Exhibit 10.33
CVC, INC.
STOCK PURCHASE AGREEMENT
Dated as of December 10, 1998
CVC, INC.
STOCK PURCHASE AGREEMENT
Dated as of December 10, 1998
INDEX
ARTICLE I
PURCHASE AND SALE OF SHARES.................................................1
1.1 Purchase and Sale...............................................1
1.2 Purchase and Sale of Warrant....................................1
1.3 The Conversion Shares...........................................2
1.4 Initial Closing.................................................2
1.5 Second Closing..................................................2
1.6 Use of Proceeds.................................................2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY.................................................................3
2.1 Organization and Corporate Power................................3
2.2 Authorization...................................................3
2.3 Government Approvals............................................4
2.4 Authorized and Outstanding Stock................................4
2.5 Subsidiaries....................................................5
2.6 Financial Information...........................................6
2.7 Events Subsequent to the Date of the Financial Statements.......6
2.8 Litigation......................................................7
2.9 Compliance with Laws and Other Instruments......................7
2.10 Taxes...........................................................7
2.11 Real Property...................................................8
2.12 Personal Property...............................................8
2.13 Patents, Trademarks, etc........................................8
2.14 Agreements of Directors, Officers and Employees.................9
2.15 Governmental and Industrial Approvals...........................9
2.16 Federal Reserve Regulations....................................10
2.17 Contracts and Commitments......................................10
2.18 Securities Act.................................................10
2.19 Registration Rights............................................10
2.20 Insurance Coverage.............................................10
2.21 Employee Matters ..............................................10
2.22 No Brokers or Finders..........................................11
2.23 Transactions with Affiliates...................................11
2.24 Assumptions, Guarantees, etc. of Indebtedness of Other Persons.11
2.25 Restrictions on Subsidiaries...................................11
2.26 Environmental Matters..........................................11
2.27 U.S. Real Property Holding Corporation.........................12
2.28 Foreign Corrupt Practices Act..................................13
2.29 Corporate Records..............................................13
2.30 Management Presentation........................................13
2.31 Intentionally Omitted..........................................13
2.32 Disclosures....................................................13
ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY.......................................14
3.1 Accounts and Reports...........................................14
3.2 Payment of Taxes...............................................15
3.3 Maintenance of Key Man Insurance...............................15
3.4 Compliance with Laws, etc......................................16
3.5 Inspection.....................................................16
3.6 Corporate Existence; Ownership of Subsidiaries.................16
3.7 Compliance with ERISA..........................................16
3.8 Board Approval.................................................17
3.9 Financings.....................................................17
3.10 Board of Directors Meetings....................................17
3.11 Rule 144A Information..........................................17
3.12 Regular Course of Business.....................................17
3.13 Intentionally Omitted..........................................18
3.14 Insurance......................................................18
3.15 Maintenance of Properties......................................18
ARTICLE IV
NEGATIVE COVENANTS OF THE COMPANY..........................................18
4.1 Intentionally Omitted..........................................18
4.2 Dealings with Affiliates.......................................18
4.3 Limitation on Restrictions on Subsidiary Dividends and Other
Distributions................................................18
4.4 No Conflicting Agreements......................................19
4.5 Compensation; Consulting and Other Agreements..................19
4.6 Limitations on Indebtedness....................................19
4.7 Other Negative Covenants.......................................19
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ARTICLE V
INVESTMENT REPRESENTATIONS.................................................20
5.1 Representations and Warranties.................................21
5.2 Permitted Sales; Legends.......................................22
ARTICLE VI
CONDITIONS OF PURCHASERS' OBLIGATION ......................................23
6.1 Effect of Conditions...........................................23
6.2 Representations and Warranties.................................23
6.3 Performance....................................................23
6.4 Amendment to Certificate of Incorporation......................23
6.5 Warrant Agreement..............................................23
6.6 Opinion of Counsel.............................................23
6.7 Certified Documents, etc.......................................23
6.8 No Material Adverse Change.....................................24
6.9 Stockholders Agreement.........................................24
6.10 Registration Rights Agreement..................................24
6.11 Employee Confidentiality and Invention Assignment Agreement....24
6.12 Board Election.................................................24
6.13 Consents and Waivers...........................................24
6.14 Series C Preferred Stock Certificates..........................24
ARTICLE VII
CONDITIONS OF THE COMPANY'S OBLIGATION.....................................25
7.1 Effect of Conditions...........................................25
7.2 Representations and Warranties; Performance....................25
7.3 Stockholders' Agreement........................................25
7.4 Registration Rights Agreement..................................25
7.5 Consideration for the Shares...................................25
ARTICLE VIII
[INTENTIONALLY OMITTED]....................................................25
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ARTICLE IX
CERTAIN DEFINITIONS........................................................25
ARTICLE X
TERMINATION 29
10.1 Termination by Mutual Written Consent..........................29
10.2 Termination for Breach.........................................29
10.3 Termination for Delay..........................................29
10.4 Rights After Termination.......................................29
ARTICLE XI
MISCELLANEOUS..............................................................29
11.1 Survival of Representations....................................29
11.2 Parties in Interest............................................29
11.3 Shares Owned by Affiliates.....................................30
11.4 Amendments and Waivers.........................................30
11.5 Notices........................................................30
11.6 Expenses.......................................................31
11.7 Counterparts...................................................31
11.8 Effect of Headings.............................................31
11.9 Adjustments....................................................31
11.10 Governing Law..................................................31
11.11 Confidentiality................................................32
11.12 Assignment.....................................................32
11.13 Waiver of Jury Trial...........................................33
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December 10, 1998
To: The Persons Listed on
Schedule 1.1 attached hereto
Re: Series C Senior Convertible Redeemable Preferred Stock
Gentlemen:
CVC, Inc., a Delaware corporation (the "Company"), hereby agrees with you
as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale. Subject to the terms and conditions hereinafter set
forth, at the Closing (as defined below) the Company shall issue and sell to
each of the persons listed on Schedule 1.1 hereto (collectively, the
"Purchasers" and individually, a "Purchaser"), and each Purchaser shall purchase
from the Company, the number of shares of the Company's Series C Senior
Convertible Redeemable Preferred Stock, $.01 par value per share (the "Series C
Preferred Stock"), set forth opposite the name of such Purchaser on Schedule
1.1, for the aggregate purchase price set forth opposite the name of such
Purchaser on such Schedule. The aggregate number of shares to be sold and
purchased pursuant to this Section 1.1 shall be One Hundred Thousand (100,000)
for an aggregate purchase price of Ten Million Dollars ($10,000,000) payable as
provided in Section 1.4. The Series C Preferred Stock shall have the rights,
terms and privileges set forth on Exhibit A attached hereto. The shares of
Series C Preferred Stock purchased pursuant to this Section 1.1, together with
the shares of Series C Preferred Stock purchased pursuant to Section 1.5, are
referred to herein as the "Purchased Shares." Terms used herein as defined terms
that are not defined in the context hereof shall have the meaning set forth in
Article IX.
1.2 Purchase and Sale of Warrant. At the Closing, the Company will sell to
the Purchasers a warrant (the "Warrant") at a price of $10.00 per warrant to
purchase 200,000 shares of the Company's Common Stock. The Warrant will be
issued pursuant to a Warrant Agreement in the form of Exhibit B attached hereto
(the "Warrant Agreement"). The warrants to be issued to each Purchaser is set
forth in Schedule 1.1. The number of shares of Common Stock issuable upon
exercise of the Warrant purchased pursuant to this Section 1.2 are referred to
herein as the "Warrant Shares." The Company has authorized and reserved and
hereby covenants that it will continue to reserve, free of any preemptive rights
or encumbrances, a sufficient number of authorized but unissued shares of Common
Stock for issuance upon exercise of the Warrant.
1.3 The Conversion Shares. The Company has authorized and reserved and
hereby covenants that it will continue to reserve, free of any preemptive rights
or encumbrances, a sufficient number of its authorized but previously unissued
shares of common stock, $.01 par value per share (the "Common Stock") and shares
of Series D Redeemable Preferred Stock, $.01 par value per share ("Series D
Preferred Stock"), to satisfy the rights of conversion or redemption (as the
case may be) of the holders of the Purchased Shares and the Warrant Shares. The
shares of Common Stock and Series D Preferred Stock issued or issuable upon
conversion or exchange (as the case may be) of the Purchased Shares and Warrant
Shares are referred to herein as the "Conversion Shares."
1.4 Initial Closing. Subject to the satisfaction or waiver of the
conditions set forth in Articles VI and VII hereof, a closing (the "Initial
Closing") of the sale and purchase of the Purchased Shares specified in Section
1.1 above shall take place at the offices of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A
Professional Corporation, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, at 10:00
A.M., on December 10, 1998, or such other date, time and place as shall be
mutually agreed upon by the Company and the Purchasers (the "Initial Closing
Date"). At the Initial Closing, the Company will deliver the Purchased Shares
being acquired by each Purchaser in the form of a certificate issued in such
Purchaser's name, upon receipt by the Company of payment of the full purchase
price therefor by or on behalf of each Purchaser to the Company by check or by
wire transfer of immediately available funds.
1.5 Second Closing. Upon the election of the Company, a second closing
(the "Second Closing") of the sale and purchase of up to 100,000 shares of
Series C Preferred Stock by Purchasers on the same terms and conditions set
forth herein for aggregate consideration to be determined by the Company, of
between five million dollars ($5,000,000) and ten million dollars ($10,000,000),
shall take place at the offices of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, located at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, at 10:00 A.M., on such date as determined
by the parties hereto (the "Second Closing Date"), which date shall be no later
than ninety (90) days after the Initial Closing Date. At the Second Closing, the
Company will deliver the Purchased Shares and the Warrant being acquired by the
Purchaser in the form of a certificate issued in such Purchaser's name upon
receipt by the Company of payment of the purchase price therefor by or on behalf
of each Purchaser to the Company by check or wire transfer of immediately
available funds. For the purposes of this Agreement, unless otherwise indicated,
the term "Closing" refers to the closing of the purchase and sale of the
Purchased Shares and the Warrant at the Initial Closing or the Second Closing,
as the case may be and the term "Closing Date" refers to the date of such
closing. Notwithstanding the foregoing, the Purchasers shall retain the right to
decline to participate in the Second Closing if, in Purchasers' sole discretion,
the Purchasers determine that there has occurred a material adverse change in
the business, operations and/or conditions (financial or otherwise) of the
Company subsequent to the Initial Closing.
1.6 Use of Proceeds. As an integral part of the purpose and structure of
the financing contemplated herein, the Company shall use the proceeds received
upon the sale of the Purchased Shares at the Closing to fund general working
capital, including, but not limited to, working
2
capital for product development, possible acquisitions of businesses, repayment
of debt, enhancement of the Company's sales and marketing capabilities, and
research and development, all as determined by the Company's Board of Directors,
subject to the compliance with the covenants and agreements contained herein and
in the Company's Certificate of Incorporation, as amended. Notwithstanding the
foregoing, the Company may utilize up to all of the proceeds received from the
sale of Purchased Shares at the Second Closing to either (i) redeem any shares
of capital stock owned by any of the stockholders of the Company (but not to pay
a dividend with respect to such shares) or (ii) to acquire substantially all of
the assets, or a majority of the outstanding shares or other equity interests of
any corporation, partnership, limited liability company or other entity,
provided that if the proceeds from the Second Closing are to be used for the
purpose set forth this paragraph (ii), the Company must notify the Purchasers of
this intent in writing and must receive the written consent of the Purchasers to
consummate any such transaction prior to the Second Closing, and provided
further that if the Purchasers do not consent to any such transaction then the
Purchasers in their sole discretion may decline to participate in the Second
Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
In order to induce the Purchasers to purchase the Purchased Shares and the
Warrant, the Company makes the following representations and warranties which
shall be true, correct and complete in all respects on the date hereof and shall
be true, correct and complete in all respects as of the Initial Closing.
2.1 Organization and Corporate Power. The Company and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own its properties and to carry on
its business as presently conducted. The Company and each of its Subsidiaries is
duly licensed or qualified to do business as a foreign corporation in each
jurisdiction wherein the character of its property, or the nature of the
activities presently conducted by it, makes such qualification necessary and
where the failure to so qualify would have a material adverse impact on the
business, condition (financial or otherwise) or operations of the Company.
2.2 Authorization. The Company has all necessary corporate power and has
taken all necessary corporate action required for the due authorization,
execution, delivery and performance by the Company of this Agreement, the
Warrant Agreement, the Amended and Restated Stockholders Agreement referred to
in Section 6.7 (the "Stockholders Agreement"), the Amended and Restated
Registration Rights Agreement referred to in Section 6.8 (the "Registration
Rights Agreement"), the Employee Confidentiality and Invention Assignment
Agreement referred to in Section 6.9 (the "Confidentiality and Invention
Assignment
3
Agreement") and any other agreements or instruments executed by the Company in
connection herewith or therewith (collectively, the "Related Agreements"), and
the consummation of the transactions contemplated herein or therein, and for the
due authorization, issuance and delivery of the Purchased Shares, the Warrant,
the Warrant Shares issuable upon exercise of the Warrant and the Conversion
Shares issuable upon conversion of the Purchased Shares. Sufficient shares of
authorized but unissued Common Stock and sufficient shares of authorized but
unissued shares of Series D Preferred Stock have been reserved for issuance upon
conversion of the Purchased Shares and the Warrant Shares. The issuance of the
Purchased Shares and the Warrant does not, the Warrant Shares issuable upon
exercise of the Warrant and the Conversion Shares upon conversion of the
Purchased Shares will not, require any further corporate action and is not and
will not be subject to any preemptive right, right of first refusal or the like.
This Agreement, the Related Agreements and the other agreements and instruments
executed by the Company in connection herewith or therewith will each be a valid
and binding obligation of the Company enforceable in accordance with its terms.
2.3 Government Approvals. No consent, approval, license or authorization
of, or designation, declaration or filing with, any court or governmental
authority is or will be required on the part of the Company in connection with
the execution, delivery and performance by the Company of this Agreement, any of
the Related Agreements and any other agreements or instruments executed by the
Company in connection herewith or therewith, or in connection with the issuance
of the Purchased Shares and Warrant or the issuance of the Warrant Shares upon
exercise of the Warrant or the Conversion Shares upon conversion of the
Purchased Shares and Warrant Shares, except for (i) those which have already
been made or granted and (ii) the filing of registration statements with the
Securities and Exchange Commission (the "Commission") and any applicable state
securities commission.
2.4 Authorized and Outstanding Stock.
(a) The authorized capital stock of the Company (immediately prior
to the Closing and the transactions contemplated by Section 1.3 hereof) will
consist of (i) 50,000,000 shares of Common Stock, (ii) 2,500 shares of Series A
Preferred Stock, and (iii) 100,000 shares of Series B Preferred Stock, (iv)
200,000 shares of Series C Preferred Stock and (v) 200,000 shares of Series D
Preferred Stock.
(b) The issued and outstanding capital stock of the Company
(immediately prior to the Initial Closing and the transactions contemplated by
Section 1.3 hereof) will consist of (i) 1,586,897 shares of Common Stock, (ii)
1,685 shares of Series A Preferred Stock, (iii) 60,492 shares of Series B
Preferred Stock, (iv) no shares of Series C Preferred Stock, and (v) no shares
of Series D Preferred Stock. In addition, (i) 4,044,000 shares of Common Stock
have been reserved for issuance upon the conversion of the Series A Preferred
Stock, (ii) 3,629,520 shares of Common Stock have been reserved for issuance
upon the conversion of the Series B Preferred Stock, (iii) 3,048,780 shares have
been reserved for issuance upon the conversion of the Series C Preferred Stock,
(iv) options to purchase 2,650,460 shares of
4
Common Stock have been granted and are unexercised under the Company's Stock
Option Plan and options for 1,350,993 shares of Common Stock are available for
future grants under the Company's Stock Option Plan and (v) 1,186,140 shares of
Common Stock has been reserved for issuance upon the exercise of a warrant,
dated May 22, 1995 (the "Seagate Warrant"), held by Seagate Technology, Inc., a
Delaware corporation ("Seagate"). Two Hundred Thousand (200,000) shares of
Series D Preferred Stock have been reserved for issuance upon conversion of the
Series C Preferred Stock. All of the issued and outstanding shares of Common
Stock are, and when issued in accordance with the terms hereof, the Purchased
Shares, the Warrant Shares and the Conversion Shares will be duly authorized and
validly issued and fully paid and non-assessable, with no personal liability
attaching to the ownership thereof and will be free and clear of all Liens,
claims, charges, Encumbrances, or transfer restrictions imposed by or through
the Company, except for restrictions imposed by Federal or state securities or
"blue sky" laws and except for those imposed pursuant to this Agreement, the
Stockholders Agreement or the Registration Rights Agreement. The designations,
powers, preferences, rights, qualifications, limitations and restrictions in
respect of each class or series of capital stock of the Company are as set forth
in the certified corporate charter of the Company delivered under Section 6.7
hereof and all such designations, powers, preferences, rights, qualifications,
limitations and restrictions are valid, binding and enforceable in accordance
with their terms and in accordance with applicable law.
(c) Except as set forth in Schedule 2.4(c) hereto or as provided in
this Agreement, (i) no subscription, warrant, option, convertible security or
other right (contingent or otherwise) to purchase or acquire any shares of
capital stock of the Company is authorized or outstanding, (ii) there is not any
commitment of the Company to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to holders of
any shares of its capital stock any evidences of indebtedness or assets of the
Company, (iii) the Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof and (iv) there are no agreements, written or oral, between the
Company and any holder of its capital stock or among any holders of its capital
stock, relating to the acquisition, disposition or voting of the capital stock
of the Company. Except as provided in this Agreement, no person or entity is
entitled to (i) any preemptive right, right of first refusal or similar rights
granted by the Company with respect to the issuance of any capital stock of the
Company, or (ii) any rights granted by the Company with respect to the
registration of any capital stock of the Company under the Securities Act of
1933, as amended (the "Act"). All of the issued and outstanding shares of the
Company's capital stock have been offered, issued and sold by the Company in
compliance with applicable Federal and state securities laws.
(d) Set forth on Schedule 2.4(d) is (i) a complete and accurate
table of the Company's capitalization, and (ii) a true and complete list of the
shareholders of the Company, showing the number of shares of Common Stock,
Series A Preferred Stock, Series B Preferred Stock or other securities of the
Company (including indebtedness convertible into capital stock)
5
held by each shareholder immediately prior to the Closing (but without giving
effect to the consummation of the transactions contemplated hereby).
2.5 Subsidiaries. Except as set forth in Schedule 2.5, the Company has no
Subsidiaries nor any investment or other interest in, or any outstanding loan or
advance to or from, any Person, including, without limitation, any officer,
director or shareholder. Except as set forth on Schedule 2.5, the Company owns
of record and beneficially, free and clear of all Liens, charges, restrictions,
claims and Encumbrances of any nature, all of the issued and outstanding capital
stock of each of its Subsidiaries.
2.6 Financial Information. The Company has previously delivered to the
Purchasers the financial statements of the Company and each Subsidiary for each
of the fiscal years ended September 30, 1996, September 30, 1997 and September
30, 1998 audited by PriceWaterhouseCoopers, LLP, the Company's certified public
accountants (collectively, the "Financial Statements"). The Financial Statements
are complete and correct in all material respects, are in accordance with the
books and records of the Company, were prepared in accordance with GAAP and
present fairly, on a basis consistent with prior periods, the financial
condition and results of operations of the Company and each Subsidiary as of the
dates and for the periods shown. Neither the Company nor any Subsidiary has any
liability, contingent or otherwise, which is required to be reflected or
reserved against under GAAP, but is not so reflected in or reserved against in
the Financial Statements that could materially and adversely affect the
business, affairs, prospects, assets or financial condition of the Company or
such Subsidiary. Since September 30, 1998 there has been no change in the
business, assets, liabilities, condition (financial or otherwise) or operations
of the Company or any Subsidiary except for changes in the ordinary course of
business which, in the aggregate, have not been materially adverse.
2.7 Events Subsequent to the Date of the Financial Statements. Except as
set forth on Schedule 2.7, since September 30, 1998, neither the Company nor any
Subsidiary has (i) issued any stock, bond or other corporate security, (ii)
borrowed any amount or incurred or become subject to any liability (absolute,
accrued or contingent), except liabilities under contracts and borrowings
entered into in the ordinary course of business, (iii) discharged or satisfied
any Lien or Encumbrance or incurred or paid any obligation or liability
(absolute, accrued or contingent) other than current liabilities shown on the
Financial Statements and current liabilities incurred since September 30, 1998,
in the ordinary course of business, (iv) declared or made any payment or
distribution to stockholders or purchased or redeemed any shares of its capital
stock or other securities, (v) mortgaged, pledged or subjected to Lien any of
its assets, tangible or intangible, other than Liens of current real property
Taxes not yet due and payable, (vi) sold, assigned or transferred any of its
tangible assets except in the ordinary course of business, or canceled any debt
or claim, except in the ordinary course of business, (vii) sold, assigned,
transferred or granted any license with respect to any patent, trademark, trade
name, service ▇▇▇▇, copyright, trade secret or other intangible asset, except
pursuant to license or other agreements entered into in the ordinary course of
business, (viii) suffered any loss of property or waived any right of
6
substantial value whether or not in the ordinary course of business, (ix) made
any change in officer compensation, except in the ordinary course of business,
(x) made any material change in the manner of its business or operations, (xi)
entered into any transaction except in the ordinary course of business or as
otherwise contemplated hereby or (xii) entered into any commitment (contingent
or otherwise) to do any of the foregoing.
2.8 Litigation. Except as otherwise set forth on Schedule 2.8, there is no
litigation or governmental proceeding or investigation pending or, to the
knowledge of the Company, threatened, against the Company or any Subsidiary or
affecting any of the Company's or such Subsidiary's properties or assets, or to
the knowledge of the Company against any officer, key employee or shareholder of
the Company or any Subsidiary in his or her capacity as such, nor has there
occurred any event or does there exist any condition on the basis of which any
litigation, proceeding or investigation might properly be instituted with any
substantial chance of recovery. Neither the Company, any Subsidiary, nor any
officer, key employee or shareholder of the Company, any Subsidiary in his or
her capacity as such is, to the knowledge of the Company, in default with
respect to any order, writ, injunction, decree, ruling or decision of any court,
commission, board or other government agency.
2.9 Compliance with Laws and Other Instruments. The Company and its
Subsidiaries are in compliance with all of the provisions of this Agreement and
of its charter and by-laws, and in all material respects with the provisions of
each mortgage, indenture, lease, license, other agreement or instrument,
judgment, decree, judicial order, statute, and regulation by which any of them
is bound or to which any of them or any of their respective properties are
subject. Neither the execution, delivery or performance of this Agreement and
the Related Agreements, nor the offer, issuance, sale or delivery of the
Purchased Shares and Warrant, or the Warrant Shares upon exercise of the Warrant
or the Conversion Shares upon conversion of the Purchased Shares and Warrant
Shares, with or without the giving of notice or passage of time, or both, will
violate, or result in any breach of, or constitute a default under, or result in
the imposition of any encumbrance upon any asset of the Company or any
Subsidiary pursuant to any provision of the Company's or such Subsidiary's
charter or by-laws, or any statute, rule or regulation, contract, lease,
judgment, decree or other document or instrument by which the Company or any
Subsidiary is bound or to which the Company or any Subsidiary or any of their
respective properties are subject, or, to the knowledge of the Company, will
cause the Company or any Subsidiary to lose the benefit of any right or
privilege it presently enjoys or, to the knowledge of the Company, cause any
Person who is expected to normally do business with the Company or any
Subsidiary to discontinue to do so on the same basis.
2.10 Taxes. The Company and each Subsidiary has filed all Tax returns
(including statements of estimated Taxes owed) required to be filed within the
applicable periods for such filings and has paid all Taxes required to be paid,
and has established adequate reserves (net of estimated Tax payments already
made) for the payment of all Taxes payable in respect to the period subsequent
to the last periods covered by such returns. Except as set forth on
7
Schedule 2.10, no deficiencies for any Tax are currently assessed against the
Company or any Subsidiary, and no Tax returns of the Company or any Subsidiary
have been audited during the last three (3) years, and, there is no such audit
pending or, to the knowledge of the Company, contemplated. There is no Tax Lien,
whether imposed by any federal, state or local Taxing authority, outstanding
against the assets, properties or business of the Company or any Subsidiary. For
the purposes of this Agreement, the terms "Tax" and "Taxes" shall include all
federal, state, local and foreign Taxes, including income, franchise, property,
sales, withholding, payroll and employment Taxes.
2.11 Real Property.
(a) Schedule 2.11 sets forth the addresses and uses of all real
property that the Company or any Subsidiary owns, leases or subleases, and any
Lien or Encumbrance of record on any such owned real property or the Company's
or Subsidiary's leasehold interest therein, specifying in the case of each such
lease or sublease, the name of the lessor or sublessor, as the case may be, the
lease term and the financial obligations of the lessee thereunder.
(b) Except as set forth on Schedule 2.11, the Company or its
Subsidiary, as the case may be, has good and marketable title to, and owns free
and clear of all Liens and Encumbrances, all property listed as owned by the
Company or any Subsidiary on Schedule 2.11, and, there is no material violation
of any law, regulation or ordinance (including without limitation laws,
regulations or ordinances relating to zoning, environmental, city planning or
similar matters) relating to any real property owned, leased or subleased by the
Company or any Subsidiary.
(c) There are no material defaults by the Company or any Subsidiary
or, to the knowledge of the Company, by any other party to a lease listed
thereon, which might curtail the present use of the Company's and such
Subsidiary's property listed on Schedule 2.11. The performance by the Company of
this Agreement and the Related Agreements will not result in the termination of,
or in any increase of any amounts payable under, any lease listed on Schedule
2.11.
2.12 Personal Property. Except as set forth on Schedule 2.12 and except
for property sold or otherwise disposed of in the ordinary course of business
since September 30, 1998, the Company and its Subsidiaries own free and clear of
any Liens or Encumbrances, all of the material personal property reflected as
owned by the Company and its Subsidiaries in the balance sheet contained in the
Financial Statements, and all other material items of personal property acquired
by the Company and its Subsidiaries through the date hereof. All items of such
material personal property necessary to the operation of the business of the
Company are in good operating condition, normal wear and tear excepted.
2.13 Patents, Trademarks, etc. Set forth on Schedule 2.13 is a list of all
patents, patent rights, patent applications, trademarks, trademark applications,
service marks, service ▇▇▇▇
8
applications trade names and registered copyrights, and all applications for
such that are in the process of being prepared, or that are owned by or
registered in the name of the Company or any Subsidiary, or of which the Company
or any Subsidiary is a licensor or licensee or in which the Company or any
Subsidiary has any right. The Company and its Subsidiaries own or possess
adequate licenses or other rights to use all patents, patent applications,
trademarks, trademark applications, service marks, service ▇▇▇▇ applications,
trade names, copyrights, manufacturing processes, formulae, trade secrets and
know how (collectively, "Intellectual Property") necessary to the conduct of
their business as conducted and as proposed to be conducted, and no claim is
pending or, to the knowledge of the Company, threatened to the effect that the
operations of the Company infringe upon or conflict with the asserted rights of
any other person under any Intellectual Property, and there is no known basis
for any such claim (whether or not pending or threatened). Except as set forth
in Schedule 2.13, no claim is pending or, to the knowledge of the Company,
threatened to the effect that any such Intellectual Property owned or licensed
by the Company, or which the Company or any Subsidiary otherwise has the right
to use, is invalid or unenforceable by the Company or such Subsidiary, and there
is no known basis for any such claim (whether, or not pending or threatened). To
the knowledge of the Company, all technical information developed by and
belonging to the Company and its Subsidiaries which has not been patented or
copywritten has been kept confidential. Neither the Company nor any Subsidiary
has granted or assigned to any other person or entity any right to manufacture,
have manufactured, assemble or sell the products or proposed products or to
provide the services or proposed services of the Company or such Subsidiary.
Except as set forth in Schedule 2.13, no current or former stockholder,
employee, officer or director of the Company or any of its Subsidiaries has
(directly or indirectly) any right, title or interest in any of the rights
described on Schedule 2.13 other than such right which such Person may enjoy as
a stockholder of the Company.
2.14 Agreements of Directors, Officers and Employees. To the knowledge of
the Company, no director, officer or employee of or consultant to the Company or
any Subsidiary is in violation of any terms of any employment contract,
non-competition agreement, non-disclosure agreement, patent disclosure or
assignment agreement or other contract or agreement containing restrictive
covenants relating to the right of any such director, officer, employee or
consultant to be employed or engaged by the Company or such Subsidiary because
of the nature of the business conducted or proposed to be conducted by the
Company or such Subsidiary, or relating to the use of trade secrets or
proprietary information of others. Schedule 2.14 hereto sets forth the name and
address of each person currently serving as a director and/or officer of the
Company, and each person listed on Schedule 2.14 was duly elected and is
presently serving as a director and/or officer, as the case may be. Set forth on
Schedule 2.14 is a list of all employees of the Company who have executed an
employee confidentiality agreement, invention assignment agreement or
non-competitive or non-solicitation agreement with the Company.
2.15 Governmental and Industrial Approvals. The Company and each of its
Subsidiaries has all the permits, licenses, orders, franchises and other rights
and privileges of all federal, state, local or foreign governmental or
regulatory bodies necessary for the Company and
9
such Subsidiaries to conduct their respective businesses as presently conducted.
All such permits, licenses, orders, franchises and other rights and privileges
are in full force and effect and no suspension or cancellation of any of them is
threatened, and none of such permits, licenses, orders, franchises or other
rights and privileges will be affected by the consummation of the transactions
contemplated in this Agreement and the Related Agreements.
2.16 Federal Reserve Regulations. Neither the Company nor any of its
Subsidiaries has engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation G of the
Board of Governors of the Federal Reserve System), and no part of the proceeds
of the sale of the Purchased Shares will be used to purchase or carry any margin
security or to extend credit to others for the purpose of purchasing or carrying
any margin security or in any other manner which would involve a violation of
any of the regulations of the Board of Governors of the Federal Reserve System.
2.17 Contracts and Commitments. Except as set forth on Schedule 2.17
attached hereto, neither the Company nor any Subsidiary has any contract,
obligation or commitment which is material or which involves a potential
material commitment or any stock redemption or stock purchase agreement,
financing agreement, license or lease. For purposes of this Section 2.17, a
contract, obligation or commitment shall be deemed material if it requires
future expenditures by the Company or any Subsidiary in excess of $100,000 or
might result in payments to the Company or any Subsidiary in excess of $100,000.
2.18 Securities Act. The Company has complied and will comply with all
applicable federal or state securities laws in connection with the issuance and
sale of the Purchased Shares and Warrant and the issuance of the Warrant Shares
upon exercise of the Warrant and the issuance of the Conversion Shares upon
conversion of the Purchased Shares and Warrant Shares. Neither the Company nor
anyone acting on its behalf has offered any of the Purchased Shares or Warrant,
or similar securities, or solicited any offers to purchase any of such
securities, so as to bring the issuance and sale of the Purchased Shares and
Warrant under the registration provisions of the Act.
2.19 Registration Rights. The Company has not granted any rights relating
to registration of its capital stock under the Act or state securities laws
other than those contained in this Agreement and the Related Agreements and
those described on Schedule 2.19 hereto.
2.20 Insurance Coverage. Schedule 2.20 hereto contains an accurate summary
of the insurance policies currently maintained by the Company and its
Subsidiaries. Except as described on Schedule 2.20, there are currently no
claims pending against the Company or any Subsidiary under any insurance
policies currently in effect and covering the property, business or employees of
the Company and its Subsidiaries, and all premiums due and payable with respect
to the policies maintained by the Company and its Subsidiaries have been paid.
10
2.21 Employee Matters. Except as set forth on Schedule 2.21, neither the
Company nor any Subsidiary has in effect any employment agreements, consulting
agreements, deferred compensation, pension or retirement agreements or
arrangements, bonus, incentive or profit-sharing plans or arrangements, or labor
or collective bargaining agreements, written or oral. The Company has no
knowledge that any of the officers or other key employees of the Company or any
Subsidiary presently intends to terminate his employment. The Company and its
Subsidiaries are in compliance in all material respects with all applicable laws
and regulations relating to labor, employment, fair employment practices, terms
and conditions of employment, and wages and hours. The Company and each
Subsidiary is in compliance in all material respects with the terms of all
plans, programs and agreements listed on Schedule 2.21, and each such plan,
program or agreement is in compliance in all material respects with all of the
requirements and provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). No such plan or program has engaged in any
"prohibited transaction" as defined in Section 4975 of the Internal Revenue Code
of 1986, as amended (the "Code"), or has incurred any "accumulated funding
deficiency" as defined in Section 302 of ERISA, nor has any reportable event as
defined in Section 4043(b) of ERISA occurred with respect to any such plan or
program. With respect to each plan listed on Schedule 2.21, all required
filings, including all filings required to be made with the United States
Department of Labor and Internal Revenue Service, have been timely filed.
2.22 No Brokers or Finders. Except as set forth on Schedule 2.22, no
person has or will have, as a result of the transactions contemplated by this
Agreement, any right, interest or claim against or upon the Company or any of
its Subsidiaries for any commission, fee or other compensation as a finder or
broker because of any act or omission by the Company or any of its Subsidiaries.
2.23 Transactions with Affiliates. Except as set forth on Schedule 2.23,
there are no loans, leases or other agreements, understandings or continuing
transactions between the Company or any Subsidiary on the one hand, and any
officer or director of the Company or any Subsidiary or any person owning one
percent (1%) or more of the Common Stock of the Company or any respective family
member or affiliate of such officer, director or shareholder on the other hand.
2.24 Assumptions, Guarantees, etc. of Indebtedness of Other Persons.
Except as set forth on Schedule 2.24, neither the Company nor any Subsidiary has
assumed, guaranteed, endorsed or otherwise become directly or contingently
liable on or for any indebtedness of any other Person, except guarantees by
endorsement of negotiable instruments for deposit or collection.
2.25 Restrictions on Subsidiaries. Except as set forth on Schedule 2.25,
there are no restrictions on the Company or any of its Subsidiaries which
prohibit or otherwise restrict the transfer of cash or other assets between the
Company and any of its Subsidiaries or between any Subsidiaries of the Company.
11
2.26 Environmental Matters. Except as disclosed on Schedule 2.26:
(a) (i) Neither the Company nor any Subsidiary has ever generated,
transported, used, stored, treated, disposed of, or managed any hazardous waste
except in compliance with applicable law; (ii) no Hazardous Waste or Hazardous
Material, has ever been or, to the knowledge of the Company, is threatened to be
spilled, released, or disposed of by the Company or any Subsidiary at any site
presently or formerly owned, operated, leased, or used by the Company or any
Subsidiary or to the knowledge of the Company, has ever come to be located in
the soil or groundwater at any such site; (iii) except in compliance in all
material respects with applicable law, no Hazardous Waste or Hazardous Material
has ever been transported by the Company or any Subsidiary from any site
presently or formerly operated, leased, or used by the Company for treatment,
storage, or disposal at any other place; (iv) neither the Company or any
Subsidiary does presently own, operate, lease, or use, nor, to the knowledge of
the Company, has the Company or any Subsidiary previously owned, operated,
leased, or used any site on which underground storage tanks are or were located;
and (v) no Lien has been imposed and not subsequently released by any
governmental agency on any property, facility, machinery, or equipment owned,
operated, leased, or used by the Company or any Subsidiary in connection with
the presence of any Hazardous Waste or Hazardous Material.
(b) (i) Neither the Company or any Subsidiary has liability under,
nor has the Company or any Subsidiary ever violated in any material respect,
without remediation, any Environmental Laws; (ii) every property owned,
operated, leased, or used by the Company or any Subsidiary, and every facility
and operation thereon, are presently in compliance with all applicable
Environmental Laws in all material respects; and (iii) neither the Company or
any Subsidiary has ever entered into or been subject to any judgment, consent
decree, compliance order, or administrative order with respect to any
environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or formal complaint
or claim with respect to any environmental or health and safety matter or the
enforcement of any Environmental Law.
(c) No site owned, operated, leased, or used by the Company or any
Subsidiary contains any asbestos or asbestos-containing material, any
polychlorinated biphenyls ("PCBs") or equipment containing PCBs, or any urea
formaldehyde foam insulation.
(d) The Company has provided to the Purchasers or their
representatives copies of all documents, records, and information received or
generated by the Company after January 1, 1993 to the Company or any Subsidiary
concerning any environmental or health and safety matter relevant to the Company
or any Subsidiary whether generated by the Company, or others, in the nature of
environmental audits, environmental risk assessments, site assessments,
documentation regarding off-site disposal of Hazardous Waste or Hazardous
Material, spill control plans, and reports, permits, licenses, approvals,
consents, and other authorizations related to environmental or health and safety
matters issued by any governmental agency.
12
2.27 U.S. Real Property Holding Corporation. Neither the Company nor any
Subsidiary is now and has ever been a "United States real property holding
corporation," as defined in Section 897(c)(2) of the Code and Section 1.897-2(b)
of the Regulations promulgated by the Internal Revenue Service, and the Company
or any Subsidiary has filed with the Internal Revenue Service all statements, if
any, with its United States income Tax returns which are required under Section
1.897-2(h) of such Regulations.
2.28 Foreign Corrupt Practices Act. Neither the Company nor any Subsidiary
has taken any action which would cause it to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any rules and regulations
thereunder. To the knowledge of the Company, there is not now, and there has
never been, any employment by the Company of, or beneficial ownership in the
Company or any Subsidiary by, any governmental or political official in any
country in the world.
2.29 Corporate Records. The minute books of the Company and each of its
Subsidiaries contain accurate, complete and current copies of all charter
documents and of all minutes of meetings, resolutions and other proceedings of
its board of directors and shareholders, duly signed by the Secretary, an
Assistant Secretary or another appropriate officer, all directors or all
shareholders, as appropriate. The stock record book of the Company and each of
its Subsidiaries are also complete, correct and current. The Company has made
available true, correct and complete copies of such minute books and stock
record books to the Purchasers.
2.30 Management Presentation. The Company has previously delivered to each
Purchaser a copy of the Company's Management Presentation attached hereto as
Exhibit 2.30. (the "Management Presentation"). The description in the Management
Presentation of the Company's business is true and correct in all material
respects as of the date of the specific document of the Management Presentation
in which such description is found. The pro forma financial information and
financial projections included in the Management Presentation were prepared with
due care based on assumptions believed by the Company to be reasonable, and
presents the Company's good faith estimate of future results based on
information available as of the date of the specific document of the Management
Presentation in which such financial information and/or projection is found (as
the case may be). The material entitled "Meeting" and dated August 25, 1998 and
the list entitled "Thin Film Head Fab Locations/World Wide" and dated August 25,
1998, describes the Company's reasonable assessment of the total market for its
products at the respective dates of such material and list. The list entitled
"CVC Data Storage and Semiconductor Equipment PNOR" (the "PNOR List") and dated
August 19, 1998 is the list of customers that the Company was soliciting at the
date of such list. A copy of the PNOR List has been previously delivered to the
Purchasers.
2.31 Intentionally Omitted.
2.32 Disclosures. Neither this Agreement, any Schedule or Exhibit to this
Agreement, the Related Agreements or the Financial Statements contains any
untrue statement of a material
13
fact or omits a material fact necessary to make the statements made herein or
therein, in light of the circumstances in which made, not misleading. There is
no fact known to the Company which, in the Company's reasonable business
judgment on the date hereof, materially and adversely affects the business, or
financial condition of the Company or its properties or assets, which has not
been set forth herein or in any other document delivered in connection herewith.
ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will observe the following covenants on and after
the date hereof and until the consummation of the first Qualified Public
Offering unless the Advent Representative otherwise consents:
3.1 Accounts and Reports. The Company will, and will cause each of its
Subsidiaries to, maintain a standard system of accounts in accordance with GAAP
consistently applied and the Company will, and will cause each of its
Subsidiaries to, keep full and complete financial records. The Company will
furnish to each Purchaser the information set forth in this Section 3.1.
(a) Within one hundred twenty (120) days after the end of each
fiscal year, a copy of the audited annual consolidated financial statement
(including income statements balance sheets) and cash flow statements of the
Company and its Subsidiaries as of the end of such year, prepared in accordance
with GAAP, duly certified by an independent public accountant of national
recognition selected by the Board of Directors of the Company.
(b) Within thirty (30) days after the end of each calendar month in
each fiscal year (other than the last month in each fiscal year) an unaudited
consolidated monthly financial statement (including income statements, balance
sheets, cash flow statements, and comparisons to budget) of the Company and its
Subsidiaries as of the end of such month, setting forth in each case in
comparative form (i) the corresponding figures for the corresponding period of
the preceding fiscal year for the Company and each of its Subsidiaries, as the
case may be, and (ii) the corresponding figures for the corresponding period set
forth in the Management Presentation, all in reasonable detail and prepared in
accordance with GAAP (except for normal year end adjustments and the absence of
footnotes).
(c) No later than thirty (30) days prior to the commencement of each
fiscal year consolidated capital and operating expense budgets, cash flow
projections and income and loss projections for the Company and its Subsidiaries
in respect of such fiscal year; provided, however, that all such budgets,
projections and revisions shall be subject to the prior approval of a majority
of the Board of Directors of the Company;
14
(d) At the time of delivery of each annual statement, a certificate,
executed by either the president or chief financial officer of the Company
stating (i) that such officer has caused this Agreement to be reviewed and has
no knowledge of any default by the Company or any Subsidiary in the performance
or observance of any of the provisions of this Agreement or, if such officer has
such knowledge, specifying such default, and (ii) with respect to the delivery
of annual statements, a statement as to the then conversion value of the
Purchased Shares and the number of Conversion Shares into which each share of
Series C Preferred Stock may then be converted.
(e) Promptly upon receipt thereof and review by the Company's Board
of Directors, any written report, so called "management letter," and any other
communication submitted to the Company or any Subsidiary by its independent
public accountants relating to the business, prospects or financial condition of
the Company and its Subsidiaries;
(f) Promptly after the commencement thereof, notice of (i) all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Company or any Subsidiary which, if successful, could have a
material adverse effect on the Company and its Subsidiaries, taken as a whole;
and (ii) all material defaults by the Company or any Subsidiary (whether or not
declared) under any agreement for money borrowed (unless waived or cured within
applicable grace periods);
(g) Promptly upon sending, making available, or filing the same, all
reports and financial statements which the Company (or any Subsidiary) shall
send or make available generally to the shareholders of the Company as such or
to the Commission; and
(h) Such other information with regard to the business, properties
or the condition or operations, financial or otherwise, of the Company or its
Subsidiaries as the Purchasers may from time to time reasonably request.
3.2 Payment of Taxes. The Company will pay and discharge (and cause any
Subsidiary to pay and discharge) all Taxes, assessments and governmental charges
or levies imposed upon it, the Company and the Subsidiaries or upon their
respective income or profits, or upon any properties belonging to each of them,
prior to the date on which penalties attach thereto, and all lawful claims
which, if unpaid, might become a Lien or charge upon any properties of the
Company (or any Subsidiary), provided that neither the Company nor any
Subsidiary shall be required to pay any such Tax, assessment, charge, levy or
claim which is being contested in good faith and by proper proceedings if the
Company or such Subsidiary shall have set aside on its books adequate reserves
with respect thereto.
3.3 Maintenance of Key Man Insurance. The Company will, at its expense,
obtain within sixty (60) days of the date hereof, and continue to maintain a
life insurance policy with a responsible and reputable insurance company payable
to the Company on the life of ▇▇▇▇▇▇▇▇▇ ▇.
15
▇▇▇▇▇▇▇ in the face amount of at least One Million Dollars ($1,000,000). The
Company will maintain such policy and will not cause or permit any assignment of
the proceeds of such policy and will not borrow against such policy.
3.4 Compliance with Laws, etc. The Company will comply (and cause each of
its Subsidiaries to comply) with all applicable laws, rules, regulations and
orders of any governmental authority, the noncompliance with which could
materially adversely affect the business, assets, or condition, financial or
otherwise, of the Company and its Subsidiaries, taken as a whole.
3.5 Inspection. Upon prior notice, at any reasonable time during normal
business hours and from time to time, the Company (and each of its Subsidiaries)
will permit any one or more of the Purchasers, or any of their authorized agents
or representatives, to examine and make copies of and extracts from the records
and books of account of and visit the properties of the Company (and any of its
Subsidiaries) and to discuss the Company's affairs, finances and accounts with
any of its officers or directors; provided that any Person or Persons exercising
rights under this Section 3.5 shall (i) use all reasonable efforts to ensure
that any such examination or visit results in a minimum of disruption to the
operations of the Company and (ii) prior to the Company disclosing or providing
access to information with respect to the Company, shall agree in writing to
keep all proprietary information of the Company disclosed to him in the course
of such inspection confidential in a manner consistent with prudent business
practices and treatment of such Person's or Persons' own confidential
information. The rights granted under this Section 3.5 shall be in addition to
any rights which any Purchaser may have under applicable law in its capacity as
a shareholder of the Company.
3.6 Corporate Existence; Ownership of Subsidiaries. The Company will, and
will cause its Subsidiaries to, at all times preserve and keep in full force and
effect their corporate existence, and rights and franchises material to the
business of the Company and its Subsidiaries, taken as a whole, and will
qualify, and will cause each of its Subsidiaries to qualify, to do business as a
foreign corporation in any jurisdiction where the failure to do so would have a
material adverse effect on the business, condition (financial or other), assets,
properties or operations of the Company and its Subsidiaries, taken as a whole;
provided, however, that the Company may merge or liquidate one or more of its
Subsidiaries into the Company or into another Subsidiary. Except for entities in
which the value of the Company's equity interests are less than $1,000,000, the
Company or a Subsidiary shall at all times own of record and beneficially, free
and clear of all Liens, charges, restrictions, claims and Encumbrances of any
nature, all of the issued and outstanding capital stock of each of its
Subsidiaries.
3.7 Compliance with ERISA. The Company will comply, (and cause each of its
Subsidiaries to comply) in all material respects with all minimum funding
requirements applicable to any pension or other employee benefit plans which are
subject to ERISA or to the Code, and comply in all other material respects with
the provisions of ERISA and the Code, and the rules and regulations thereunder,
which are applicable to any such plan. Neither the
16
Company nor any of its Subsidiaries will permit any event or condition to exist
which could permit any such plan to be terminated under circumstances which
cause the Lien provided for in Section 3068 of ERISA to attach to the assets of
the Company or any of its Subsidiaries.
3.8 Board Approval. No later than thirty (30) days after the commencement
of each fiscal year, the Company will prepare and submit to its Board of
Directors for its approval prior to such year end a business plan, which shall
include an operating plan and budget, cash flow projections and profit and loss
projections, all itemized in reasonable detail for the immediately following
year.
3.9 Financings. The Company will promptly provide to the Board of
Directors the details and terms of, and any brochures or investment memoranda
prepared by the Company related to, any possible financing of any nature for the
Company (or any of its Subsidiaries), whether initiated by the Company or any
other Person.
3.10 Board of Directors Meetings. The Company shall use its best efforts
to fix the number of members of its Board of Directors at nine (9) and to cause
the election of the Advent Representative (as such term is defined in the
Stockholders Agreement) as a member of its Board of Directors. The Advent
Representative will be nominated by Global Private Equity III Limited
Partnership. The Certificate of Incorporation of or By-laws of the Company shall
at all times provide for indemnification of the directors and limitations on the
liability of the directors to the fullest extent permitted under applicable
state law. The Company agrees to the fullest extent permitted by law to
indemnify the Advent Representative on the Board of Directors pursuant to its
Certificate of Incorporation and By-Laws. The Company shall ensure that meetings
of its Board of Directors are held at least four (4) times each year, and will
reimburse the Advent Representative for his reasonable travel expenses,
including the cost of airfare and any necessary meals and lodging, incurred in
connection with attending meetings of the Board of Directors. In addition, the
Company shall maintain at all times a Compensation Committee and an Audit
Committee of the Board of Directors. The Advent Representative shall be a member
of the Audit Committee and shall have those responsibilities set forth in the
Stockholders Agreement or as may be determined from time to time by a majority
of the entire Board of Directors. In addition to the four (4) meetings of the
Board of Directors to be held annually as described herein, the Company
covenants and agrees that it shall cause each of the Chief Executive Officer and
the Chief Financial Officer of the Company to be available to meet with the
Advent Representative either in person or by telephone upon the reasonable
request of the Advent Representative while the Advent Representative is a member
of the Board of Directors.
3.11 Rule 144A Information. The Company shall, upon the written request of
any Purchaser, provide to such Purchaser and to any prospective institutional
transferee of the Purchased Shares or Conversion Shares designated by such
Purchaser, such financial and other information as is available to the Company
or can be reasonably obtained by the Company without material expense and as
such Purchaser may reasonably determine is required to permit such transfer to
comply with the requirements of Rule 144A promulgated under the Act.
17
3.12 Regular Course of Business. The Company agrees that on and after the
date hereof and prior to the Closing that it and each of its Subsidiaries will
carry on its business diligently and in the ordinary course and substantially in
the same manner as heretofore carried on and will use its best efforts to
preserve its present business organization intact, keep available the services
of its present officers, agents and employees and preserve its present
relationships with suppliers, customers and other persons having business
dealings with it.
3.13 Intentionally Omitted.
3.14 Insurance. The Company and each Subsidiary will keep its insurable
properties insured, upon reasonable business terms, by financially sound and
reputable insurers against liability, and the perils of casualty, fire and
extended coverage in amounts of coverage sufficient in the reasonable business
judgment of the Company to protect the Company. The Company will also maintain,
upon reasonable business terms, with such insurers insurance against other
hazards and risks and liability to persons and property sufficient in the
reasonable business judgment of the Company to protect the Company and each
Subsidiary. Notwithstanding the foregoing, within six (6) months from the date
of the Closing and prior to a Qualified Public Offering, the Company shall, at
its sole expense, obtain and continue to maintain director and officer liability
insurance coverage for each of its officers and directors with a responsible and
reputable insurance company at reasonable commercial rates.
3.15 Maintenance of Properties. The Company will and will cause each of
its Subsidiaries to maintain all properties used or useful in the conduct of its
business in good repair, working order and continue as necessary to permit such
business to be properly conducted.
ARTICLE IV
NEGATIVE COVENANTS OF THE COMPANY
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will comply (and will cause each Subsidiary to
comply) with each of the provisions of this Article IV on and after the date
hereof until the earlier of the conversion of all the Series C Preferred Stock
or the closing of a Qualified Public Offering.
4.1 Intentionally Omitted.
4.2 Dealings with Affiliates. Except as set forth on Schedule 4.2 and
except for transactions made on an arms-length basis, or through the Company's
normal and customary dealings, the Company will not enter into any transaction
including, without limitation, any loans or extensions of credit or royalty
agreements with any officer or director of the Company or any Subsidiary or
holder of any class of capital stock of the Company, or any member of their
respective immediate families or any corporation or other entity directly or
indirectly controlled by one or more of such officers, directors or shareholders
or members of their immediate
18
families, except for (i) advances in reasonable amounts made to employees of the
Company or any Subsidiary for valid business purposes, provided that such
advances are repaid to the Company within 90 days, and (ii) advances made to
employees of the Company, upon approval of the Board of Directors, related to
such employees' exercise of stock options.
4.3 Limitation on Restrictions on Subsidiary Dividends and Other
Distributions. Except as set forth on Schedule 4.3, the Company shall not permit
any of its Subsidiaries, directly or indirectly, to create or suffer to exist or
become effective any Encumbrances or restrictions on the ability of any of its
Subsidiaries to (i) pay dividends or make any other distributions on its capital
stock or any other interest or participation in its profit owned by any of the
Company or any of its Subsidiaries, or pay any indebtedness owed by any of the
Subsidiaries, (ii) make loans or advances to the Company, or (iii) transfer any
of its properties or assets to the Company.
4.4 No Conflicting Agreements. The Company agrees that neither it nor any
Subsidiary will, without the consent of a majority in interest of the
Purchasers, enter into or amend any agreement, contract, commitment or
understanding which would restrict or prohibit the exercise by the Purchasers of
any of their rights under this Agreement.
4.5 Compensation; Consulting and Other Agreements. The Company's
Compensation Committee, established pursuant to the Stockholders Agreement,
shall determine the base salary and other compensation and benefit arrangements
of the Company's Chief Executive Officer and each member of the Company's senior
management who report directly to the Chief Executive Officer.
4.6 Limitations on Indebtedness. Without the consent of the Board of
Directors, the Company will not create, incur, assume or permit to exist any
debt for borrowed money in excess of One Million Dollars ($1,000,000), except
for (i) all deferred Taxes, and (ii) all unfunded pension fund and other
employee benefit plan obligations and liabilities, but only to the extent they
are permitted to remain unfunded under applicable law.
4.7 Other Negative Covenants. The Company hereby further covenants and
agrees that it will not:
(a) Create or authorize the creation of any additional class or
series of shares of stock or equity unless the same ranks junior to the Series C
Preferred Stock as to conversion, redemption, the distribution of assets on the
liquidation, dissolution or winding up of the Company, or increase the
authorized amount of the Series C Preferred Stock or any series thereof or
increase the authorized amount of any additional class or series of shares of
stock unless the same ranks junior to the Series C Preferred Stock as to
conversion, redemption, or the distribution of assets on the liquidation,
dissolution or winding up of the Company, or create or authorize any obligation
or security convertible into shares of Series C Preferred Stock or into shares
of any other class or series of stock unless the same ranks junior to the Series
C Preferred
19
Stock as to conversion, redemption or the distribution of assets on the
liquidation, dissolution or winding up of the Company, whether any such
creation, authorization or increase shall be by means of amendment to the
Certificate of Incorporation or by merger, consolidation or otherwise, provided,
however, that unless the Second Closing has occurred, then the foregoing is not
applicable unless the creation of any additional class or series of shares is
done in contemplation of an investment in the Company by a third party for an
aggregate amount equal to or greater than $10,000,000;
(b) Amend, alter or repeal its Certificate of Incorporation, By-laws
or other organizational documents in any manner, or take any other corporate
action, that would alter, change or adversely affect the terms, conditions,
rights or privileges of the Series C Preferred Stock, except any amendment to
its Certificate of Incorporation in connection with the creation of an
additional class or series of shares permitted pursuant to Section 4.7(a);
(c) Prior to the closing of a Qualified Public Offering, declare or
pay (or set aside any amounts for the payment of) dividends on any of the Common
Stock or of any class or classes of stock of the Company other than dividends
paid solely in shares of Common Stock;
(d) Increase or decrease (other than by conversion as permitted
hereby) the total number of authorized shares of Series C Preferred Stock;
(e) Redeem, purchase or otherwise acquire for value (or pay into or
set aside for a sinking fund for such purpose) any of the Common Stock of any
class, any other capital stock of the Company, or any of the Company's options,
warrants or convertible or exchangeable securities except that these provisions
will not prohibit the Company from completing any redemption contemplated by
Section 1.6 or the redemption required by the Certificate of Incorporation or
Amended and Restated Stockholders Agreement and except for acquisitions of
securities of employees of the Company or its affiliates;
(f) acquire a controlling or significant equity position in, or
purchase all or substantially all of the assets of (in each case whether by
merger, consolidation, private sale or otherwise) any business, person or entity
("Target") where the Target has a valuation of more than $10,000,000 for cash
acquisitions or more than $10,000,000 for acquisitions by the corporation using
its equity securities (provided in all cases under this Clause (f), the holders
of Series C Preferred Stock will not apply their own judgment unreasonably in
making their determination); or
(g) make any investment, through the direct or indirect holding of
securities or otherwise, other than (i) investments in obligations issued or
guaranteed by the United States of America or any department or agency thereof
or marketable municipal obligations of any state or local government, in each
case having a maturity not in excess of one year or money market funds
consisting (in substantial portion) of the foregoing; (ii) deposits, bankers
acceptances and repurchase agreements maturing not more than one year from the
date of such purchase or
20
acquisition and evidencing direct obligations of any bank or trust company
having capital surplus and undivided profits in excess of $50,000,000, (iii)
commercial paper of issuers which are United States domestic corporations
bearing a rating by a national credit agency of not less than A-1 or P-1, (iv)
any investments not to exceed $50,000, either individually or in the aggregate,
at any time outstanding (v) investments permitted by Section 3.6, and (vi)
investments permitted by Section 4.7(f); or
(h) within one (1) year following the Initial Closing, the Company
may not merge or consolidate with or into any other corporation or sell, lease
or convey all or substantially all of its property or business without obtaining
the prior written consent of the Purchasers, provided that such consent shall
not be required in the event that the consideration to be received by the
Purchasers as a result of such transaction is equal to or greater than the
product of $200 and the number of Purchased Shares owned by Purchaser
immediately prior to such transaction.
ARTICLE V
INVESTMENT REPRESENTATIONS
5.1 Representations and Warranties. Each Purchaser hereby represents and
warrants to the Company, understanding and agreeing that the Company is entering
into this Agreement in part in reliance on such representations and warranties,
as follows:
(a) Such Purchaser is an "Accredited Investor" as that term is
defined in Rule 501(a) of Regulation D promulgated under the Act.
(b) Such Purchaser is duly authorized to execute this Agreement and
the Related Agreements, and assuming due execution and delivery by the Company
of the Agreement and the Related Agreements, this Agreement and the Related
Agreements to which such Purchaser is a party constitute legal, valid and
binding obligations of such Purchaser, enforceable against such Purchaser in
accordance with their respective terms;
(c) Such Purchaser has been advised by the Company that none of the
Purchased Shares or Warrant Shares have been registered under the Act, that the
Purchased Shares and Warrant Shares will be issued on the basis of the statutory
exemption provided by Section 4(2) of the Act or Regulation D promulgated
thereunder, or both, relating to transactions by an issuer not involving any
public offering and under similar exemptions under certain state securities
laws, that this transaction has not been reviewed by, passed on or submitted to
any federal or state agency or self-regulatory organization where an exemption
is being relied upon, and that the Company's reliance thereon is based in part
upon the representations made by such Purchaser in this Agreement and the
Related Agreements. Such Purchaser acknowledges that he, she or it has been
informed by the Company of, or is
21
otherwise familiar with, the nature of the limitations imposed by the Act and
the rules and regulations thereunder on the transfer of securities;
(d) Such Purchaser has been further advised and understands that no
public market now exists for any of the securities issued by the Company and
that a public market may never exist for the Purchased Shares, Warrant, Warrant
Shares or Conversion Shares;
(e) Such Purchaser is purchasing the Purchased Shares and Warrant
for investment purposes, for its own account and not with a view to, or for sale
in connection with, any distribution thereof in violation of federal or state
securities laws;
(f) By reason of its business or financial experience, such
Purchaser has the capacity to protect its own interest in connection with the
transactions contemplated hereunder;
(g) Such Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Purchased Shares and
Warrant; provided, however, that nothing in this Section 6.1 shall be deemed to
vitiate or limit the representations, warranties and covenants of the Company
contained in this Agreement; and
(h) No person has or will have, as a result of the transaction
contemplated by this Agreement, any right, interest or claim against or upon any
Purchaser, the Company, or any of its Subsidiaries for any commission, fee or
other compensation as a finder or broker because of any act or omission by such
Purchaser.
5.2 Permitted Sales; Legends. Notwithstanding the foregoing
representations, the Company agrees that it will permit (i) a distribution of
Purchased Shares or Conversion Shares by a partnership to one or more of its
partners or investors or a limited liability company and its members, where no
consideration is exchanged therefor by such members, partners, or to a retired
or withdrawn partner who retires or withdraws after the date hereof in full or
partial distribution of his interest in such partnership, or to the estate of
any such partner or the transfer by gift, will or intestate succession of any
partner to his spouse or to the siblings, lineal descendants or ancestors of
such partner or his spouse, or to a trust created for the benefit of one or more
of the foregoing, if the transferee agrees in writing to be subject to the terms
hereof to the same extent as if it were an original Purchaser hereunder and (ii)
a sale or other transfer of any of the Purchased Shares, the Warrant Shares or
Conversion Shares upon obtaining assurance satisfactory to the Company that such
transaction is exempt from the registration requirements of, or is covered by an
effective registration statement under, the Act and applicable state securities
or "blue-sky" laws, including, without limitation, receipt of an unqualified
opinion to such effect of counsel reasonably satisfactory to the Company. The
certificates representing the Purchased Shares and any Conversion Shares
issuable upon conversion thereof shall bear a legend evidencing such restriction
on transfer substantially in the following form:
22
The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended ("the Act"), and have been acquired
for investment and not with a view to, or in connection with, the sale or
distribution thereof. Such shares may not be sold, offered for sale,
pledged or hypothecated in the absence of such registration unless (a) the
Corporation receives an opinion of counsel reasonably satisfactory to it
stating that such sale or transfer is exempt from the registration and
prospectus delivery requirements of the act, (b) it is established to the
satisfaction of the Corporation that such sale or transfer is in a
transaction which is exempt under, or otherwise in compliance with, such
laws or (c) the Corporation receives a "no action" letter or similar
declaration from the securities and exchange commission to the effect that
such sale or transfer without registration will not result in a
recommendation by said commission that action be taken with respect
thereto. Copies of the agreements covering the purchase of these shares
and restricting the sale, assignment, transfer, or other disposition of,
or the voting of, the shares represented by this certificate may be
obtained at no cost by written request made by the holder of record of
this certificate to the Secretary of the Corporation at the principal
executive offices of the Corporation.
The Corporation is authorized to issue more than one class of stock.
Shareholders may obtain, upon written request and without charge, a
statement of the rights, preferences, privileges, and restrictions granted
to or imposed upon each class or series of shares authorized to be issued
and upon the holders thereof from the principal office of the Corporation.
ARTICLE VI
CONDITIONS OF PURCHASERS' OBLIGATION
6.1 Effect of Conditions. The obligation of the Purchasers to purchase and
pay for the Purchased Shares at the Initial Closing, if any, shall be subject at
their election to the satisfaction of each of the conditions stated in the
following Sections of this Article VI.
6.2 Representations and Warranties. The representations and warranties of
the Company contained in this Agreement shall be true and correct on the date of
the Closing with the same effect as though made on and as of that date, and the
Purchasers shall have received a certificate dated as of such Closing and signed
on behalf of the Company to that effect.
6.3 Performance. The Company shall have performed and complied with all of
the agreements, covenants and conditions contained in this Agreement required to
be performed or complied with by it at or prior to the Closing, and the
Purchasers shall have received a certificate dated as of such Closing and signed
on behalf of the Company to that effect.
23
6.4 Amendment to Certificate of Incorporation. The Certificate of
Incorporation of the Company shall have been amended to provide for the
authorization of the Purchased Stock with the terms set forth in Exhibit A
hereto.
6.5 Warrant Agreement. A Warrant Agreement in the form attached hereto as
Exhibit B shall have been executed by the Company and each of the Purchasers.
6.6 Opinion of Counsel. The Purchasers shall have received an opinion,
dated the date of the Closing, from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, counsel to the
Company, in the form attached hereto as Exhibit C.
6.7 Certified Documents, etc. Counsel for the Purchasers shall have
received a copy of the Company's Certificate of Incorporation, as amended,
certified by the Secretary of State of the State of Delaware and copies of the
Company's By-Laws certified by its Secretary, as well as any and all other
documents, including certificates as to votes adopted and incumbency of officers
and certificates from appropriate authorities as to the legal existence and good
standing of the Company and its Subsidiaries, which the Purchasers or their
counsel may reasonably request.
6.8 No Material Adverse Change. The business, properties, assets or
condition (financial or otherwise) of the Company and its Subsidiaries shall not
have been materially adversely affected since the date of this Agreement,
whether by fire, casualty, act of God or otherwise, and there shall have been no
other changes in the business, properties, assets, condition (financial or
otherwise), management or prospects of the Company or any of its Subsidiaries
that would have a material adverse effect on their respective businesses or
assets.
6.9 Stockholders Agreement. The Company, each Purchaser, and certain
shareholders of the Company shall have executed the Stockholders Agreement in
the form of Exhibit D attached hereto.
6.10 Registration Rights Agreement. The Company, each Purchaser and
certain shareholders of the Company shall have executed the Registration Rights
Agreement in the form of Exhibit E attached hereto.
6.11 Employee Confidentiality and Invention Assignment Agreement. Each key
technical and management personnel of the Company, designated by the Purchasers,
shall have executed an Confidentiality and Invention Assignment Agreement in the
form of Exhibit F attached hereto.
6.12 Board Election. Concurrently with the Closing, the Board of Directors
of the Company shall have been fixed at nine (9) members to be designated as
provided for in the Stockholders Agreement.
24
6.13 Consents and Waivers. The Company shall have obtained all consents or
waivers necessary to execute this Agreement and the other agreements and
documents contemplated herein, to issue the Purchased Shares, and to carry out
the transactions contemplated hereby and thereby. All corporate and other action
and governmental filings necessary to effectuate the terms of this Agreement,
the Related Agreements, the Purchased Shares, and the Conversion Shares and
other agreements and instruments executed and delivered by the Company in
connection herewith shall have been made or taken.
6.14 Series C Preferred Stock Certificates. The Company shall have
delivered a stock certificate to each Purchaser representing that number of
shares of Series C Preferred Stock and set Purchaser's name on Schedule 1.1
attached hereto.
ARTICLE VII
CONDITIONS OF THE COMPANY'S OBLIGATION
7.1 Effect of Conditions. The Company's obligation to sell the Purchased
Shares shall be subject at its election to the satisfaction of each of the
conditions stated in the following Sections of this Article VII.
7.2 Representations and Warranties; Performance. The representations and
warranties of the Purchasers contained in this Agreement shall be true and
correct on the date of the Closing with the same effect as though made on and as
of that date and, with respect to the Company's obligation to issue and deliver
Purchased Shares of any Purchaser, such Purchaser shall have tendered payment
for the Purchased Shares at the Closing in accordance with Section 1.4 hereof.
7.3 Stockholders' Agreement. The Company, each Purchaser, and certain
shareholders of the Company shall have executed the Stockholders' Agreement in
the form of Exhibit C attached hereto.
7.4 Registration Rights Agreement. The Company, each Purchaser, and
certain shareholders of the Company shall have executed the Registration Rights
Agreement in the form of Exhibit D attached hereto.
7.5 Consideration for the Shares. Each of the Purchasers shall pay the
purchase price of the Purchased Shares each is purchasing, as set forth on
Schedule 1.1 attached hereto, in full at the Closing either by check or by wire
transfer to an account designated in writing by the Company.
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ARTICLE VIII
[INTENTIONALLY OMITTED]
ARTICLE IX
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Act" shall have the meaning set forth in Section 2.4(c).
"Advent Representative" shall have the meaning set forth in the
Stockholders Agreement.
"Agreement" means this Stock Purchase Agreement as from time to time
amended and in effect between the parties.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall have the meaning set forth in Section 2.3.
"Common Stock" will include (a) the Company's Common Stock as authorized
on the date of this Agreement, (b) any other capital stock of any class or
classes of the Company authorized on or after the date hereof, the holders of
which shall have the right, without limitation as to amount, either to all or to
a share of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to preference, and
(c) any other securities of the Company into which or for which any of the
securities described in (a) or (b) may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, sale of assets or otherwise.
"Company" means and shall include CVC, Inc., a Delaware corporation, its
predecessors, successors and assigns.
"Confidential Information" shall have the meaning set forth in Section
11.11.
"Confidentiality and Invention Assignment Agreement" shall have the
meaning set forth in Section 2.2.
"Conversion Shares" shall have the meaning set forth in Section 1.3.
26
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other claim, charge or
encumbrance of any nature whatsoever on any property or property interest.
"Environmental Laws" shall mean all foreign, federal, state and local
laws, regulations, rules and ordinances relating to pollution or protection of
the environment and worker health and safety, including, without limitation,
laws relating to releases or threatened releases of hazardous waste or materials
(and permits, licenses and approvals which may be required under such laws,
regulations, rules and ordinances) into the indoor or outdoor environment
(including, without limitation, ambient air, surface water, groundwater, land,
surface and subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, release, transport or
handling of Hazardous Waste or Hazardous Material and all laws and regulations
with regard to record keeping, notification, disclosure and reporting
requirements respecting hazardous waste or materials.
"ERISA" shall have the meaning set forth in Section 2.21.
"Financial Statements" shall have the meaning set forth in Section 2.6.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"Hazardous Waste or Hazardous Material" shall include any hazardous,
toxic, infectious, or radioactive substances, including petroleum products
including without limitation, those substances regulated pursuant to the Federal
Comprehensive Environmental Response, Compensation and Liability Act, 42 USC
ss.9601 et seq., the Federal Resource Conservation and Recovery Act, 42 USC
ss.6901 et seq., the Federal Water Pollution Contract Act, 33 USC ss.1251 USC
ss.2601, et seq., and any applicable state environmental statutes and
regulation, all present and future amendments to such statutes, and all
regulations promulgated thereunder.
"Initial Closing" and "Initial Closing Date" shall have the meaning set
forth in Section 1.4.
"Intellectual Property" shall have the meaning set forth in Section 2.13.
"Knowledge" of the Company and similar terms shall mean the actual
knowledge of the Company's Chief Executive Officer and those members of the
Company's senior management who report directly to the Company's Chief Executive
Officer.
27
"Lien" means, with respect to any asset, any mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, lien, charge, restriction,
adverse claim by a third party, title defect or encumbrance of any kind
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any assignment or other conveyance of any right to receive
income and any assignment of receivables with recourse against assignor), any
filing of any financing statement as debtor under the Uniform Commercial Code or
comparable law of any jurisdiction and any agreement to give or make any of the
foregoing.
"Management Presentation" shall have the meaning set forth in Section
2.30.
"Permitted Recipients" shall have the meaning set forth in Section 11.11.
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, trust or unincorporated organization or a government or
agency or political subdivision thereof.
"Purchased Shares" shall have the meaning set forth in Section 1.1.
"Purchaser" shall have the meaning set forth in Section 1.1.
"Qualified Public Offering" means the closing of an underwritten public
offering by the Company pursuant to a registration statement filed and declared
effective under the Act covering the offer and sale of Common Stock for the
account of the Company in which the aggregate net proceeds to the Company equal
at least $20,000,000.
"Registration Rights Agreement" shall have the meaning set forth in
Section 2.2.
"Related Agreements" shall have the meaning set forth in Section 2.2.
"Seagate Warrant" shall have the meaning set forth in Section 2.4.
"Second Closing" and "Second Closing Date" shall have the meaning set
forth in Section 1.5.
"Series C Preferred Stock" shall have the meaning set forth in Section
1.1.
"Stockholders Agreement" shall have the meaning set forth in Section 2.2.
"Stock Option Plan" means the Company's 1996 Stock Option Plan and 1997
Stock Option Plan in effect as of the date hereof.
"Subsidiary" or "Subsidiaries" means any corporation, association or other
business entity of which the Company and/or any of its other Subsidiaries (as
herein defined), directly or
28
indirectly owns at the time more than fifty percent (50%) of the outstanding
voting shares of every class of such corporation or trust other than directors'
qualifying shares.
"Target" shall have the meaning set forth in Section 4.7.
"Tax" and "Taxes" shall have the meaning set forth in Section 2.10.
"Warrant Agreement" shall have the meaning set forth in Section 1.2.
"Warrant" shall have the meaning set forth in Section 1.2.
"Warrant Shares" shall have the meaning set forth in Section 1.2.
ARTICLE X
TERMINATION
10.1 Termination by Mutual Written Consent. This Agreement may be
terminated, and the transactions contemplated hereby abandoned, at any time
prior to the Initial Closing by the written agreement of the Company and the
Purchasers.
10.2 Termination for Breach. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time before the Initial
Closing (or any date to which such Initial Closing may have been extended by the
written agreement of the parties obligated to perform on such Initial Closing)
by any party obligated to perform on such Initial Closing if the conditions for
its benefit set forth in Article VI or VII, as the case may be, have not been
satisfied on or prior to such Initial Closing and if the conditions for the
benefit of the other parties have been satisfied or waived, and if such
performing party shall have given written notice of termination to the
non-performing party.
10.3 Termination for Delay. Unless earlier terminated in accordance with
Section 10.1 or 10.2, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned by the Company or the Purchasers if the
Initial Closing does not occur by December 15, 1998, provided, however, that the
right to terminate this Agreement under this Section 10.3 shall not be available
to any party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Initial Closing to occur
on or before such date.
10.4 Rights After Termination. Upon termination of this Agreement under
this Article X, the parties shall be released from all obligations arising
hereunder, except as to any liability for misrepresentations, breach or default
in connection with any warranty, representation, covenant, duty or obligation
given, occurring or arising prior to the date of termination and except as to
the Company's obligations under Section 11.6 hereof.
29
ARTICLE XI
MISCELLANEOUS
11.1 Survival of Representations. The representations, warranties,
covenants and agreements made herein or in any certificates or documents
executed in connection herewith shall survive the execution and delivery hereof
and the Closing of the transaction contemplated hereby.
11.2 Parties in Interest. Except as otherwise set forth herein, all
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the
respective successors and assigns of the parties hereto (including permitted
transferees of any of the Purchased Shares). Except as may be required to be
disclosed by order of a court or otherwise required by law, the parties agree to
maintain in confidence the terms of the purchase of the Purchased Shares
hereunder, except that the Purchasers may disclose such terms to their investors
in the ordinary course and except that the Company may disclose such terms to
its shareholders, accountants, bankers and advisors in the ordinary course.
11.3 Shares Owned by Affiliates. For the purposes of applying all
provisions of this Agreement which condition the receipt of information or
access to information or exercise of any rights upon ownership of a specified
number or percentage of shares, the shares owned of record by any affiliate of a
Purchaser shall be deemed to be owned by such Purchaser. For the purpose of this
Agreement, the term "affiliate" shall mean any Person controlling, controlled by
or under common control with, a Purchaser and any general or limited partner of
a Purchaser. Without limiting the foregoing, each Purchaser shall be considered
an affiliate of each other Purchaser.
11.4 Amendments and Waivers. Amendments or additions to this Agreement may
be made and compliance with any term, covenant, agreement, condition or
provision set forth herein may be omitted or waived (either generally or in a
particular instance and either retroactively or prospectively) upon the written
consent of the Company (or the consent of the Advent Representative as herein
provided) and the holders of a majority of the Conversion Shares, assuming for
such purposes the conversion of all shares. Prompt notice of any such amendment
or waiver shall be given to any Person who did not consent thereto. This
Agreement (including the Schedules and Exhibits annexed hereto, which are an
integral part of this Agreement) constitutes the full and complete agreement of
the parties with respect to the subject matter hereof.
11.5 Notices. All notices, requests, consents, reports and demands shall
be in writing and shall be hand delivered, sent by facsimile or other electronic
medium, or mailed, postage prepaid, to the Company or to the Purchasers at the
address set forth below or to such other address as may be furnished in writing
to the other parties hereto:
30
The Company: CVC, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: President
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
The Purchasers: The address set forth opposite the Purchaser's name on
Schedule 1.1 attached hereto.
with copy to: ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
A Professional Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., P.C.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
11.6 Expenses. Each party hereto will pay its own expenses in connection
with the transactions contemplated hereby, provided, however, that the Company
shall pay (i) the Purchasers' reasonable costs and expenses, for legal counsel
and accounting review (not including audit procedures performed by such
accountants), in connection with the investigation, preparation, execution and
delivery of this Agreement (and due diligence related thereto) and the other
instruments and documents to be delivered hereunder and the transactions
contemplated hereby and thereby; provided, however, that Advent shall use its
best efforts to keep such costs and expenses to a minimum, and in no case shall
such costs and expenses exceed $40,000.
11.7 Counterparts. This Agreement and any exhibit hereto may be executed
in multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument. One or more counterparts
of this Agreement or any exhibit hereto may be delivered via telecopier, with
the intention that they shall have the same effect as an original counterpart
hereof.
11.8 Effect of Headings. The article and section headings herein are for
convenience only and shall not affect the construction or interpretation hereof.
31
11.9 Adjustments. All provisions of this Agreement shall be automatically
adjusted to reflect any stock dividend, stock split or other such form of
recapitalization.
11.10 Governing Law. This Agreement shall be deemed a contract made under
the laws of the State of Delaware and together with the rights and obligations
of the parties hereunder, shall be construed under and governed by the laws of
such state. Each of the parties hereto agrees that any action or proceeding
brought to enforce the rights or obligations of any party hereto under this
Agreement may be commenced and maintained in any court of competent jurisdiction
located in the State of Delaware, and that the United States District Court for
Delaware County, Delaware shall have non-exclusive jurisdiction over any such
action, suit or proceeding brought by any of the parties hereto. Each of the
parties hereto further agrees that process may be served upon it by certified
mail, return receipt requested, addressed as more generally provided in Section
11.5 hereof, and consents to the exercise of jurisdiction over it and its
properties with respect to any action, suit or proceeding arising out of or in
connection with this agreement or the transactions contemplated hereby or the
enforcement of any rights under this Agreement.
11.11 Confidentiality. Each Purchaser covenants and agrees that such
Purchaser shall maintain the confidentiality of all financial, confidential and
proprietary information of the Company ("Confidential Information") that is
provided to such Purchaser under this Agreement or that is otherwise provided to
such Purchaser by the Company and identified by the Company in writing to such
Purchaser as being of a confidential nature. For purposes hereof, "Confidential
Information" shall not include any information which (i) was available to or in
possession of such Purchaser or any employees thereof or any beneficial owner of
a partnership interest in such Purchaser (collectively referred to herein as
"Permitted Recipients") prior to the time of disclosure to such Purchaser by the
Company or its representatives, (ii) is or becomes generally available to the
public other than as a result of a disclosure by any of such Permitted
Recipients, or (iii) is or becomes available to such Permitted Recipients on a
nonconfidential basis by a third party which is not bound by a confidentiality
agreement with the Company. Notwithstanding the preceding sentence, a Purchaser
may (a) disclose such confidential information when required by law or
governmental order or regulation or when required by a subpoena or other
process, provided that such Purchaser shall use reasonable efforts to give the
Company prior notice thereof; (b) disclose such confidential information to the
extent necessary to enforce this Agreement; (c) disclose such confidential
information to its attorneys, accountants, consultants and other professionals
to the extent necessary to obtain their services in connection with its
investment in the Company, provided that the requirements of this Section 11.11
shall in turn be binding on any such attorney, accountant consultant or other
professional; (d) disclose such confidential information as may be required by
any prospective purchaser of any Shares or Conversion Shares from such
Purchaser, provided that such proposed sale is in compliance with the
restrictions imposed by this Agreement and the Related Agreements and such
prospective purchaser agrees in writing to be bound by the provisions of this
Section 11.11; and (e) disclose such confidential information to any of its
affiliates, provided that the requirements of this Section 11.11 shall in turn
be binding on such affiliates.
32
11.12 Assignment. Each Purchaser has the right to assign or transfer any
of its rights pursuant to this Agreement in connection with (and in proportion
to) its transfer of securities purchased hereunder, in all cases subject to the
terms of the Stockholders Agreement. The Company may not assign or transfer any
of its rights pursuant to this Agreement unless the Company first obtains the
express written consent of a majority of the Purchasers.
11.13 Waiver of Jury Trial. Each of the Company and the purchasers hereby
expressly waives its respective rights to a jury trial of any claim or cause of
action based upon or arising out of this agreement, any other related agreements
or any dealings between them relating to the subject matter of this agreement.
The Company and Purchasers also waive any bond or surety or security upon such
bond which might, but for this waiver, be required of any party. The scope of
this waiver is intended to be all encompassing of any and all disputes that may
be filed in any court and that relate to the subject matter of this transaction,
including without limitation, contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims. The Company and the
Purchasers further warrant and represent that each has reviewed this waiver with
its legal counsel, and that each voluntarily waives its jury trial rights
following consultation with legal counsel. This waiver is irrevocable and may
only be modified either orally or in amendments, renewals, supplements or
modifications to this agreement, any other related agreement or the purchased
shares. In the event of litigation, this agreement may be filed as a written
consent to a trial (without a jury) by the court.
*******
33
CVC, INC.
COUNTERPART SIGNATURE PAGE
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon, this letter shall become a binding agreement among us.
CVC. INC.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President & Chief Executive
Officer
Global Private Equity III Limited
Partnership
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By:
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Senior Vice President
Advent PGGM Global Limited Partnership
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By:
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Senior Vice President
Advent Partners GPE III Limited
Partnership
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By:
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Senior Vice President
Advent Partners (NA) GPE III Limited
Partnership
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By:
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Senior Vice President
Advent Partners Limited Partnership
By: Advent International Limited
Partnership, G.P.
By: Advent International Corporation,
G.P.
By:
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Senior V.P.
S-1
CVC, INC.
COUNTERPART SIGNATURE PAGE
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon, this letter shall become a binding agreement among us.
CVC. INC.
By:
------------------------------------
Name:
Title:
Global Private Equity III Limited
Partnership
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Senior Vice President
Advent PGGM Global Limited Partnership
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Senior Vice President
Advent Partners GPE III Limited
Partnership
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Senior Vice President
Advent Partners (NA) GPE III Limited
Partnership
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Senior Vice President
Advent Partners Limited Partnership
By: Advent International Limited
Partnership, G.P.
By: Advent International Corporation,
G.P.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Senior V.P.
S-1
Schedule 1.1
Purchaser Purchased Shares Consideration
--------- ---------------- -------------
Global Private Equity III 84,000 $8,400,000
Limited Partnership
Advent PGGM 12,870 $1,287,000
Global Limited Partnership
Advent Partners GPE III 1,270 $127,000
Limited Partnership
Advent Partners (NA) GPE III 380 $38,000
Limited Partnership
Advent Partners 1,480 $148,000
Limited Partnership
c/o Advent International Corporation
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇