission Filings or on Schedule 3.1(i) attached hereto, neither
the Company nor any of its subsidiaries has any liabilities, obligations, claims
or losses (whether liquidated or unliquidated, secured or unsecured, absolute,
accrued, contingent or otherwise) that would be required to be disclosed on a
balance sheet of the Company or any subsidiary (including the notes thereto) in
conformity with GAAP and are not disclosed in the Commission Documents or
Commission Filings, other than those incurred in the ordinary course of the
Company's or its subsidiaries respective businesses since July 31, 2001 and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect.
(j) 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 financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed except for events or circumstances which individually or in the
aggregate, do not or would not have a Material Adverse Effect.
(k) Indebtedness. The Commission Documents or Commission Filings set forth
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all outstanding secured and unsecured Indebtedness of the Company or any
subsidiary, or for which the Company or any subsidiary has commitments. For the
purposes of this Agreement, "Indebtedness" shall mean (a) any liabilities for
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borrowed money or amounts owed in excess of $1,000,000 (other than trade
accounts payable incurred in the ordinary course of business), (b) all
guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $1,000,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any subsidiary is
in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and its subsidiaries has good and
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marketable title to all of their respective real and personal property reflected
in the Commission Documents or the Commission Filings, free of any mortgages,
pledges, charges, liens, security interests or other encumbrances, except for
those indicated in the Commission Documents, the Commission Filings or on
Schedule 3.1(l) attached hereto or those that do not or would not have a
Material Adverse Effect. All said real property leases of the Company and each
of its subsidiaries are valid and subsisting and in full force and effect in all
material respects.
(m) Actions Pending. There is no action, suit, claim, investigation or
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proceeding pending or, to the knowledge of the Company, threatened against the
Company or any subsidiary which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the Commission Documents, the
Commission Filings or on Schedule 3.1(m) attached hereto, there is no action,
suit, claim, investigation or proceeding pending or, to the knowledge of the
Company,
9
threatened, against or involving the Company, any subsidiary or any of
their respective properties or assets and which, if determined adversely to the
Company or its subsidiary, would have a Material Adverse Effect.
(n) Compliance with Law. The business of the Company and the subsidiaries
-------------------
has been and is presently being conducted in all material respects in accordance
with all applicable federal, state and local governmental laws, rules,
regulations and ordinances, except as set forth in the Commission Documents, the
Commission Filings or on Schedule 3.1(n) attached hereto, and except as,
individually or in the aggregate, do not or would not have a Material Adverse
Effect. The Company and each of its subsidiaries have all franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals necessary for the conduct of its business as now being conducted by
it, except where the failure to possess such franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals,
individually or in the aggregate, do not or would not have a Material Adverse
Effect.
(o) Certain Fees. Except for the placement fee paid by the Company to
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Reedland Capital Partners, an Institutional Division of Financial West Group,
Member, NASD/SIPC/MSRB, no brokers, finders or financial advisory fees or
commissions will be payable by the Company or any subsidiary with respect to the
transactions contemplated by this Agreement.
(p) Disclosure. Neither this Agreement or the Schedules hereto nor any
----------
other documents, certificates or instruments furnished to the Purchaser by or on
behalf of the Company or any subsidiary in connection with the transactions
contemplated by this Agreement, taken as a whole, contain any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements made herein or therein, in the light of the circumstances under
which they were made herein or therein, not misleading.
(q) Operation of Business. The Company or one or more of its subsidiaries
---------------------
owns or controls all patents, trademarks, service marks, trade names,
copyrights, licenses and authorizations, and all rights with respect to the
foregoing, which are necessary for the conduct of its business as now conducted
without, to the best of the Company's knowledge, any conflict with the rights of
others, except to the extent set forth in the Commission Documents or the
Commission Filings and except to the extent that any such conflict would not
have a Material Adverse Effect.
(r) Environmental Compliance. Except as disclosed in the Commission
------------------------
Documents, Commission Filings or on Schedule 3.1(r) attached hereto, the Company
and each of its subsidiaries have obtained all material approvals,
authorization, certificates, consents, licenses, orders and permits or other
similar authorizations of all governmental authorities, or from any other
person, that are required under any Environmental Laws, except for any
approvals, authorization, certificates, consents, licenses, orders and permits
or other similar authorizations the failure of which to obtain does not or would
not have a Material Adverse Effect. "Environmental Laws" shall mean all
applicable laws relating to the protection of the environment including, without
limitation, all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened
10
releases of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. Except for such instances as would not individually or in the
aggregate have a Material Adverse Effect, to the best of the Company's
knowledge, there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting the Company
or its subsidiaries that violate or could reasonably be expected to violate any
Environmental Law after the Closing or that could reasonably be expected to give
rise to any environmental liability, or otherwise form the basis of any claim,
action, demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.
(s) Material Agreements. Except for such instruments which are described
-------------------
in the Commission Documents, filed with the Commission Filings or otherwise set
forth on Schedule 3.1(s) attached hereto, neither the Company nor any subsidiary
of the Company is a party to any written or oral contract, instrument,
agreement, commitment, obligation, plan or arrangement, a copy of which would be
required to be filed with the Commission as an exhibit to a registration
statement on Form S-1 or an annual report on Form 10-K (collectively, "Material
Agreements") if the Company or any subsidiary were registering securities under
the Securities Act. The Company and each of its subsidiaries has in all material
respects performed all the obligations required to be performed by them to date
under the Material Agreements, have received no notice of default by the Company
thereunder and are not in default under any Material Agreement now in effect,
the result of which would have a Material Adverse Effect.
(t) Transactions with Affiliates. Except as set forth in the Commission
----------------------------
Documents, the Commission Filings or on Schedule 3.1(t) attached hereto, there
are no loans, leases, agreements, contracts, royalty agreements, management
contracts or arrangements or other continuing transactions exceeding $60,000
between (a) the Company or any subsidiary, on the one hand, and (b) on the other
hand, any officer, employee or director of the Company, or any of its
subsidiaries, or any person who would be covered by Item 404(a) of Regulation S-
K or any corporation or other entity controlled by such officer, employee,
director or person.
(u) Securities Act. The Company has complied in all material respects with
--------------
all applicable federal and state securities laws in connection with the offer,
issuance and sale of the Shares hereunder.
(i) Each Prospectus included as part of the Registration Statement as
originally filed or as part of any amendment or supplement thereto, including
the Amendment, or filed pursuant to Rule 424 under the Securities Act, complied
and will comply, as applicable, when so filed in all material respects with the
provisions of the Securities Act. The Commission has not issued any order
preventing or suspending the use of any Prospectus.
11
(ii) The Company meets the requirements for the use of Form S-3 under the
Securities Act. The Registration Statement in the form in which it became
effective, the Amendment in the form in which it will become effective and also
in such form as the Registration Statement, as so amended, may be further
amended or supplemented from time to time, and the Prospectus and any supplement
or amendment thereto when filed with the Commission under Rule 424(b) under the
Securities Act, complied and will comply, as the case may be, in all material
respects with the provisions of the Securities Act and did not and will not at
any such times contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein in the light of the circumstances under which they were and are made,
not misleading, except that this representation and warranty does not apply to
statements in or omissions from the Registration Statement or the Prospectus
made in reliance upon and in conformity with information relating to the
Purchaser furnished to the Company in writing by or on behalf of the Purchaser
expressly for use therein.
(iii) The Company has not distributed and, prior to the completion of the
distribution of the Shares, will not distribute any offering material in
connection with the offering and sale of the Shares other than the Registration
Statement, the Amendment, the related prospectus or other materials, if any,
permitted by the Securities Act.
(v) Employees. As of the date hereof, neither the Company nor any
---------
subsidiary of the Company has any collective bargaining arrangements or
agreements covering any of its employees, except as set forth in the Commission
Documents, the Commission Filings or on Schedule 3.1(v) attached hereto. Except
as set forth in the Commission Filings, Commission Documents or on Schedule
--------
3.1(v) attached hereto, as of the date hereof the Company has no employment
------
contract or any other similar contract or restrictive covenant, relating to the
right of any officer, employee or consultant to be employed or engaged by the
Company. Each of the Company and its subsidiaries requires its officers,
technical employees and certain consultants to enter into agreements regarding
proprietary information and assignment of inventions, or other similar
agreements containing restrictive covenants. As of the date hereof, except as
disclosed in the Registration Statement, the Commission Documents, the
Commission Filings or Schedule 3.1(v), no officer, consultant or key employee of
the Company or any subsidiary whose termination, either individually or in the
aggregate, would have a Material Adverse Effect, has terminated or, to the
knowledge of the Company, has any present intention of terminating his or her
employment or engagement with the Company or any subsidiary.
(w) Use of Proceeds. The proceeds from the sale of the Shares will be used
---------------
by the Company and its subsidiaries as set forth in the Registration Statement.
(x) Public Utility Holding Company Act and Investment Company Act Status.
--------------------------------------------------------------------
The Company is not a "holding company" or a "public utility company" as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended.
The Company is not, and as a result of and immediately upon Closing will not be,
an "investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
12
(y) ERISA. Neither the Company nor any ERISA Affiliate (as defined below)
-----
has ever sponsored, maintained, contributed to or been obligated to contribute
to a Plan (as defined below) subject to Title IV of ERISA or Section 412 of the
Code. The Company and each ERISA Affiliate, with respect to each Plan is, and
each such Plan is, in compliance in all material respects with ERISA, the Code,
and any other applicable legal requirements. Neither the Company nor any ERISA
Affiliate nor, to the Company's knowledge, any fiduciary of any Plan which
covers or has covered employees or former employees of the Company or any ERISA
Affiliate has engaged in any transaction in violation of ERISA (S)(S) 404 or 406
or any "prohibited transaction," as defined in Code (S) 4975(c)(1), or has
otherwise violated in any material respect any of the provisions of ERISA. As
used in this Section 3.1(y) the term "ERISA Affiliate" shall mean any other
---------------
person that, together with the Company, would be treated as a single employer
under Code (S) 414(b) or (c), and solely for the purposes of potential liability
under ERISA (S) 302(c)(ii) and Code (S) 412(c)(ii) and the lien created under
ERISA (S) 302(f) and Code (S) 412(n), under Code (S) 414(m) or (o). As used in
this Section 3.1(y) the term "Plan" shall mean an "employee pension benefit
plan" as defined in Section 3(3) of ERISA that is, or at any time was,
sponsored, maintained, or contributed to by the Company or any ERISA Affiliate
or to which the Company or any ERISA Affiliate has ever been obligated to
contribute.
(z) Acknowledgment Regarding Purchaser's Purchase of Shares. The Company
-------------------------------------------------------
acknowledges and agrees that the Purchaser is acting solely in the capacity of
an arm's length purchaser with respect to this Agreement and the transactions
contemplated hereunder. The Company further acknowledges that the Purchaser is
not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereunder and any advice given by the Purchaser or any of its representatives or
agents in connection with this Agreement and the transactions contemplated
hereunder is merely incidental to the Purchaser's purchase of the Shares.
(aa) Market Value of Stock Held by Non-Affiliates. As of November 7, 2001,
--------------------------------------------
the aggregate market value of the Company's outstanding voting stock held by
non-affiliates of the Company was $150,186,508.90.
Section 3.2 Representations and Warranties of the Purchaser. The
-----------------------------------------------
Purchaser hereby makes the following representations and war ranties to the
Company:
(a) Organization and Standing of the Purchaser. The Purchaser is an
------------------------------------------
international business company duly incorporated, validly existing and in
good standing under the laws of the Commonwealth of The Bahamas.
(b) Authorization and Power. The Purchaser has the requisite corporate
-----------------------
power and authority to enter into and perform this Agreement and to purchase the
Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Purchaser, its
Board of Directors or stockholders is required. This Agreement has been duly
executed and delivered by the Purchaser. This Agreement constitutes, or shall
constitute when executed and delivered, a valid and binding obligation of the
Purchaser enforceable against the
13
Purchaser in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership, or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of this
------------
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby and thereby or relating hereto do not and will not (i) result in a
violation of such Purchaser's charter documents or bylaws or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Purchaser is a party, (iii) create or impose or lien,
charge or encumbrance on any property of the Purchaser under any agreement or
any commitment to which the Purchaser is party or by which the Purchaser is
bound or by which any of its respective properties or assets are bound, or (iv)
result in a violation of any law, rule, or regulation, or any order, judgment or
decree of any court or governmental agency applicable to the Purchaser or its
properties, except for such conflicts, defaults and violations as would not,
individually or in the aggregate, prohibit or otherwise interfere with the
ability of the Purchaser to enter into and perform its obligations under this
Agreement in any material respect. The Purchaser is not required 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 to purchase the Shares in accordance
with the terms hereof; provided, however, that for purposes of the
representation made in this sentence, the Purchaser is assuming and relying upon
the accuracy of the representations, warranties and agreements of the Company
herein.
(d) Information. The Purchaser and its advisors, if any, have been
-----------
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Shares which
have been requested by the Purchaser. The Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. The
Purchaser has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Shares. The Purchaser understands that it (and not the
Company) shall be responsible for its own tax liabilities that may arise as a
result of this investment or the transactions contemplated by this Agreement.
ARTICLE IV
Covenants
The Company covenants with the Purchaser, and the Purchaser covenants with
the Company, as follows, which covenants of one party are for the benefit of the
other party, during the Investment Period.
14
Section 4.1 Securities Compliance. The Company shall notify the
---------------------
Commission and Nasdaq, if applicable, in accordance with their rules and
regulations, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Shares to the Purchaser.
Section 4.2 Registration and Listing. The Company will take all action
------------------------
necessary to cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) 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 Securities Act) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company will take all action necessary to continue the
listing or trading of its Common Stock and the listing of the Shares purchased
by Purchaser hereunder on Nasdaq or any Alternate Market, if applicable, and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Nasdaq or any Alternate Market.
Section 4.3 Registration Statement. Before the Company shall issue a Draw
----------------------
Down Notice, the Company shall have caused a sufficient number of shares of
Common Stock to be registered to cover the maximum number of Shares to be issued
in connection with this Agreement and the Amendment to be declared effective by
the Commission.
Section 4.4 Compliance with Laws.
--------------------
(a) The Company shall comply, and cause each subsidiary to comply, with
all applicable laws, rules, regulations and orders (including without limitation
Rule 415(a)(4) under the Securities Act), noncompliance with which would have a
Material Adverse Effect.
(b) In addition to the limitations set forth in Section 4.6 hereof, the
Company will not be obligated to issue and the Purchaser will not be obligated
to purchase any shares of the Company's Common Stock which would result in the
issuance under this Agreement of more than nineteen and nine-tenths percent
(19.9%) of the issued and outstanding shares of the Company's Common Stock,
unless permitted by the Nasdaq or an Alternative Market.
(c) The Purchaser shall comply with all applicable laws, rules,
regulations and orders in connection with this Agreement and the transactions
contemplated hereby. Without limiting the foregoing, the Purchaser shall comply
with the requirements of the Securities Act and the Exchange Act including
without limitation Rule 415(a)(4) under the Securities Act and Rule 10b-5 and
Regulation M under the Exchange Act.
Section 4.5 Keeping of Records and Books of Account. The Company shall
---------------------------------------
keep and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
15
Section 4.6 Limitations on Holdings and Issuances. At no time during the
-------------------------------------
term of this Agreement shall the Purchaser directly or indirectly own more than
fourteen and nine-tenths percent (14.9%) of the issued and outstanding shares of
Common Stock. The Company will not be obligated to issue and the Purchaser will
not be obligated to purchase any shares of the Common Stock which would result
in the issuance under this Agreement to Purchaser at any time of more than
fourteen and nine-tenths percent (14.9%) of the issued and outstanding shares of
the Common Stock.
Section 4.7 Amendment to Registration Statement. The Company will cause a
-----------------------------------
post-effective amendment to the Registration Statement with respect to this
Agreement (the "Amendment") to be filed and declared effective as soon as
reasonably practicable and will advise the Purchaser promptly and, if requested
by the Purchaser, will confirm such advice in writing, when it receives notice
that the Amendment has become effective.
Section 4.8 Other Agreements and Other Financings.
-------------------------------------
(a) The Company shall not enter into any agreement in which the terms of
such agreement would restrict or impair the right to perform of the Company or
any subsidiary under this Agreement or the Articles.
(b) If the Company enters into any definitive agreement with a third
party, the principal purpose of which is to secure an Other Financing (as
defined below) during a Draw Down Pricing Period, the Company shall notify the
Purchaser of the material terms of such Other Financing (the "Other Financing
---------------
Notice") and the Purchaser shall have, within 48 hours following the receipt of
------
the Other Financing Notice, the option to purchase Shares of the Draw Down
Amount Requested and the Call Option Amounts Requested by the Company for such
Draw Down Pricing Period at (i) the Purchaser's price as provided in this
Agreement, (ii) the Third Party's Price (as defined below) or (iii) the
Purchaser may elect to not purchase Common Stock for that Draw Down Pricing
Period.
As used herein, "Other Financing" shall mean any issuance of Common Stock or
securities convertible into, exerciseable for, or exchangeable for Common Stock
for the purpose of raising capital; provided, however, without limiting the
foregoing, Other Financing shall not include the Company (i) entering into a
loan, credit or lease facility with a bank, financing institution or other
creditor (including any equity component thereof), (ii) establishing or amending
an employee, director or officer option plan or stock purchase plan, or
establishing or amending a stockholders' rights plan (the primary purpose of
which is not to raise capital), (iii) issuing shares of Common Stock in
connection with the Company's current or future employee, director or officer
option plans, or stock purchase plans or in connection with the Company' current
or future stockholders' rights plans, (iv) increasing the number of shares
available under plans referred to in (iii) above, (v) issuing securities upon
exercise or conversion of currently outstanding warrants, options, debt
securities or other convertible securities of the Company; and (vi) issuing
securities in connection with the formation and maintenance of strategic
partnerships, alliances, joint ventures or Commercial Relationships (as defined
below), commercial credit arrangements, equipment financings, the acquisition
of products, licenses, other assets or acquisitions or mergers (each a
"Permitted Transaction").
----------------------
16
"Third Party's Price" shall mean a third party's purchase price, net of third
-------------------
party discounts and fees; if the Other Financing is a convertible securities
financing, then the Third Party's Price shall be the lesser of (i) the
conversion price of the convertible financing and (ii) the Company's valuation
of the average price per share of the common stock for convertible financing,
after taking into account any other securities issued in conjunction with such
convertible financing.
"Commercial Relationships" shall mean any relationship with an entity where such
------------------------
entity makes an equity investment in the Company and, in the Company's
judgement, is uniquely qualified to enhance the value of the Company pursuant to
such investment.
(c) If the Company enters into the Other Financing between Draw Down
Pricing Periods, the Purchaser shall have the option, which option shall be
exercised no later than five (5) Trading Days after receipt by the Purchaser of
the Other Financing Notice, to purchase up to the Draw Down Amount that would be
applicable under this Agreement based on the gross price per share to be paid
for the Common Stock in the Other Financing on the same terms and conditions
contemplated in the Other Financing, net of such third party's discount and
fees, or, if the applicable share price is below the Minimum Threshold Price, up
to 20% of the aggregate total amount to be raised by the Company in the Other
Financing. If the Purchaser does not exercise its purchase option in writing
before 8:00 p.m. (New York time) on the fifth Trading Day after its receipt of
the Other Financing Notice, the Company shall have the right to close the Other
Financing on the scheduled closing date with a third party, provided that all of
the terms and conditions of such closing are the same in all material respects
to those provided to the Purchaser in the Other Financing Notice.
Section 4.9 Stop Orders. The Company will advise the Purchaser promptly
-----------
and, if requested by the Purchaser, will confirm such advice in writing: (i) of
the Company's receipt of notice of any request by the Commission for amendment
of or a supplement to the Registration Statement, any Prospectus or for
additional information; (ii) of the Company's receipt of notice of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) of the Company becoming aware of the happening of any
event, which makes any statement of a material fact made in the Registration
Statement or the Prospectus (as then amended or supplemented) untrue or which
requires the making of any additions to or changes in the Registration Statement
or the Prospectus (as then amended or supplemented) in order to state a material
fact required by the Securities Act to be stated therein or necessary in order
to make the statements therein not misleading, or of the necessity to amend or
supplement the Registration Statement (as then amended or supplemented) to
comply with the Securities Act or any other law. If at any time the Commission
shall issue any stop order suspending the effectiveness of the Registration
Statement, the Company will make commercially reasonable efforts to obtain the
withdrawal of such order at the earliest possible time.
Section 4.10 Amendments to the Registration Statement. Except as provided
----------------------------------------
in Section 4.11 hereof, the Company will not file any amendment to the
Registration Statement that relates to the Purchaser, this Agreement or the
transactions contemplated hereby or make any amendment or supplement to the
Prospectus that relates to the Purchaser, this Agreement or the
17
transactions contemplated hereby of which, in either case, the Purchaser
shall not previously have been advised or to which the Purchaser shall
reasonably object after being so advised within forty-eight (48) hours of
receipt of such amendment or supplement to the Prospectus. In addition, for so
long as, in the reasonable opinion of counsel for the Purchaser and counsel for
the Company, a Prospectus is required to be delivered in connection with any
purchase of Shares by the Purchaser, the Company will not file any Prospectus or
Prospectus supplement with respect to the Shares without delivering a copy of
such Prospectus or Prospectus supplement, to the Purchaser promptly following
such filing. It is understood that the Company may file amendments to the
Registration Statement and make amendments and supplements to the Prospectus in
connection with offerings pursuant to the Registration Statement to parties
other than the Purchaser, and that such amendments and supplements shall not be
covered by the first two (2) sentences of this Section 4.10.
------------
Section 4.11 Prospectus Delivery. The Company shall file with the
-------------------
Commission a Prospectus supplement on the first Trading Day immediately
following the end of each Settlement Period, and will deliver to the Purchaser,
without charge, in such quantities as reasonably requested by the Purchaser,
copies of each form of Prospectus and Prospectus supplement on each Settlement
Date. The Company consents to the use of the Prospectus (and of any amendment or
supplement thereto) in accordance with the provisions of the Securities Act and
with the securities or Blue Sky laws of the jurisdictions in which the Shares
may be sold by the Purchaser, in connection with the offering and sale of the
Shares and for such period of time thereafter as the Prospectus is required by
the Securities Act to be delivered in connection with sales of the Shares. If
during such period of time any event shall occur that in the judgment of the
Company and its counsel or in the opinion of counsel for the Purchaser is
required to be set forth in the Prospectus (as then amended or supplemented) or
should be set forth therein in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if it
is necessary to supplement or amend the Prospectus to comply with the Securities
Act or any other applicable law or regulation, the Company will forthwith
prepare and, subject to Section 4.9 above, file with the Commission an
appropriate supplement or amendment to such Prospectus, and will expeditiously
furnish to the Purchaser a reasonable number of copies thereof.
Section 4.12 Selling Restriction. The Purchaser has the right to sell
-------------------
shares of the Stock during the Investment Period. However, the Purchaser
covenants that prior to and during the term of the Investment Period, neither
the Purchaser nor any affiliates of the Purchaser nor any entity managed by the
Purchaser will sell shares of the Company's Common Stock other than shares that
the Purchaser (or the respective affiliate or managed entity) owns at the time
of the sale, or any shares that the Purchaser is obligated to purchase under a
pending Draw Down Notice.
Section 4.13 Non-Public Information. Neither the Company nor any of its
----------------------
directors, officers or agents shall disclose any material non-public information
about the Company to the Purchaser.
Section 4.14 Effective Registration Statement. The Company will use
--------------------------------
reasonable efforts to keep the Registration Statement continuously effective
until the later of (i) one (1) year
18
after the expiration of the Investment Period and (ii) such time as Acqua
Wellington is no longer required to deliver a prospectus with respect to the
Shares.
Section 4.15 Disclosure of Draw Down Notice. Other than disclosure in a
------------------------------
Prospectus Supplement, press release or filing under the Securities Act or
Exchange Act of the number of Shares sold to the Purchaser and the purchase
price, the Company shall not disclose any Draw Down Notice or any information
contained in any Draw Down Notice (other than to its legal and accounting
advisors) unless such disclosure is required by applicable law, rule or court
order; provided that the Company shall notify the Purchaser if such disclosure
during the Draw Down Pricing Period is required by law, rule, regulation or
court order.
Section 4.16 Broker-Dealer. Except as set forth below, the Purchaser
-------------
shall use ▇▇▇▇▇▇ ▇▇▇▇▇ Holdings, ▇▇▇.▇▇ its broker-dealer to effectuate all
sales, if any, of shares of Common Stock that the Purchaser will purchase from
the Company pursuant to this Agreement. In the event that the Purchaser desires
to use a different broker-dealer, the Purchaser shall notify the Company, and
the Purchaser shall not use such new broker-dealer until the Company has filed
with the Commission and the Commission shall have declared effective an
appropriate amendment to the Registration Statement to disclose such broker-
dealer's participation. No broker-dealer used by the Purchaser to effectuate
sales of shares of Common Stock purchased pursuant to this Agreement will be an
affiliate of the Purchaser, and the commission received by any such broker-
dealer from the Purchaser will not exceed customary brokerage commissions.
ARTICLE V
Conditions to Closing, Draw Downs and Call Options
Section 5.1 Conditions Precedent to Closing by the Company and to the
---------------------------------------------------------
Company's Obligation to Sell the Shares. The execution of this Agreement by the
---------------------------------------
Company and the obligation of the Company to issue and sell Shares to the
Purchaser pursuant to a Draw Down Notice is subject to the satisfaction or
waiver, at or before the Closing and with respect to each Draw Down and Call
Option, at or before each Draw Down Exercise Date and Settlement Date, as
applicable, 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 Representations and Warranties. Except for
----------------------------------------------------------
representations and warranties that are expressly made as of a particular date,
the representations and warranties of the Purchaser in this Agreement shall be
true and correct in all material respects as of the date when made and as of
each Draw Down Exercise Date and each Settlement Date as though made at that
time.
(b) Performance by the Purchaser. The Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchaser at or prior to the Closing, each Draw Down Exercise Date
and each Settlement Date, as applicable.
19
(c) No Injunction. No statute, 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 the
consummation of any of the transactions contemplated by this Agreement.
(d) No Proceedings or Litigation. No action, suit or proceeding before any
----------------------------
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any subsidiary, or any of the officers, directors or affiliates
of the Company or any subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
(e) Effective Registration Statement and Amendment. With respect to the
----------------------------------------------
Closing, the Registration Statement shall have been declared effective by the
Commission prior to the Closing Date and there shall be no stop order suspending
the effectiveness thereof. With respect to each Draw Down and Call Option, the
Registration Statement and the Amendment shall have been declared effective by
the Commission at or before each Draw Down Exercise Date or Settlement Date, as
applicable, and there shall be no stop order suspending the effectiveness
thereof.
Section 5.2 Conditions Precedent to the Closing by the Purchaser. The
----------------------------------------------------
execution of this Agreement by the Purchaser is subject to the satisfaction or
waiver, at or before the Closing, of each of the conditions set forth below.
These conditions are for the Purchaser's sole benefit and may be waived by the
Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Except for
--------------------------------------------------------
representations and warranties that are expressly made as of a particular date,
the representations and warranties of the Company in this Agreement shall be
true and correct in all material respects as of the date when made and as of the
Closing as though made at that time, including, without limitation, under
Section 3.1(h).
(b) Performance by the Company. The Company shall have performed,
--------------------------
satisfied and complied in all material 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 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
the consummation of any of the transactions contemplated by this Agreement.
(d) No Suspension, Etc. Trading in the Common Stock shall not have been
------------------
suspended by the Commission or the Nasdaq (except for any suspension of trading
of limited duration agreed to by the Company, which suspension shall be
terminated prior to Closing), and, at any time prior to the Closing, trading in
securities generally as reported on Nasdaq shall not have been suspended or
limited, nor shall a banking moratorium have been declared either by the
20
United States or New York State authorities, nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in any financial market which, in each case, in the
reasonable judgment of the Purchaser, makes it impracticable or inadvisable to
purchase the Shares.
(e) No Proceedings or Litigation. No action, suit or proceeding before any
----------------------------
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any subsidiary, or any of the officers, directors or affiliates
of the Company or any subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
(f) Effective Registration Statement. The Registration Statement shall
--------------------------------
have been declared effective by the Commission prior to the Closing Date and
there shall be no stop order suspending the effectiveness thereof.
(g) Opinion of Counsel, Secretary's Certificate and Closing Certificate.
-------------------------------------------------------------------
At the Closing, the Purchaser shall have received (i) an opinion of counsel to
the Company, dated the date of Closing, In the form and with respect to such
matters as are reasonably acceptable to the Purchaser, (ii) a Secretary's
Certificate from the Company, dated the date of Closing, in the form of Exhibit
B hereto, and (iii) a Closing Certificate, dated the Closing Date, in the form
of Exhibit C hereto.
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to
----------------------------------------------------------
Accept a Draw Down or Call Option Grant and Purchase the Shares. The obligation
---------------------------------------------------------------
hereunder of the Purchaser to accept a Draw Down or Call Option grant and to
acquire and pay for the Shares is subject to the satisfaction or waiver, as of
each Draw Down Exercise Date and each Settlement Date, of each of the conditions
set forth below. The conditions are for the Purchaser's sole benefit and may be
waived by the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Except for
--------------------------------------------------------
representations and warranties that are expressly made as of a particular date,
each of the representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of each Draw
Down Exercise Date and each Settlement Date, as though made at that time,
including, without limitation, under Section 3.1(h) hereof.
(b) Registration Statement. The Company shall have a dollar amount of
----------------------
Shares registered under the Registration Statement which are in an amount equal
to or in excess of the maximum dollar amount worth of Shares issuable pursuant
to such Draw Down Notice or Call Option. The Registration Statement and the
Amendment shall have been declared effective by the Commission prior to each
Draw Down Exercise Date and Settlement Date and shall have been amended or
supplemented, as required, to disclose the sale of the Shares prior to each
Settlement Date, as applicable.
21
(c) No Suspension. Trading in the Common Stock shall not have been
-------------
suspended by the Commission or the Nasdaq (except for any suspension of trading
of limited duration agreed to by the Company, which suspension shall be
terminated prior to each Draw Down Exercise Date), and, at any time prior to
such Draw Down Exercise Date, trading in securities generally as reported on
Nasdaq shall not have been suspended or limited, nor shall a banking moratorium
have been declared either by the United States or New York State authorities,
nor shall there have occurred any material outbreak or escalation of hostilities
or other national or international calamity or crisis of such magnitude in its
effect on, or any material adverse change in, any financial market which, in
each case, in the reasonable judgment of the Purchaser, makes it impracticable
or inadvisable to issue the Shares.
(d) Performance by the Company. The Company shall have performed,
--------------------------
satisfied and complied in all material 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 each Draw Down Exercise Date and each
Settlement Date, and shall have delivered the Compliance Certificate
substantially in the form attached hereto as Exhibit D.
(e) Settlement of Prior Draw Downs and Call Options. All prior Draw
-----------------------------------------------
Downs and Call Options shall have settled.
(f) Aggregate Limit. The Draw Down Amount Requested in the Draw Down
---------------
Notice Issued by the Company, when aggregated with all prior Draw Down Amounts,
shall not exceed the Aggregate Limit.
ARTICLE VI
Draw Down Terms; Call Option
Section 6.1 Draw Down Terms. Subject to the satisfaction of the conditions
---------------
set forth in this Agreement, and subject to Section 6.3 below, the parties agree
as follows:
(a) Beginning on the effective date of the Amendment, the Company may, in
its sole discretion, issue a Draw Down Notice (as defined in Section 6.1(j)
hereof) for a specified Draw Down Amount Requested of up to (i) up to $2,000,000
if the Threshold Price for the Draw Down Amount as set forth in such Draw Down
Notice is equal to or greater than $3.00 and less than $4.00, (ii) increased by
up to $500,000 incrementally for every $1.00 increase in the Threshold Price
above $3.00 and up to and including $10.00, or (iii) such other amount mutually
agreed upon by the Purchaser and the Company, which Draw Down the Purchaser will
be obligated to accept. The date the Company issues any Draw Down Notice in
accordance with this Section 6.1 shall be a "Draw Down Exercise Date" for
purposes of this Agreement.
(b) Subject to Section 6.1(i) below, the number of Shares to be issued by
the Company to the Purchaser in connection with each Draw Down shall be equal to
the sum of the quotients (for each Trading Day of the Draw Down Pricing Period
for which the VWAP equals or exceeds the Threshold Price) of (x) a fraction of
the Draw Down Amount, the numerator of
22
which is one (1) and the denominator of which equals the number of Trading Days
during the Draw Down Pricing Period, divided by (y) the specified percentage of
the VWAP set forth in Section 6.1(k) hereof or such other percentage mutually
agreed upon by the Purchaser and the Company (the "Draw Down Discount Price") of
------------------------
the Common Stock.
(c) Only one Draw Down shall be allowed in each Draw Down Pricing Period.
(d) Each Draw Down Pricing Period shall consist of two (2) periods of ten
(10) trading days (each, a "Settlement Period").
-----------------
(e) Each Draw Down shall be settled on the second Trading Day after the end
of each Settlement Period (the "Settlement Date").
---------------
(f) There shall be a minimum of five (5) Trading Days between the end of a
Draw Down Pricing Period and the commencement of the next Draw Down Pricing
Period, unless otherwise mutually agreed upon between the Purchaser and the
Company.
(g) There shall be a maximum of twelve (12) monthly Draw Downs during the
Investment Period.
(h) Each Draw Down will automatically expire immediately after the last
Trading Day of each Draw Down Pricing Period.
(i) If the VWAP on a given Trading Day in the Draw Down Pricing Period is
less than the Threshold Price, then the total amount of the Draw Down Amount
Requested will be reduced by a Pro-Rata Amount and no Shares will be purchased
or sold with respect to such Trading Day, except as provided below. The
aggregate amount by which the Draw Down Amount Requested is reduced shall be
referred to herein as the "Below Threshold Amount." At no time shall the
----------------------
Threshold Price be set below three dollars ($3.00) per share (as adjusted for
stock splits, reverse stock splits, recapitalizations and the like) unless
agreed upon by the Company and the Purchaser. If trading in the Common Stock is
suspended for any reason for three (3) hours or more in any Trading Day or
trading is suspended in the markets of the United States for any reason, such
day shall be deemed an "Unallocated Day". For each Unallocated Day during the
---------------
Draw Down Pricing Period the Purchaser may, at its option, purchase a Pro-Rata
Amount of the Draw Down Amount at the previous Trading Day's VWAP. For each
Trading Day during a Draw Down Pricing Period that the VWAP is below the
Threshold Price, the Purchaser may elect in its sole discretion to purchase the
Common Stock at the Threshold Price multiplied by the applicable percentage set
forth in Section 6.1(k) at the end of such Draw Down Pricing Period. The
Purchaser will inform the Company via facsimile transmission no later than 8:00
p.m. (New York time) on the last Trading Day of such Draw Down Pricing Period as
to the number of Shares, if any, the Purchaser chooses to purchase under such
circumstances.
(j) As a condition to exercise of any Draw Down, the Company must provide a
notice to the Purchaser of the Company's exercise of any Draw Down via facsimile
transmission before the first Trading Day of the Draw Down Pricing Period
covered by such
23
notice (the "Draw Down Notice"), substantially in the form attached hereto as
----------------
Exhibit E. The Draw Down Notice shall specify the Draw Down Amount Requested,
set the Threshold Price for such Draw Down and Call Option, designate the first
Trading Day of the Draw Down Pricing Period and specify the Call Option(s), if
any, that the Company wishes to grant to the Purchaser during the Draw Down
Pricing Period. If the Company wishes the date of the Draw Down notice to be the
first Trading Day of the Draw Down Pricing Period, such notice must be delivered
to the Purchaser and such receipt confirmed, before 9:30 a.m. (New York time) on
such Trading Day.
(k) With respect to any Draw Down, if the Threshold Price for the Draw Down
Amount as set forth in the Draw Down Notice is equal to or greater than $3.00
and less than $4.00, the Draw Down Discount Price shall be 94.60% of the VWAP.
For any Threshold Price for the Draw Down Amount as set forth in the Draw Down
Notice above $3.00, the Draw Down Discount Price shall increase by 0.15%
incrementally for every $1.00 increase in the Threshold Price above $3.00, up to
a maximum Draw Down Discount Price of 97% of the VWAP.
(l) On each Settlement Date, the Company shall deliver the Shares purchased
by the Purchaser to the Purchaser or to The Depositary Trust Company ("DTC") on
---
the Purchaser's behalf via the Deposit Withdrawal Agent Commission system
("DWAC"), and upon receipt of the Shares, the Purchaser shall cause payment
----
therefor to be made to the account designated by the Company by wire transfer of
immediately available funds, provided that the Shares are received by the
Purchaser no later than 1:00 p.m., New York time, or of next day available funds
if the Shares are received thereafter. In certain circumstances and as set forth
in Section 9.1(b), a failure by the Company to deliver such Shares may result in
the payment of liquidated damages by the Company to the Purchaser.
(m) If during any Draw Down Pricing Period the Company reasonably believes
an event may occur which would result in or may require the suspension of the
effectiveness of the Registration Statement prior to the applicable Settlement
Date, including, without limitation, entering into an extraordinary transaction
in which the Company is not the surviving entity, the Company shall notify the
Purchaser before 9:30 a.m. (New York time) on any Trading Day (a "Truncate
--------
Notice") and truncate the number of Trading Days in such Draw Down Pricing
------
Period (a "Truncated Pricing Period"). If the Company delivers the Truncate
Notice (i) before 9:30 a.m. (New York time) on a Trading Day, the last Trading
Day of such Truncated Pricing Period shall be the Trading Day preceding the
receipt of the Truncate Notice between, or (ii) between 9:30 a.m. and 4:00 p.m.
(New York time) on a Trading Day, then the last Trading Day of such Truncated
Pricing Period shall be the Trading Day on which the Truncate Notice was
received by the Purchaser.
The Purchaser will purchase the Truncated Draw Down Allocation Amount for
each of the Trading Days in a Truncated Pricing Period, for an aggregate
purchase price determined in accordance with Section 6.1(b) and Section 6.1(i).
In addition, the Purchaser may, at its option, elect to purchase Shares in
an additional dollar amount equal to the product of the Draw Down Amount
requested in the applicable Draw
24
Down Notice, first multiplied by (x) a fraction, the numerator of which equals
one (1) and the denominator of which equals the number of Trading Days in such
Draw Down Pricing Period (such number of days being referred to herein as the
"Trading Day Number"), and next multiplied by (y) that number that is equal to
-----------------
the Trading Day Number minus the number of Trading Days in the Truncated Pricing
Period. The price per share for such additional dollar amount shall equal the
aggregate of (i) the Truncated Draw Down Allocation Amounts, the total Call
Options exercised and any Below Threshold Amounts that the Purchaser has elected
to purchase during the 0Truncated Pricing Period divided by (ii) the number of
Shares to be purchased during such Truncated Pricing Period, excluding any
Shares purchased pursuant to this paragraph of Section 6.1(m).
Upon receipt of the Truncate Notice, the Purchaser may (x) elect to
purchase the Common Stock at the Threshold Price for any Trading Day that the
VWAP was below the Threshold Price during the Truncated Pricing Period in
accordance with Section 6.1(h) hereof, (y) elect to purchase the Common Stock in
the additional amount as set forth in the preceding paragraph of this Section
6.1(m), and (z) elect to exercise any unexercised Call Options by issuing a Call
Option Notice to the Company, in each such case, no later than 10:00 a.m. (New
York time) on the first Trading Day after the end of the Truncated Pricing
Period. The exercise price of the Call Option shall be the applicable
percentage set forth in Section 6.1(k) multiplied by the greater of (A) the VWAP
for the Common Stock on the day the Purchaser issues its Call Option Notice or
(B) the Threshold Price.
(n) The Settlement Date for any Truncated Pricing Period shall be the
second business day after the last Trading Day of the applicable Truncated
Pricing Period.
Section 6.2 Purchaser's Call Option. Subject to the satisfaction of the
-----------------------
conditions set forth in this Agreement, and subject to Section 6.3 below, the
parties agree as follows:
(a) The Company may, in its sole discretion, grant to the Purchaser the
right to exercise one (1) or more Call Options during each Draw Down Pricing
Period for a specified Call Option Amount Requested. The Call Option Amount
Requested and the Threshold Price shall be set forth in the Draw Down Notice.
(b) The number of shares of Common Stock to be issued in connection with
each Call Option shall equal (i) the Call Option Amount divided by (ii) the
applicable percentage set forth in Section 6.1(j) multiplied by the greater of
(A) the VWAP for the Common Stock on the day the Purchaser issues its Call
Option Notice or (B) the Threshold Price.
(c) Each Call Option exercised shall be settled on the next Settlement
Date.
(d) The Threshold Price designated by the Company in its Draw Down Notice
shall apply to each Call Option.
(e) For each Call Option that the Purchaser exercises pursuant to this
Section 6.2, as a condition to such exercise the Purchaser must issue a Call
Option Notice (as defined in Section 1.1(j) hereof) to the Company no later than
8:00 p.m. (New York time) on the
25
day such Call Option is exercised. If the Purchaser does not exercise a Call
Option by 8:00 p.m. (New York time) on the last day of the applicable Draw Down
Pricing Period, the Purchaser's Call Options with respect to that Draw Down
Pricing Period shall automatically terminate.
Section 6.3 Aggregate Limit. Notwithstanding anything to the contrary
---------------
herein, in no event may the Company issue a Draw Down Notice or grant a Call
Option to the extent that the sale of shares of Common Stock pursuant thereto
and pursuant to all prior Draw Down Notices or Call Options issued hereunder
would cause the Company to sell or the Purchaser to purchase shares of Common
Stock which in the aggregate are in a dollar amount in excess of the Aggregate
Limit.
ARTICLE VII
Termination
Section 7.1 Term; Termination by Mutual Consent. The term of this
-----------------------------------
Agreement shall expire on the earlier of (i) fourteen (14) months from the date
hereof (the "Investment Period"), (ii) the date that the entire dollar amount of
-----------------
Shares registered under the Registration Statement have been issued and sold and
(iii) the date the Purchaser shall have purchased $14,000,000 of Common Stock.
Either party may terminate this agreement if the Company enters into a
definitive agreement with respect to a merger or acquisition of the Company as a
result of which more than fifty percent (50%) of the voting power of the Company
is acquired or the Company would not be the surviving entity so long as such
termination does not occur during a Draw Down Pricing Period, or during a
Truncated Pricing Period, or prior to a Settlement Date of any Draw Down Pricing
Period or Truncated Pricing Period. This Agreement may be terminated at any time
by mutual written consent of the parties.
Section 7.2 Other Termination. The Company shall inform the Purchaser, and
-----------------
the Purchaser shall have the right to terminate this Agreement within the
subsequent thirty (30) days (the "Event Period"), if (x) the Company enters into
------------
an Other Financing without the prior consent of the Purchaser, which consent
will not be unreasonably delayed, conditioned or withheld, which provides for
(i) the issuance of Common Stock or securities convertible, exercisable or
exchangeable into Common Stock at a discount to the then current market price of
the Common Stock, including, without limitation, an equity line of credit
transaction, (ii) a mechanism for the reset of the purchase price of the Common
Stock to below the then current market price of the Common Stock, or (iii) the
issuance of Common Stock with warrants, which have an exercise price such that
together with the price of the Common Stock would result in the issuance of
shares of Common Stock at a per share price below the then current market price
of the Common Stock, or (y) an event resulting in a Material Adverse Effect or
Material Change in Ownership has occurred. The Purchaser may terminate this
Agreement upon one (1) business day's prior written notice during the Event
Period.
Section 7.3 Effect of Termination. In the event of termination by the
---------------------
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party, provided, however, that if a
Draw Down and/or a Call Option has not yet settled, the parties shall
26
still be obligated to settle such Draw Down and/or Call Option on the terms set
forth in this Agreement. If this Agreement is terminated as provided in Section
7.1 or 7.2 herein, this Agreement shall become void and of no further force and
effect, except as provided in the first sentence of this Section 7.3, Section
9.1 and Section 9.9 hereof. Nothing in this Section 7.3 shall be deemed to
release the Company or the Purchaser from any liability for any breach under
this Agreement, or to impair the rights of the Company and the Purchaser to
compel specific performance by the other party of its obligations under this
Agreement.
ARTICLE VIII
Indemnification
Section 8.1 General Indemnity.
-----------------
(a) Indemnification by the Company. The Company will indemnify and hold
------------------------------
harmless the Purchaser, any broker-dealer named in the Registration Statement,
as amended, (the "Broker-Dealer") and each person, if any, who controls the
-------------
Purchaser or the Broker-Dealer within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against any losses,
claims, damages, liabilities and expenses (including reasonable costs of defense
and investigation and all attorneys' fees) to which the Purchaser, the Broker-
Dealer and each such controlling person may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages, liabilities and
expenses (or actions in respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Registration Statement (including any
Prospectus or Prospectus supplement which are a part of it), or any amendment or
supplement to it, or (ii) the omission or alleged omission to state in the
Registration Statement (including any Prospectus or Prospectus supplement which
are a part of it), or any amendment or supplement to it, or any document
incorporated by reference in the Registration Statement, a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
The Company will reimburse the Purchaser, the Broker-Dealer and each such
controlling person promptly upon demand for any legal or other costs or expenses
reasonably incurred by the Purchaser, the Broker-Dealer or such controlling
person in investigating, defending against, or preparing to defend against any
such claim, action, suit or proceeding, except that the Company will not be
liable to the extent any loss, claim, damage, liability or expense arises out
of, or is based upon, an untrue statement, alleged untrue statement, omission or
alleged omission, included in any Prospectus or Prospectus supplement or any
0amendment or supplement to the Prospectus or Prospectus supplement in reliance
upon, and in conformity with, written information furnished by either the
Purchaser or the Broker-Dealer to the Company for inclusion in the Prospectus or
Prospectus supplement.
(b) Indemnification by the Purchaser. The Purchaser will indemnify and
--------------------------------
hold harmless the Company, each of its directors and officers, and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against any
expenses (including reasonable costs of defense and investigation and all
attorneys fees) to which the Purchaser and each such controlling person may
27
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities and expenses (or actions in respect thereof) arise
out of or are based upon (i) an untrue statement, alleged untrue statement,
omission or alleged omission, included in any Prospectus or Prospectus
supplement or any amendment or supplement to the Prospectus or Prospectus
supplement in reliance upon, and in conformity with, written information
furnished by the Purchaser to the Company for inclusion in the Prospectus or
Prospectus supplement, or (ii) the omission or alleged omission to state in any
Prospectus or Prospectus supplement or any amendment or supplement to it a
material fact required to be stated therein or necessary to make the statements
therein not misleading, to the extent, but only to the extent, the untrue
statement, alleged untrue statement, omission or alleged omission was made in
reliance upon, and in conformity with, written information furnished by the
Purchaser to the Company for inclusion in the Prospectus or Prospectus
supplement or an amendment or supplement to it. The Purchaser will reimburse the
Company and each such director, officer or controlling person promptly upon
demand for any legal or other costs or expenses reasonably incurred by the
Company or the other person in investigating, defending against, or preparing to
defend against any loss, claim, damage, liability or expense arising out of, or
based upon, an untrue statement, alleged untrue statement, omission or alleged
omission, included in any Prospectus or Prospectus supplement or any amendment
or supplement to the Prospectus or Prospectus supplement in reliance upon, and
in conformity with, written information furnished by the Purchaser to the
Company for inclusion in the Prospectus or Prospectus supplement.
Section 8.2 Indemnification Procedures. Promptly after a person
--------------------------
receives notice of a claim or the commencement of an action for which the person
intends to seek indemnification under Section 8.1, the person will notify the
indemnifying party in writing of the claim or commencement of the action, suit
or proceeding; provided, however, that failure to notify the indemnifying party
will not relieve the indemnifying party from liability under Section 8.1, except
to the extent it has been materially prejudiced by the failure to give notice.
The indemnifying party will be entitled to participate in the defense of any
claim, action, suit or proceeding as to which indemnification is being sought,
and if the indemnifying party acknowledges in writing the obligation to
indemnify the party against whom the claim or action is brought, the
indemnifying party may (but will not be required to) assume the defense against
the claim, action, suit or proceeding with counsel satisfactory to the
indemnified party. After an indemnifying party notifies an indemnified party
that the indemnifying party wishes to assume the defense of a claim, action,
suit or proceeding, the indemnifying party will not be liable for any legal or
other expenses incurred by the indemnified party in connection with the defense
against the claim, action, suit or proceeding except that if, in the opinion of
counsel to the indemnified party, one or more of the indemnified parties should
be separately represented in connection with a claim, action, suit or
proceeding, the indemnifying party will pay the reasonable fees and expenses of
one separate counsel for the indemnified parties. Each indemnified party, as a
condition to receiving indemnification as provided in Section 8.1, will
cooperate in all reasonable respects with the indemnifying party in the defense
of any action or claim as to which indemnification is sought. No indemnifying
party will be liable for any settlement of any action effected without its prior
written consent. No indemnifying party will, without the prior written consent
of the indemnified party, effect any settlement of a pending or threatened
action with respect to which an indemnified party is, or is informed that it may
be,
28
made a party and for which it would be entitled to indemnification, unless the
settlement includes an unconditional release of the indemnified party from all
liability and claims which are the subject matter of the pending or threatened
action.
If for any reason the indemnification provided for in this Agreement is not
available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in Section 8.1 as to which it is
entitled to indemnification thereunder, each indemnifying party will, in lieu of
indemnifying the indemnified party, contribute to the amount paid or payable by
the indemnified party as a result of such loss or liability, (i) in the
proportion which is appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and by the indemnified party on the other
from the sale of Shares which is the subject of the claim, action, suit or
proceeding which resulted in the loss or liability or (ii) if that allocation is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits of the sale of such Shares, but also the relative
fault of the indemnifying party and the indemnified party with respect to the
statements or omissions which are the subject of the claim, action, suit or
proceeding that resulted in the loss or liability, as well as any other relevant
equitable considerations.
ARTICLE IX
Miscellaneous
Section 9.1 Fees and Expenses.
-----------------
(a) Each party shall bear its own fees and expenses related to the
transactions contemplated by this Agreement; provided, however, that the Company
shall pay, at the Closing, all fees and expenses, including attorneys' fees,
incurred by the Purchaser up to $25,000 in connection with the preparation,
negotiation, execution and delivery of this Agreement. In addition, the Company
shall pay all reasonable fees and expenses, including attorneys' fees, incurred
by the Purchaser in connection with any amendments, modifications or waivers of
this Agreement. The Company shall pay all stamp or other similar taxes and
duties levied in connection with issuance of the Shares pursuant hereto.
(b) If the Company issues a Draw Down Notice and fails to deliver the
Shares on the applicable Settlement Date, and such failure continues for ten
(10) Trading Days, the Company shall pay the Purchaser in cash or restricted
shares of Common Stock, at the option of the Purchaser, as liquidated damages
for such failure and not as a penalty an amount equal to two percent (2%) of the
payment required to be paid by the Purchaser on such Settlement Date (i.e., the
sum of the Draw Down Amount and the Call Option Amount) for the initial thirty
(30) days following such Settlement Date until the Shares have been delivered,
and an additional two percent (2%) for each additional thirty (30) day period
thereafter until the Shares have been delivered, which amount shall be prorated
for such periods less than thirty (30) days.
(c) On each Settlement Date, the Company shall pay Reedland Capital
Partners, an Institutional Division of Financial West Group, Member,
NASD/SIPC/MSRB, a
29
placement fee in the amount of one-fifth of one percent (0.20%) of the
corresponding Draw Down Amount or Call Option Amount.
Section 9.2 Specific Enforcement, Consent to Jurisdiction.
---------------------------------------------
(a) The Company and the Purchaser acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that either party shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement by the other party and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which either
party may be entitled by law or equity.
(b) Each of the Company and the Purchaser (i) hereby irrevocably submits
to the jurisdiction of the United States District Court and other courts of the
United States sitting in the State of New York for the purposes of any suit,
action or proceeding arising out of or relating to this Agreement, and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
Section 9.3 Entire Agreement; Amendment. This Agreement represents the
---------------------------
entire agreement of the parties with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by either
party relative to subject matter hereof not expressly set forth herein. No
provision of this Agreement may be amended other than by a written instrument
signed by both parties hereto.
Section 9.4 Notices. Any notice, demand, request, waiver or other
-------
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by facsimile (with facsimile
machine confirmation of delivery received) at the address or number designated
below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The address
for such communications shall be:
30
If to the Company:
TiVo Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
Attention: Chief Financial Officer
With copies to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
If to the Purchaser:
Acqua Wellington North American Equities Fund, Ltd.
c/o Fortis Fund Services (Bahamas) Ltd.
Montage Sterling Centre
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇-▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
With copies to: Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
Chrysler Building
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Either party hereto may from time to time change its address for notices by
giving at least ten (10) days advance written notice of such changed address to
the other party hereto.
Section 9.5 Waivers. No waiver by either party of any default with
-------
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter. No provision of this Agreement may be
waived other than in a written instrument signed by the party against whom
enforcement of such waiver is sought.
31
Section 9.6 Headings. The article, section and subsection headings in
--------
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 9.7 Successors and Assigns. The Purchaser may not assign this
----------------------
Agreement to any person without the prior consent of the Company, in the
Company's sole discretion. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns. After Closing, the
assignment by a party to this Agreement of any rights hereunder shall not affect
the obligations of such party under this Agreement.
Section 9.8 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.
Section 9.9 Survival. The representations and warranties of the Company
--------
and the Purchaser contained in Article III and the covenants contained in
Article IV shall survive the execution and delivery hereof and the Closing until
the termination of this Agreement, and the agreements and covenants set forth in
Article VIII of this Agreement shall survive the execution and delivery hereof
and the Closing hereunder.
Section 9.10 Counterparts. This Agreement may be executed in any number
------------
of counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
Section 9.11 Publicity. Prior to the Closing, neither the Company nor
---------
the Purchaser shall issue any press release or otherwise make any public
statement or announcement with respect to this Agreement or the transactions
contemplated hereby or the existence of this Agreement without the prior written
consent of the other party to such disclosure, except that if the Company is
required by law, based upon an opinion of the Company's counsel, to issue a
press release or otherwise make a public statement or announcement with respect
to this Agreement prior to the Closing, the Company may do so and shall consult
with the Purchaser in advance on the form and substance of such press release.
After the Closing, the Company may issue a press release or otherwise make a
public statement or announcement with respect to this Agreement or the
transactions contemplated hereby or the existence of this Agreement; provided,
however, that prior to issuing any such press release, making any such public
statement or announcement, the Company shall consult with the Purchaser on the
form and substance of such press release or other disclosure.
Section 9.12 Severability. The provisions of this Agreement are
------------
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability
32
shall not affect any other provision or part of a provision of this Agreement,
and this Agreement shall be reformed and construed as if such invalid or illegal
or unenforceable provision, or part of such provision, had never been contained
herein, so that such provisions would be valid, legal and enforceable to the
maximum extent possible.
Section 9.13 Further Assurances. From and after the date of this
------------------
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
33
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
TIVO INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
ACQUA WELLINGTON NORTH AMERICAN
EQUITIES FUND, LTD.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
34
EXHIBIT A TO THE
COMMON STOCK PURCHASE AGREEMENT
[Intentionally Omitted]
EXHIBIT B TO THE
COMMON STOCK PURCHASE AGREEMENT
SECRETARY'S CERTIFICATE
_________, 2001
In connection with the Common Stock Purchase Agreement dated as of
_________, 2001, (the "Agreement") by and among TiVo Inc. (the "Company") and
---------
Acqua Wellington North American Equities Fund, Ltd., (the "Purchaser") the
undersigned hereby certifies as follows: (capitalized terms used herein without
definition have the meanings assigned to them in the Agreement):
1. Attached hereto as Exhibit A is a true, complete and correct copy of
the Certificate of Incorporation of the Company as filed with the Secretary of
State of the State of Delaware. The Certificate of Incorporation of the Company
has not been further amended or restated, and no document with respect to any
amendment to the Certificate of Incorporation of the Company has been filed in
the office of the Secretary of State of the State of Delaware since ________,
2001, the date shown on the face of the state certification relating to the
Company's Certificate of Incorporation, which is in full force and effect on the
date hereof, and no action has been taken by the Company in contemplation of any
such amendment or the dissolution, merger or consolidation of the Company which
would require disclosure in the Prospectus.
2. Attached hereto as Exhibit B is a true and complete copy of the By-laws
of the Company, as amended and restated, and as in full force and effect on, the
date hereof, and no proposal for any amendment, repeal or other modification to
the By-laws of the Company has been taken or is currently pending before the
Board of Directors or stockholders of the Company.
3. Attached hereto as Exhibit C is a true and correct copy of all written
actions and resolutions of the Board of Directors (including any committees
thereof) of the Company relating to the Agreement and the transactions
contemplated thereby; said actions and resolutions have not been amended,
rescinded or modified since their adoption and remain in full force and effect
as of the date hereof; said actions and resolutions are the only resolutions
adopted by the Board of Directors of the Company, or any committee thereof,
pertaining to (A) the offering of the Common Stock to be sold by the Company
pursuant to the Agreement, (B) the execution and delivery of the Agreement and
(C) all other transactions in connection with the foregoing.
4. Each person who, as an officer of the Company, or as attorney-in-fact
of an officer of the Company, signed (A) the Agreement, (B) the Registration
Statement and (C) any other document delivered prior hereto or on the date
hereof in connection with the transactions contemplated by the Agreement, was
duly elected, qualified and acting as such officer or duly appointed and acting
as such attorney-in-fact, and the signature of each such person appearing on any
such document is her genuine signature.
5. The Agreement as executed and delivered on behalf of the Company has
been approved by the Company.
6. All records and other documents of the Company made available to the
Purchaser and its counsel were true and complete in all respects. There have
been no material changes, additions or alterations in said records and other
documents that have not been disclosed to the Purchaser.
IN WITNESS WHEREOF, I have signed my name as of the date first above
written.
By:
---------------------------------
Name:
Title: Secretary
I, __________________, Chief Executive Officer of TiVo Inc., do hereby
certify that ______________________ is the duly elected, qualified and acting
Secretary of the above mentioned company, and that the signature set forth above
is his true and genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name as of the date first
above written.
By:
-------------------------------------
Name:
Title: Chief Executive Officer
EXHIBIT C TO THE
COMMON STOCK PURCHASE AGREEMENT
CLOSING CERTIFICATE
In connection with the Common Stock Purchase Agreement dated as of
_________, 2001, (the "Agreement") by and among TiVo Inc. (the "Company") and
---------
Acqua Wellington North American Equities Fund, Ltd., the undersigned hereby
certifies as follows:
1. The undersigned is the duly elected Chief Financial Officer of the
Company.
2. Except as set forth in the attached Schedule or the Schedule to the
Agreement, the representations and warranties of the Company set forth in
Section 3.1 of the Agreement are true and correct in all material respects as
though made on and as of the date hereof, except for representations and
warranties that speak as of a particular date.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Closing Date and
has complied in all material respects with all obligations and conditions
contained in the Agreement.
Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to them in the Agreement.
The undersigned has executed this Certificate this _____ day of _________,
200_.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
EXHIBIT D TO THE
COMMON STOCK PURCHASE AGREEMENT
COMPLIANCE CERTIFICATE
In connection with the issuance of shares of common stock of TiVo Inc. (the
"Company") pursuant to the Draw Down Notice, dated ___________ delivered by the
Company to Acqua Wellington North American Equities Fund, Ltd. (the "Purchaser")
pursuant to Article VI of the Common Stock Purchase Agreement dated __________,
2001, by and between the Company and the Purchaser (the "Agreement"), the
---------
undersigned hereby certifies as follows:
1. The undersigned is the duly elected Chief Financial Officer of the
Company.
2. Except as set forth in the attached Schedule or the Schedule to the
Agreement, the representations and warranties of the Company set forth in
Section 3.1 of the Agreement are true and correct in all material respects as
though made on and as of the date hereof, except for representations and
warranties that speak as of a particular date.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Draw Down Exercise
Date and the Settlement Date related to the Draw Down Notice and has complied in
all material respects with all obligations and conditions contained in Section
5.3 of the Agreement.
Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to them in the Agreement.
The undersigned has executed this Certificate this _____ day of _________,
200_.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
EXHIBIT E TO THE
COMMON STOCK PURCHASE AGREEMENT
FORM OF DRAW DOWN NOTICE
Reference is made to the Common Stock Purchase Agreement dated as of
_________, 2001, (the "Purchase Agreement") between TiVo Inc. (the "Company"),
------------------ -------
and Acqua Wellington North American Equities Fund, Ltd. Capitalized terms used
and not otherwise defined herein shall have the meanings given such terms in the
Purchase Agreement.
In accordance with and pursuant to Section 6.1 of the Purchase Agreement,
the Company hereby issues this Draw Down Notice to exercise a Draw Down request
for the Draw Down Amount indicated below.
Draw Down Amount:
---------------------------------------------------
Call Option Amount Requested:
----------------------------------------
Draw Down Pricing Period start date:
---------------------------------
Draw Down Pricing Period end date:
----------------------------------
Settlement Date:
-----------------------------------------------------
Threshold Price:
-----------------------------------------------------
Minimum Threshold Price: $3.00
--------------------------------------------
Dollar Amount and/or Number of Shares
of Common Stock Currently Unissued
under the Registration Statement:
------------------------------------
Dollar Amount of Common Stock
Currently Available under the
Aggregate Limit:
---------------------------------------
Dated:
-----------------------
By:
-----------------------------------
Name:
Title:
Address:
Facsimile No.:
Wire Instructions:
--------------------
Contact Name:
-------------------------
EXHIBIT F TO THE
COMMON STOCK PURCHASE AGREEMENT
FORM OF CALL OPTION NOTICE
To: ______________
Fax#:
Reference is made to the Common Stock Purchase Agreement effective as of
__________, 2001 (the "Purchase Agreement") between TiVo Inc., a Delaware
------------------
corporation (the "Company"), and Acqua Wellington North American Equities Fund,
-------
Ltd. Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement.
In accordance with and pursuant to Section 6.2 of the Purchase Agreement,
the Purchaser hereby issues this Call Option Notice to exercise a Call Option
for the Call Option Amount indicated below.
Call Option Amount Exercised:
------------------------------------
Number of Shares to be purchased:
--------------------------------
VWAP on the date hereof:
-----------------------------------------
Draw Down Discount Price:
----------------------------------------
Settlement Date:
-------------------------------------------------
Threshold Price:
-------------------------------------------------
Minimum Threshold Price: $3.00
-----------------------------------------
Dated:
----------------
Acqua Wellington North American Equities Fund, Ltd.
By:
------------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------