Exhibit II
STORMEDIA INCORPORATED
SECURITIES PURCHASE AGREEMENT
DATED AS OF MAY 29, 1998
TABLE OF CONTENTS
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Article I - DEFINITIONS................................................1
1.1 Definitions; Interpretation..................................1
Article II - ISSUANCE AND SALE OF SECURITIES...........................3
2.1 Securities and Price.........................................3
Article III - CLOSING; CLOSING DELIVERIES..............................4
3.1 Closing......................................................4
3.2 Payment for and Delivery of Securities.......................4
3.3 Simultaneous Closing.........................................4
Article IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............4
4.1 Organization, Good Standing and Qualification................4
4.2 Capitalization...............................................4
4.3 Subsidiaries.................................................5
4.4 Authorization and Enforceability.............................5
4.5 Issuance of Shares...........................................5
4.6 Liabilities..................................................6
4.7 Title to Properties and Assets...............................6
4.8 Status of Proprietary Assets.................................6
4.9 Material Contracts and Obligations...........................7
4.10 Litigation...................................................7
4.11 Consents.....................................................7
4.12 Compliance with Other Instruments............................7
4.13 Disclosure...................................................8
4.14 Other Security Interests.....................................8
4.15 Registration Rights..........................................8
4.16 Insurance....................................................8
4.17 Financial Statements.........................................8
4.18 Certain Actions..............................................9
4.19 Activities Since Balance Sheet Date..........................9
4.20 Matters......................................................9
4.21 Environmental Matters.......................................10
4.22 Interested Party Transactions...............................10
4.23 Private Sale................................................11
4.24 Nature of Investment........................................11
4.25 Disclosure..................................................11
4.26 SEC Filings; Company Financial Statements...................11
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TABLE OF CONTENTS
(continued)
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Article V - REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER..........11
5.1 Authorization and Enforceability............................11
5.2 Government Approvals........................................12
Article VI - COMPLIANCE WITH SECURITIES LAWS..........................12
6.1 Investment Intent of Purchaser..............................12
6.2 Status of Preferred Shares and Warrants.....................12
6.3 Sophistication and Financial Condition of Each Purchaser....12
6.4 Opportunity for Review of Company Information...............12
6.5 Transfer of Preferred Shares and Warrant Stock..............12
Article VII - CONDITIONS PRECEDENT....................................13
7.1 Conditions Precedent to Purchasers' Obligations.............13
7.2 Conditions Precedent to Company's Obligations...............14
Article VIII - COVENANTS OF THE COMPANY...............................14
8.1 Reservation of Common Stock.................................14
8.2 Current Public Information..................................15
8.3 Rights Agreement............................................15
8.4 No Five Percent Holders.....................................15
Article IX - SURVIVAL AND INDEMNIFICATION.............................15
9.1 Survival....................................................15
9.2 Indemnification.............................................15
Article X - GENERAL PROVISIONS........................................16
10.1 Successors and Assigns......................................16
10.2 Entire Agreement............................................16
10.3 Notices.....................................................16
10.4 Amendment and Waiver........................................17
10.5 Counterparts................................................17
10.6 Headings....................................................17
10.7 Remedies Cumulative.........................................17
10.8 Governing Law...............................................17
10.9 No Third Party Beneficiaries................................18
10.10 Severability................................................18
10.11 Legal Fees..................................................18
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TABLE OF CONTENTS
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EXHIBITS
Exhibit A Certificate of Designations
Exhibit B Registration Rights Agreement
Exhibit C Warrant
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT") dated as of May 29, 1998
by and among StorMedia Incorporated, a Delaware corporation (the "COMPANY"), and
Prudential Private Equity Investors, III, L.P., a Delaware limited partnership
("PPEI") and Capital Ventures International, a Cayman Islands corporation
("CVI") (collectively with PPEI, the "PURCHASERS").
The Purchasers desire to purchase from the Company, and the Company desires
to issue to the Purchasers shares of Series A Preferred Stock of the Company
(the "SERIES A PREFERRED STOCK") and Warrants to purchase Class A Common Stock
of the Company (as hereinafter defined).
In consideration of the mutual promises, representations, warranties,
covenants and conditions set forth in this Agreement, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS; INTERPRETATION.
(a) For purposes of this Agreement, the following terms have the
indicated meanings:
"AFFILIATE" means (i) any shareholder who owns more than 10% of the
outstanding voting securities of the Company, any officer or director of the
Company or any Subsidiary, (ii) any individual related by blood, marriage or
adoption to any such shareholder, officer or director of the Company or any
Subsidiary or (iii) any Person in which any of the foregoing owns a interest.
"BANK WARRANTS" means those warrants to purchase Class A Common Stock
of the Company to be issued to certain banks simultaneously with the closing
hereunder.
"CERTIFICATE OF DESIGNATIONS" means the Company's Certificate of
Designations filed May 29, 1998 and attached as EXHIBIT A hereto.
"CLASS A COMMON STOCK" means the Class A Common Stock $0.013 par value
per share of the Company
"CLASS B COMMON STOCK" means the Class B Common Stock $0.013 par value
per share of the Company.
"CLOSING" has the meaning set forth in Section 3.1.
"COMMON STOCK" means, collectively, the Class A Common Stock and the
Class B Common Stock.
"CONVERSION STOCK" means shares of the Class A Common Stock issued or
issuable on conversion of the Series A Preferred Stock.
"CONVERTIBLE NOTE" means that certain Convertible Promissory Note to
be issued to Seagate Technology, Inc. by the Company.
"ESPP" means the Company's 1998 Employee Stock Purchase Plan.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"GOVERNMENTAL AGENCY" means any federal, state, local, foreign or
other governmental agency, instrumentality, commission, authority, board or
body.
"INCLUDES" and "INCLUDING" mean includes and including, without
limitation.
"LIQUIDATION VALUE" for each share of Series A Preferred Stock as of
any date of determination shall mean the preferential payment amount
contemplated by Section 2 of the Certificate of Designations.
"MARKET PRICE" means the average closing bid price of the Company's
Class A Common Stock as reported by the Nasdaq national market on the five (5)
trading days ending one trading day prior to the date of execution of this
Agreement.
"MATERIAL ADVERSE CHANGE" means any material adverse change in the
business, condition (financial or otherwise), results of operations, prospects
or customer, distributor or supplier relations of the Company.
"MATERIAL ADVERSE EFFECT" means any material adverse effect on (i) the
business, condition (financial or otherwise), results of operations, prospects
or customer, distributor or supplier relations of the Company or (ii) the
transactions contemplated hereby or by the Related Documents.
"OPTION PLANS" means the Company's 1994 Non-Qualified Stock Option
Plan, as amended in March 1995, the Company's 1994 Incentive Stock Option Plan,
as amended in March 1995, the Company's 1998 Nonstatutory Stock Option Plan and
the Company's 1995 Director Stock Option Plan.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past practice (including with respect to quantity, quality and
frequency).
"PERSON" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or other entity.
"PREFERRED SHARES" means Series A Preferred Stock or Conversion Stock.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, as amended, by and among the Company, Purchasers, Seagate Technology,
Inc., Canadian Imperial Bank of Commerce [Asia] Ltd., Banque Nationale de Paris,
Singapore Branch, Union Bank of California N.A., Sanwa Bank California, Fleet
National Bank and ▇▇▇▇▇ Family Trust, in the form of EXHIBIT B hereto.
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"RESTATED CERTIFICATE OF INCORPORATION" means the corrected Amended
and Restated Certificate of Incorporation, as modified by the Certificate of
Designations and the Certificate of Elimination.
"RELATED DOCUMENTS" means all documents and instruments executed or to
be executed by the Company in connection herewith, including the Preferred
Shares, the Warrants and the Registration Rights Agreement.
"RIGHTS AGREEMENT" means that Preferred Shares Rights Agreement dated
July 31, 1996 by and among the Company and BankBoston as the Rights Agent, as
defined therein.
"SEAGATE AGREEMENT" means the Termination of Supply Agreement and Loan
and Security Agreement between the Company and Seagate Technology, Inc.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SUBSIDIARY" means any corporation, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by the Company or
(ii) if a partnership, association or other business entity, a majority of the
partnership or other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by the Company. For purposes hereof, the
Company shall be deemed to have a majority ownership interest in a partnership,
association or other business entity gains or losses, or is or controls the
managing director or general partner of such partnership, association or other
business entity.
"WARRANTS" means the Stock Purchase Warrants in the form of EXHIBIT C
hereto.
"WARRANT STOCK" means shares of the Class A Common Stock issued or
issuable on exercise of the Warrants.
(b) The words "HEREIN", "HEREOF" and "HEREUNDER" refer to this
Agreement as a whole and any particular article, section or other subdivision of
this Agreement.
ARTICLE II
ISSUANCE AND SALE OF SECURITIES
2.1 SECURITIES AND PRICE. On the terms and subject to the conditions of
this Agreement, at the Closing, the Company shall issue to PPEI and CVI,
respectively, (a) that number of shares of Series A Preferred Stock obtained by
dividing $5,000,011.50 and $3,000,000.75, respectively, by ten (10) times the
Market Price (the "PREFERRED SHARES") at a price per share equal to ten (10)
times the Market Price (i.e. $30.75) and (b) Warrants to purchase that number of
shares of Class A Common Stock obtained by dividing $5,000,011.50 (in the case
of PPEI) and $3,000,000.75 (in the case of CVI) by the Market Price. The
exercise price per share of the Warrants shall be the Market Price ($3.075).
Notwithstanding the foregoing, in no event shall fractional shares be issued,
and, in each case, the aggregate purchase price shall be increased so as to
result in a whole number of Preferred Shares being purchased and issued and
being subject to each Warrants.
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ARTICLE III
CLOSING; CLOSING DELIVERIES
3.1 CLOSING. The closing of the transactions contemplated hereby (the
"CLOSING") shall take place at 10:00 a.m. on May 29, 1998 (the "CLOSING DATE"),
at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or at such other time and date as shall be agreed upon by the
parties hereto.
3.2 PAYMENT FOR AND DELIVERY OF SECURITIES. At the Closing, the Company
shall issue and deliver to the Purchasers, stock certificates for the Preferred
Shares and Warrants, each duly registered in the name of the respective
Purchasers, against immediate payment by the Purchasers, by wire transfer of
immediately-available funds, to the account designated by the Company (a) in the
case of PPEI, $5,000,011.75 (adjusted as described in the last sentence of
Section 2.1 above) for the purchase of the Preferred Shares, and (b) in the case
of CVI, $3,000,000.75 (adjusted as described in the last sentence of Section 2.1
above) for the purchase price of the Preferred Shares; in each case with the
value of the Warrants for income tax purposes as set forth in each Warrant.
3.3 SIMULTANEOUS CLOSING. Simultaneously with the Closing, each of
Foothill Capital Corporation ("FOOTHILL") and Canadian Imperial Bank of
Commerce, New York Agent (the "AGENT"), on behalf of itself and a syndicate of
banks (together, the "LENDERS" and together with Foothill, the "INSTITUTIONAL
LENDERS") are entering into financing and/or restructuring of certain financing
transactions with the Company (the "FINANCING TRANSACTIONS"). The Financing
Transactions are closing simultaneously with the transaction between Seagate
Technology, Inc. and the Company set forth in the Seagate Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
StorMedia hereby represents and warrants to the Purchasers that, except as
set forth in the schedules ("DISCLOSURE SCHEDULES") delivered contemporaneously
with this Agreement (which Disclosure Schedules shall be deemed to constitute
part of these representations and warranties) or as disclosed in the Company's
Annual Report on Form 10-K for the years ended December 31, 1997, December 31,
1996 and December 31, 1995, Quarterly Report on Form 10-Q for the quarter ended
March 27, 1998 and definitive proxy materials for the annual meeting of
stockholders held May 21, 1998, as filed with the SEC under the Exchange Act
(collectively, the "SEC REPORTS") the statements in the following paragraphs of
this Article IV are all true and correct:
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION The Company is a
corporation duly organized, validly existing and in good standing under, and by
virtue of, the laws of the State of Delaware and has all requisite corporate
power and authority to own its properties and assets and to carry on its
business as now conducted and as presently proposed to be conducted. The
Company is qualified to do business as a foreign corporation in each
jurisdiction where failure to be so qualified would have a material adverse
effect on its financial condition, business, prospects or operations.
4.2 CAPITALIZATION. As of prior to the opening of business on May 29,
1998, the authorized capital stock of the Company consisted of (i) 50,000,000
shares of Class A Common Stock, par value $0.013 per share, of which 16,317,932
shares were issued and outstanding; (ii) 5,000,000 shares of Class B Common
Stock par value $0.013 per share, of which 4,362,001 shares were issued and
outstanding; and (iii) 1,000,000 shares of
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Preferred Stock, $.01 par value, none of which was issued and outstanding. As of
May 29, 1998, the Company had reserved 4,362,001 shares of Class A Common Stock
for issuance upon conversion of the Class B Common Stock, 6,700,000 shares of
Class A Common Stock for issuance pursuant to the Option Plans and 1,500,000
shares of Class A Common Stock for issuance pursuant to the ESPP. The
outstanding shares of Class B Common Stock are being converted into 4,362,001
shares of Class A Common Stock simultaneously with the Closing. The Company has
reserved 2,601,630 shares of Class A Common Stock for issuance upon conversion
of Preferred Shares, 2,601,630 shares of Class A Common Stock for issuance upon
exercise of the Warrants,1,000,000 shares of Class A Common Stock for issuance
upon conversion of the Convertible Note and 2,000,000 shares of Class A Common
Stock for issuance upon exercise of the Bank Warrants. As of May 29, 1998, there
were (i) outstanding options to purchase 1,979,413 shares of Class A Common
Stock under the Company's 1994 Incentive Stock Option Plan and 364,665 shares of
Class A Common Stock remained available for future grant; (ii) outstanding
options to purchase 435,274 shares of Class A Common Stock under the Company's
1994 Non-Qualified Stock Option Plan and no shares remained available for future
grant; (iii) outstanding options to purchase 33,000 shares of Class A Common
Stock under the Company's 1995 Director Stock Option Plan and 42,000 shares
remained available for future grant; and (iv) outstanding options to purchase
1,175,950 shares of Class A Common Stock under the Company's 1998 Nonstatutory
Stock Option Plan and 824,050 shares remain available for future grant. All of
such outstanding capital stock is validly issued, fully paid and nonassessable
and has been issued in compliance with all applicable securities laws. Except as
set forth above and in the Restated Certificate of Incorporation or as described
on Section 4.2 of the Schedule of Exceptions, there are no other options,
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convertible securities, warrants, calls, pledges, transfer restrictions (except
restrictions imposed by federal and state securities laws), liens, rights of
first offer, rights of first refusal, antidilution provisions or commitments of
any character relating to any issued or unissued shares of capital stock of the
Company other than as specifically contemplated in the Related Documents. Except
as contemplated by this Agreement and the Related Documents, there are no
preemptive or other preferential rights applicable to the issuance and sale of
securities of the Company, including the issuance and sale of the Preferred
Shares and Warrants.
4.3 SUBSIDIARIES. The Company does not presently own or control, directly
or indirectly, any interest in any other corporation, partnership, trust, joint
venture, association, or other entity, except as set forth on Section 4.3 of the
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Disclosure Schedules
4.4 Authorization and Enforceability. The Company has full power and
authority and has taken all required corporate and other action necessary to
permit it to execute and deliver this Agreement and the Related Documents and to
carry out the terms hereof and thereof and to issue and deliver the Preferred
Shares, the Conversion Stock, the Warrants and the Warrant Stock, and none of
such actions will violate any provision of the Restated Certificate of
Incorporation or the Bylaws, as amended, or of any applicable law, regulation,
order, judgment or decree, or result in the breach of or constitute a default
(or an event which, with notice or lapse of time or both would constitute a
default) under any material agreement, instrument or understanding to which the
Company is a party or by which it is bound. This Agreement and each of the
Related Documents constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
4.5 Issuance of Shares. The Preferred Shares have been duly authorized
and, when issued and delivered in accordance with this Agreement, will be
validly issued and outstanding, fully paid and nonassessable. The Warrants have
been duly authorized and, when issued and delivered in accordance with this
Agreement, will be validly issued and outstanding. The Conversion Stock and
Warrant Stock have been duly reserved for issuance upon conversion of the
Preferred Shares and exercise of the Warrants and, when so issued, will be duly
authorized, validly issued and outstanding, fully paid and nonassessable shares
Class A Common Stock. Neither the issuance and delivery of the Preferred Shares
and Warrants nor the issuance and delivery of any Conversion
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Stock or Warrant Stock is subject to any preemptive right of any stockholder of
the Company or to any right of first refusal or other similar right in favor of
any Person.
4.6 LIABILITIES. Except as disclosed on Section 4.6 of the Disclosure
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Schedules in the SEC Reports or as contemplated by the Financing Transactions
and the Seagate Agreement, the Company has no material (as defined in Section
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4.9) indebtedness for borrowed money that the Company has directly or indirectly
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created, incurred, assumed, or guaranteed, or with respect to which the Company
has otherwise become directly or indirectly liable.
4.7 TITLE TO PROPERTIES AND ASSETS. Except with respect to liens created
by the Financing Transactions and the Seagate Agreement, the Company has good
and marketable title to its properties and assets held in each case subject to
no lien of any kind except for liens for taxes that are not yet due and payable
or, in the case of leased real property, easements and other rights or
restrictions of record that do not materially impair the use or value of such
property to the Company. With respect to the property and assets it leases, the
Company is in compliance with such leases and, to the best of the Company's
knowledge, the Company holds valid leasehold interests in such assets free of
any liens, encumbrances, security interests or claims of any party other than
the lessors of such property and assets.
4.8 STATUS OF PROPRIETARY ASSETS.
(a) Ownership. Except with respect to liens created by the Financing
---------
Transactions and the Seagate Agreement, the Company has full title and ownership
of, or has license to, all proprietary assets necessary to enable it to carry on
its business as now conducted and as presently proposed to be conducted
("PROPRIETARY ASSETS") without any conflict with or infringement of the rights
of others. To the best of the Company's knowledge, except with respect to liens
created by the Financing Transactions, no third party has any ownership right,
title, interest, claim in or Lien on any of the Company's Proprietary Assets and
the Company has taken, and in the future the Company will use its best efforts
to take, all steps reasonably necessary to preserve its legal rights in, and the
secrecy of, all its Proprietary Assets, except those for which disclosure is
required for legitimate business or legal reasons.
(b) Licenses: Other Agreements. Except with respect to liens created
--------------------------
by the Financing Transactions and the Seagate Agreement, the Company has not
granted, and, to the best of the Company's knowledge, there are not outstanding,
any options, licenses or agreements of any kind relating to any Proprietary
Asset of the Company, nor is the Company bound by or a party to any option,
license or agreement of any kind with respect to any of its Proprietary Assets.
The Company is not obligated to pay any royalties or other payments to third
parties with respect to the marketing, sale, distribution, manufacture, license
or use of any Proprietary Asset or any other property or rights.
(c) No Infringement. To the best of the Company's knowledge, the
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Company has not violated or infringed, and is not currently violating or
infringing, and the Company has not received any communications alleging that
the Company (or any of its employees or consultants) has violated or infringed
or, by conducting its business as proposed, would violate or infringe, any
Proprietary Asset of any other person or entity.
(d) No Breach by Employee. The Company is not aware that any employee
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or consultant of the Company is obligated under any agreement (including
licenses, covenants or commitments of any nature) or subject to any judgment,
decree or order of any court or administrative agency, or any other restriction
that would interfere with the use of his or her best efforts to carry out his or
her duties for the Company or to promote the interests of the Company or that
would conflict with the Company's business as proposed to be conducted.
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The carrying on of the Company's business by the employees and contractors of
the Company and the conduct of the Company's business as presently proposed,
will not, to the best of the Company's knowledge, conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
any contract, covenant or instrument under which any of such employees or
contractors or the Company is now obligated. The Company does not believe it is
or will be necessary to utilize any inventions of any employees of or
consultants to the Company (or persons the Company currently intends to hire)
made prior to their employment by the Company. To the best of the Company's
knowledge, at no time during the conception of or reduction of any of the
Company's Proprietary Assets to practice was any developer, inventor or other
contributor to such patents operating under any grants from any governmental
entity or agency or private source, performing research sponsored by any
governmental entity or agency or private source or subject to any employment
agreement or invention assignment or nondisclosure agreement or other obligation
with any third party that could adversely affect the Company's rights in such
Proprietary Assets.
4.9 MATERIAL CONTRACTS AND OBLIGATIONS. All agreements, contracts,
leases, licenses, instruments, commitments (oral or written), indebtedness,
liabilities and other obligations to which the Company is a party or by which it
is bound that are (a) material to the conduct operations of its business and
properties; (b) involve any of the officers, consultants, directors, employees
or shareholders of the Company; or (c) obligate the Company, to share, license
or develop any product or technology are listed in Section 4.9 of the Disclosure
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Schedules attached hereto and have been made available for inspection by the
Purchasers and its counsel. For purposes of this Section 4.9 and Section 4.6,
"material" shall mean any agreement, contract, indebtedness, liability or other
obligation having an aggregate value, cost or amount in excess of $5,000,000.
4.10 LITIGATION. There is no action, suit, proceeding, claim, arbitration
or investigation ("ACTION") pending (or, to the best of the Company's knowledge,
currently threatened) against the Company, its activities, properties or assets
or, to the best of the Company's knowledge, against any officer, director or
employee of the Company in connection with such officer's, director's or
employee's relationship with, or actions taken on behalf of the Company that
might result, individually or in the aggregate, in any material adverse change
in the business, properties, assets, financial condition, affairs or prospects
of the Company. To the best of the Company's knowledge, there is no factual or
legal basis for any such Action that might result, individually or in the
aggregate, in any material adverse change in the business, properties, assets,
financial condition, affairs or prospects of the Company. By way of example but
not by way of limitation, there are no Actions pending or, to the best of the
Company's knowledge, threatened (or any basis therefor known to the Company)
relating to the prior employment of any of the Company's employees or
consultants, their use in connection with the Company's business of any
information, technology or techniques allegedly proprietary to any of their
former employers, clients or other parties, or their obligations under any
agreements with prior employers, clients or other parties. The Company is not a
party to or subject to the provisions of any order, writ, injunction, judgment
or decree of any court or government agency or instrumentality and there is no
Action by the Company currently pending or which the Company intends to
initiate.
4.11 CONSENTS. All consents, approvals, orders, authorizations or
registrations, qualifications, designations, declarations or filings
("CONSENTS") with any U.S., federal or state governmental authority, or any
third party, on the part of the Company required in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby and thereby shall have been obtained prior
to and be effective as of the Closing Date, except Consents from third parties
that may be required under agreements to which the Company is a party but which
are not listed on Section 4.9 of the Disclosure Schedules.
4.12 COMPLIANCE WITH OTHER INSTRUMENTS. Except as would not, either
individually or in the aggregate, have a material adverse effect on the business
or operations of the Company, the Company is not in,
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nor will the conduct of its business as proposed to be conducted result in, any
violation, breach or default of any term of the Restated Certificate of
Incorporation or the Company's Bylaws or in any material respect of any term or
provision of any mortgage, indenture, contract, agreement or instrument to which
the Company is a party or by which it may be bound, or of any provision of any
foreign or domestic state or federal judgment, decree, order, statute, rule or
regulation applicable to or binding upon the Company. The execution, delivery
and performance of and compliance with this Agreement and the consummation of
the transactions contemplated hereby, including the issuance of the Conversion
Stock and the issuance of the Warrant Stock, will not result in any such
violation or default, or be in conflict with or constitute, with or without the
passage of time or the giving of notice or both, either a default under the
Restated Certificate of Incorporation or Bylaws, or any agreement or contract of
the Company, including agreements the Company will enter into simultaneously
with the closing of this transaction, or, to the best of the Company's
knowledge, a violation of any statutes, laws, regulations or orders, or an event
which results in the creation of any lien, charge or encumbrance upon any asset
of the Company except as would not, either individually or in the aggregate,
have a material adverse effect on the business or operations of the Company.
4.13 DISCLOSURE. No representation or warranty by the Company in this
Agreement or in any statement or certificate signed by any officer of the
Company furnished or to be furnished to the Purchasers pursuant to this
Agreement or any Related Document contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances in which they are made, not misleading.
4.14 OTHER SECURITY INTERESTS. Except in connection with the Financing
Transactions and the Seagate Agreement and the transactions thereunder, the
Company has not heretofore assigned or granted a security interest in any of its
assets, has not otherwise suffered or permitted to exist any lien on any of its
assets, and will not hereafter assign or grant a security interest in or suffer
or permit any lien on all or any portion of its assets, in all cases except as
disclosed on Section 4.14 of the Disclosure Schedules attached hereto.
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4.15 REGISTRATION RIGHTS. Except as provided in the Registration Rights
Agreement, the Company has not granted or agreed to grant any person or entity
any rights (including piggyback registration rights) to have any securities of
the Company registered with the SEC or any other governmental authority.
4.16 INSURANCE. The Company has obtained, or will obtain (within 15 days
of the Closing Date) and will maintain, fire and casualty insurance policies
with extended coverage, sufficient in amount (subject to reasonable deductibles)
to allow it to replace any of its properties that might be damaged or destroyed.
4.17 FINANCIAL STATEMENTS. The SEC Reports contain an audited balance
sheet of the Company dated December 31, 1997, an audited income statement and
statement of changes in cash flows of the Company for its fiscal year ended
December 31, 1997; and an unaudited balance sheet of the Company dated March 27,
1998 (the "BALANCE SHEET DATE") and an unaudited income statement of the Company
for the fiscal quarter ended March 27, 1998 (all such financial statements being
collectively referred to herein as the "FINANCIAL STATEMENTS"). Such Financial
Statements (a) are in accordance with the books and records of the Company, (b)
are true, correct and complete and present fairly the financial condition of the
Company at the date or dates therein indicated and the results of operations for
the period or periods therein specified, and (c) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, except as to the unaudited financial statements, for the omission of
notes thereto and normal year-end audit adjustments. Specifically, but not by
way of limitation, the respective balance sheets of the Financial Statements
disclose all of the Company's material debts, liabilities and obligations of any
nature, whether due or to become due, as of their respective dates (including,
without limitation, absolute liabilities, accrued liabilities, and contingent
liabilities) to the extent such debts, liabilities and obligations are required
to be disclosed in accordance with generally accepted accounting
-8-
principles. The Company has good and marketable title to all assets set forth on
the balance sheets of the Financial Statements, except for such assets as have
been spent, sold or transferred in the ordinary course of business since their
respective dates or such assets classified on the balance sheet of March 27,
1998 as "held for sale" which are subsequently sold ("ASSETS HELD FOR SALE")and
except as contemplated by the Financing Transactions and the Seagate Agreement.
4.18 CERTAIN ACTIONS. Since the Balance Sheet Date, the Company has not,
except as contemplated by the Financing Transactions, the Seagate Agreement or
in the ordinary course of business: (a) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock; (b) incurred any indebtedness for money borrowed or
incurred any other liabilities individually in excess of $500,000 or in excess
of $1,000,000 in the aggregate; (c) made any loans or advances to any person,
other than ordinary advances for travel expenses; (d) sold, exchanged or
otherwise disposed of any material assets or rights other than the sale of
inventory in the ordinary course of its business or sale of Assets Held for
Sale; or (e) entered into any transactions with any of its officers, directors
or employees or any entity controlled by any of such individuals.
4.19 ACTIVITIES SINCE BALANCE SHEET DATE. Since the Balance Sheet Date,
there has not been:
(a) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, prospects or business of the
Company (as presently conducted and as presently proposed to be conducted);
(b) any waiver by the Company of a valuable right or of a material
debt owed to it;
(c) except as contemplated by Section 4.6, any satisfaction or
discharge of any lien, claim or encumbrance or payment of any obligation by
the Company, except such a satisfaction, discharge or payment made in the
ordinary course of business that is not material to the assets, properties,
financial condition, operating results or business of the Company;
(d) except with respect to sales of certain assets used in connection
with the operations of Akashic Memories Corporation, any material change or
amendment to a material contract or arrangement by which the Company or any
of its assets or properties is bound or subject, except for changes or
amendments which are expressly provided for or disclosed in this Agreement,
the Seagate Agreement or the Financing Transactions.
(e) any material change in any compensation arrangement or agreement
with any present or prospective employee, contractor or director not
approved by the Company's Board of Directors; or
(f) to the Company's knowledge, any other event or condition of any
character which would materially and adversely affect the assets,
properties, financial condition, operating results or business of the
Company.
4.20 TAX MATTERS. The provisions for taxes in the Financial Statements are
sufficient for the payment of all accrued and unpaid federal, state, county and
local taxes of the Company, whether or not assessed or disputed as of the date
of each such balance sheet. There have been no examinations or audits of any tax
returns or reports by any applicable federal, state or local governmental
agency. The Company has duly filed all federal,
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state, county and local tax returns required to have been filed by it and paid
all taxes shown to be due on such returns. There are in effect no waivers of
applicable statutes of limitations with respect to taxes for any year.
4.21 ENVIRONMENTAL MATTERS.
(a) Except with respect to properties and facilities owned or leased
by Akashic Memories Corporation and its subsidiaries, during the period that the
Company has owned or leased its properties and facilities, (a) there have been
no material disposals, releases or threatened releases of Hazardous Materials
(as defined below) on, from or under such properties or facilities except for
such disposals, releases or threatened releases as have not violated any
applicable law, (b) neither the Company nor, to the Company's knowledge, any
third party, has used, generated, manufactured or stored on, under or about such
properties or facilities or transported to or from such properties or facilities
any Hazardous Materials except for such use, generation, manufacture or storage
as has not violated any applicable law. The Company has no knowledge of any
presence, disposals, releases or threatened releases of Hazardous Materials on,
from or under any of such properties or facilities, which may have occurred
prior to the Company having taken possession of any of such properties or
facilities.
(b) With respect to properties and facilities owned or leased by
Akashic, Memories Corp and its subsidiaries, to the best knowledge of the
Company (a) there have been no material disposals, releases or threatened
releases of Hazardous Materials (as defined below) on, from or under such
properties or facilities except for such disposals, releases or threatened
releases as have not violated any applicable law, (b) neither the Company nor,
to the Company's knowledge, any third party, has used, generated, manufactured
or stored on, under or about such properties or facilities or transported to or
from such properties or facilities any Hazardous Materials except for such use,
generation, manufacture or storage as has not violated any applicable law. The
Company has no knowledge of any presence, disposals, releases or threatened
releases of Hazardous Materials on, from or under any of such properties or
facilities, which may have occurred prior to the Company having taken possession
of any of such properties or facilities.
(c) For purposes of this Agreement, the terms "disposal", "release",
and "threatened release" shall have the definitions assigned thereto by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. Section 9601 et seq., as amended ("CERCLA"). For the purposes of this
-- ---
Section, "Hazardous Materials" shall mean any hazardous or toxic substance,
material or waste which is regulated under, or defined as, a hazardous
substance", "pollutant", "contaminant", "toxic chemical", "hazardous material",
"toxic substance", or "hazardous chemical" under (1) CERCLA; (2) the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. Section 1101 et seq.; (3)
-- ---
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; (4)
-- ---
the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; (5) the
-- ---
Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 et seq.; (6)
-- ---
regulations promulgated under any of the above statutes; or (7) any applicable
state or local statute, ordinance, rule, or regulation that has a scope or
purpose similar to those statutes identified above.
4.22 INTERESTED PARTY TRANSACTIONS. To the best knowledge of the Company,
no officer or director of the Company or any "affiliate" or "associate" (as
those terms are defined in Rule 405 promulgated under the Securities Act) of any
such person has had, either directly or indirectly, a material interest in: (a)
any person or entity which purchases from or sells, licenses or furnishes to the
Company any goods, property, technology, intellectual or other property rights
or services; or (b) any contract or agreement to which the Company is a party or
by which it may be bound or affected.
4.23 PRIVATE SALE. The Company has not violated any applicable federal or
state securities laws in connection with the offer, sale and issuance of any of
its capital stock. Subject to the accuracy of Purchasers'
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representations contained herein, nether the offer, sale and issuance of the
Preferred Shares or the Warrants hereunder nor the issuance and delivery of any
Conversion Stock upon conversion of the Preferred Shares or Warrant Stock on
exercise of the Warrants requires registration under the Securities Act or any
state securities laws.
4.24 NATURE OF INVESTMENT. The purchase of the Preferred Shares and
Warrants by PPEI does not constitute attributable interest in a telephone common
carrier or cable television systems as described in 47 C.F.R. (S) 63.54 or of a
cognizable interest in a broadcast licensee or cable television system as
described in C.F.R. (S) 76.501.
4.25 DISCLOSURE. Neither this Agreement nor any Related Documents, nor any
information provided by the Company in connection herewith or therewith, nor the
transactions contemplated hereby or thereby contains any untrue statement of any
material fact or omits to state any material fact necessary in order to make the
statements contained herein or therein complete and not misleading.
4.26 SEC FILINGS; COMPANY FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports and documents required to
be filed with the SEC since January 1, 1998, and has made available to
Purchasers such forms, reports and documents in the form filed with the SEC. As
of their respective dates, the SEC Reports (i) were prepared in accordance with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such SEC
Reports, and (II) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of the Company's subsidiaries is required to file
any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in SEC Reports (the "COMPANY
FINANCIALS") (x) complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, (y) was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC with
respect to Form 10-Q filed under the Exchange Act) and (z) fairly presented the
consolidated financial position of the Company and its subsidiaries as at the
respective dates thereof and the consolidated results of the Company's
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal year-end adjustments.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER
Each Purchaser, severally but not jointly, represents and warrants to the
Company as follows:
5.1 AUTHORIZATION AND ENFORCEABILITY. Such Purchaser has taken all action
necessary to permit it to execute and deliver this Agreement and the other
documents and instruments to be executed by it pursuant hereto and to carry out
the terms hereof and thereof. This Agreement and each such other document and
instrument, when duly executed and delivered by such Purchaser, will constitute
a valid and binding obligation of such Purchaser, enforceable against such
Purchaser in accordance with its terms.
-11-
5.2 GOVERNMENT APPROVALS. Such Purchaser is not required to obtain any
order, consent, approval or authorization of, or to make any declaration or
filing with, any Governmental Agency in connection with the execution and
delivery of this Agreement and the other documents and instruments to be
executed by it pursuant hereto or the consummation of the transactions
contemplated hereby and thereby.
ARTICLE VI
COMPLIANCE WITH SECURITIES LAWS
6.1 INVESTMENT INTENT OF PURCHASER. Each Purchaser, severally but not
jointly, represents and warrants to the Company that it is acquiring Preferred
Shares and the Warrants for its own account, with no present intention of
selling or otherwise distributing the same to the public except pursuant to a
transaction registered under the Securities Act or exempt from the registration
requirements thereunder.
6.2 STATUS OF PREFERRED SHARES AND WARRANTS. Each Purchaser has been
informed by the Company that the Preferred Shares and Warrants have not been and
will not be registered under the Securities Act or under any state securities
laws and are being offered and sold in reliance upon state exemptions for
transactions not involving any public offering. Except as set forth in the
Registration Rights Agreement and Section 8.3 hereof, the Conversion Stock and
Warrant Stock have not and will not be registered under the Securities Act or
under any state securities laws.
6.3 SOPHISTICATION AND FINANCIAL CONDITION OF EACH PURCHASER. Each
Purchaser, severally but not jointly, represents and warrants to the Company
that it is an "Accredited Investor" as defined in Regulation D under the
Securities Act and that it considers itself to be an experienced and
sophisticated investor and to have such knowledge and experience in financial
and business matters as are necessary to evaluate the merits and risks of an
investment in Preferred Shares and the Warrants.
6.4 OPPORTUNITY FOR REVIEW OF COMPANY INFORMATION. Each Purchaser
acknowledges that it has had the opportunity to ask questions of and receive
answers from officers of the Company regarding the Preferred Shares and the
Warrants, the Company and its business, prospects and financial condition.
6.5 TRANSFER OF PREFERRED SHARES AND WARRANT STOCK.
(a) Preferred Shares and Warrant Stock may be transferred pursuant to
(i) public offerings registered under the Securities Act, (ii) Rule 144
promulgated pursuant to the Securities Act (or any similar rule then in force)
or (iii) subject to conditions set forth in Section 6.5(b), any other legally-
available means of transfer.
(b) In connection with any transfer of any Preferred Shares,
Conversion Stock, Warrants or Warrant Stock (other than a transfer described in
Section 6.5(a)(i) or (ii)), the holder of such shares shall deliver written
notice to the Company describing in reasonable detail the proposed transfer,
together with an opinion of counsel (which, to the Company's reasonable
satisfaction, is knowledgeable in securities law matters) to the effect that
such transfer may be effected without registration of such shares under the
Securities Act. The holder of the shares being transferred shall not consummate
the transfer until (i) the prospective transferee has confirmed to the Company
in writing its agreement to be bound by the provisions of this Section 6.5 and
Section 8.5 or (ii) such holder shall have delivered to the Company an opinion
of such counsel that no subsequent transfer of such Preferred Shares, Conversion
Stock, Warrants or Warrant Stock shall require registration under the Securities
Act. Promptly upon receipt of any opinion described in clause (ii) of the
preceding sentence, the Company shall
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prepare and deliver in connection with the consummation of the proposed
transfer, new certificates for the Preferred Shares being transferred that do
not bear the legend set forth in Section 6.5(c).
(c) Except as provided in Section 6.5(b), each certificate for
Preferred Shares, Conversion Stock, Warrants and Warrant Stock shall be
imprinted with a legend substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON MAY __,1998 AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THE TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SET FORTH IN THE
SECURITIES PURCHASE AGREEMENT DATED AS OF MAY 29, 1998 AMONG THE
ISSUER (THE "COMPANY") AND CERTAIN INVESTORS, AND THE COMPANY RESERVES
THE RIGHT TO REFUSE ANY TRANSFER OF SUCH SECURITIES UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY
OF SUCH CONDITIONS SHALL BE FURNISHED WITHOUT CHARGE TO THE HOLDER
HEREOF UPON WRITTEN REQUEST TO THE COMPANY.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATIONS. The obligations of
the Purchasers to consummate the transactions contemplated hereby are subject to
satisfaction (or written waiver) at or prior to the Closing of the following
conditions:
(a) The representations and warranties of the Company set forth in
Article IV hereof shall be true and correct as of the Closing Date and all
covenants, agreements and conditions contained in this Agreement to be performed
or complied with by the Company on or prior to the Closing Date shall have been
performed or complied with;
(b) The Company shall have adopted and filed with the Secretary of
State of the State of Delaware, on or before the Closing, the Certificate of
Elimination of the Company;
(c) The Company shall have adopted and filed with the Secretary of
State of the State of Delaware, on or before the Closing, the Certificate of
Designations;
(d) The Company shall have delivered to Purchasers a certificate of
the Company, executed by a duly authorized officer of the Company, dated the
Closing Date, and certifying, among other things, to the fulfillment of the
conditions specified in Section 7.1(a) of this Agreement;
(e) The Company and the Purchasers shall have executed the
Registration Rights Agreement;
(f) Purchasers shall have received an opinion of counsel to the
Company in form and substance reasonably satisfactory to counsel for the
Purchasers;
(g) No action, suit, investigation or proceeding shall be pending or
threatened before any court or Governmental Agency to restrain, prohibit,
collect damages as a result of or otherwise challenge this Agreement or any of
the Related Documents or any transaction contemplated hereby or thereby and all
applicable
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waiting periods under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act relating to the
transactions contemplated hereby will have expired or terminated early;
(h) PPEI shall be satisfied, in its sole discretion, that the
structure of the transactions contemplated by this Agreement comply in all
respects with the Prudential Equity Guidelines;
(i) The Financing Transactions shall have been consummated; and
(j) The transaction with Seagate Technology, Inc. under the Seagate
Agreement shall have been consummated.
(k) There shall have been no material adverse change in the Company's
condition from the date hereof on the Closing Date.
7.2 CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS. The obligations of the
Company hereunder are subject to satisfaction (or written waiver) at or prior to
the Closing of the following conditions:
(a) The Company and the Purchasers shall have executed the
Registration Rights Agreement;
(b) All acts or covenants required hereunder to be performed by the
Purchasers at or prior to the Closing shall have been fully performed by them;
and
(c) No action, suit, investigation or proceeding shall be pending or
threatened before any court or Governmental Agency to restrain, prohibit,
collect damages as a result of or otherwise challenge this Agreement or any of
the Related Documents or any transaction contemplated hereby or thereby and all
applicable waiting periods under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act relating to the
transactions contemplated hereby will have expired or terminated early.
ARTICLE VIII
COVENANTS OF THE COMPANY
8.1 RESERVATION OF COMMON STOCK. The Company shall at all times reserve
and keep available out of its authorized but unissued shares of Class A Common
Stock, solely for the purpose of issuance upon the conversion of the Preferred
Shares and exercise of the Warrants, such number of shares of Class A Common
Stock as are issuable upon the conversion of all outstanding Preferred Shares
and exercise of the Warrants. All shares of Common Stock which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges. The Company shall take all actions as
may be necessary to assure that all such shares of Class A Common Stock may be
so issued without violation of any applicable law or governmental regulation or
any requirements of any domestic securities exchange upon which shares of Class
A Common Stock may be listed (except for official notice of issuance which shall
be immediately transmitted by the Company upon issuance).
8.2 CURRENT PUBLIC INFORMATION. The Company shall file timely all reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations thereunder and shall take such further action as any
holder of Preferred Shares, Conversion Stock, Warrants or Warrant Stock may
reasonably request, all to the extent required to enable such holder to sell
such shares pursuant to (i) Rule 144 under the Securities Act or any successor
provision or (ii) a registration statement on Form S-2 or S-3 or any similar
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registration form hereafter adopted by the SEC. Upon reasonable request, the
Company shall deliver to any holder of Preferred Shares, Conversion Stock,
Warrants or Warrant Stock a written statement as to whether it has complied with
such requirements.
8.3 RIGHTS AGREEMENT. The Company will use its reasonable best efforts to
amend the Rights Agreement to put the holders of Preferred Shares in parity with
rights of holders of Common Stock under the Rights Agreement.
8.4 NO FIVE PERCENT HOLDERS. Unless CVI delivers a waiver in accordance
with the last sentence of this Section 8.4, in no event shall CVI be entitled to
receive shares of Class A Common Stock upon a conversion of the Series A
Preferred Stock or the exercise of the Warrants to the extent that the sum of
(x) the number of shares of Class A Common Stock beneficially owned by CVI and
its affiliates (exclusive of shares issuable upon conversion of the unconverted
or unexercised portion of the Series A Preferred Stock or the exercise of the
Warrants or the unexercised or unconverted portion of any other securities of
the Company, subject to a limitation on conversion or exercise analogous to the
limitations contained here) and (y) the number of shares of Class A Common Stock
issuable upon the conversion of the Series A Preferred Stock or the exercise of
the Warrants with respect to which the determination of this Section is being
made, would result in beneficial ownership by CVI and its affiliates of more
than 4.99% of the outstanding shares of Class A Common Stock. For purposes of
this subparagraph, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and Regulation 13 D-G thereunder, except as
otherwise provided in clause (x) above. Except as provided in the immediately
succeeding sentence, the restriction contained in this Section shall not be
altered, amended, deleted or changed in any manner whatsoever unless CVI shall
approve such alteration, amendment, deletion or change. Notwithstanding the
foregoing, CVI may, by providing written notice to the Company, adjust the
restriction set forth in this Section so that the limitation on beneficial
ownership of 4.99% of the outstanding shares of Class A Common Stock referred to
above shall be increased to 9.99%, which adjustment shall not take effect until
the 61st day after the date of such notice.
8.5 NO AMENDMENTS TO CERTAIN PROVISIONS. Prior to the 365th day after the
Maturity Date (as defined in the Amended and Restated Credit Agreement) or at
any time that all or any portion of the Term Loan (as defined in the Amended and
Restated Credit Agreement) is outstanding, no amendment or other modification or
waiver can be made with respect to the second paragraph of Section 1D, the
second paragraph of ▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇ ▇▇ (▇▇) or the second paragraph of
Section 7 of the Certificate of Designations, or to any other provision of the
Certificate of Designations that refers to any of those Sections, without the
prior written consent of the Majority Banks (as defined in the Amended and
Restated Credit Agreement). This provision is made for the benefit of, and
shall be enforceable by, the Banks, the Agent and the Co-Agent (as defined in
the Amended and Restated Credit Agreement), and shall be binding on all
subsequent holders of the Preferred Shares.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1 SURVIVAL. Notwithstanding any examination made by or on behalf of any
party hereto, pledge of any party or the acceptance by any party of any
certificate or opinion, each representation and warranty contained herein, and
in writing delivered pursuant hereto, shall survive the Closing and shall be
fully effective and enforceable.
9.2 INDEMNIFICATION. The Company shall indemnify Purchasers, their
officers, directors, employees, agents and representatives against any damages,
claims, losses, liabilities and expenses (including reasonable
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counsel fees and expenses) which may be suffered or incurred by it as a result
of a breach of any representation, warranty or covenant made by the Company in
this Agreement.
ARTICLE X
GENERAL PROVISIONS
10.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns,
including each subsequent holder of Preferred Shares, Conversion Stock, Warrants
or Warrant Stock. Except as otherwise specifically provided herein, this
Agreement shall not be assignable by any party without the prior written consent
of the other parties hereto, which consent shall not be unreasonably withheld by
the Company.
10.2 ENTIRE AGREEMENT. This Agreement and the other writings referred to
herein or delivered Pursuant hereto constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
arrangements or understandings.
10.3 NOTICES. All notices, requests, consents and other communications
provided for shall be in writing and shall be (i) delivered in person, (ii)
transmitted by telecopy or (iii) sent by first-class registered or certified
mail, postage prepaid, to the recipient at the address or telecopy number set
forth below, or such other address or telecopy number as may hereafter be
designated in writing by such recipient. Notices shall be deemed given upon
personal delivery, seven days following deposit in the mail as set forth above
or upon acknowledgment by the receiving telecopier.
(a) If to the Company:
StorMedia Incorporated
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, Esq.
(b) If to PPEI:
Prudential Private Equity Investors III, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
with a copy to:
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▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
Citicorp Center
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
(c) If to CVI:
Heights Capital Management, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
Wolf Block ▇▇▇▇▇▇ & ▇▇▇▇▇-▇▇▇▇▇ LLP
12th Floor, Packard Building
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
10.4 AMENDMENT AND WAIVER. No amendment of any provision of this Agreement
shall be effective, unless the same shall be in writing and signed by the
Company and the holders of two-thirds of the Preferred Shares and the Conversion
Stock issued hereunder. Any failure of the Company to comply with any provision
hereof or in the Warrants, and any provision applicable to the Warrant Stock,
Conversion Stock or Preferred Shares hereof may be waived in writing by the
holders of two-thirds of the then outstanding Preferred Shares and the
Conversion Stock issued hereunder. No such waiver shall operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. No failure by any
party to take any action against any breach of this Agreement or default by any
other party shall constitute a waiver of such party's right to enforce any
provision hereof or to take any such action.
10.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one agreement.
10.6 HEADINGS. The headings of the various sections of this Agreement have
been inserted for reference only and shall not be deemed to be a part of this
Agreement.
10.7 REMEDIES CUMULATIVE. Except as otherwise provided herein, the
remedies provided herein shall be cumulative and shall not preclude the
assertion by any party hereto of any other rights or the seeking of any other
remedies against any other party hereto.
10.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal substantive laws of the State of California without
giving affect to principles of conflicts of law or choice of law whether of the
State of California or of any other jurisdiction which would result in the
application of any laws other than those of the State of California.
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10.9 NO THIRD PARTY BENEFICIARIES. Except as specifically set forth or
referred to herein, nothing herein is intended or shall be construed to confer
upon any person or entity other than the parties hereto and their successors or
assigns, any rights or remedies under or by reason of this Agreement.
10.10 SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
10.11 LEGAL FEES. The Company will pay or reimburse PPEI for the
reasonable fees and expenses of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, special counsel to the
Purchasers, not to exceed $10,000, incurred in connection with the transactions
contemplated hereby (the "▇▇▇▇▇▇▇▇ FEES").
* * * *
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IN WITNESS WHEREOF, the parties have executed this Securities Purchase
Agreement as of the date first written above.
STORMEDIA INCORPORATED
By:
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Name:
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Title:
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PRUDENTIAL PRIVATE EQUITY INVESTORS III,
L.P., by Prudential Equity Investors, Inc.,
General Partner
by Cornerstone Equity Investors, L.L.C.,
its Investment Advisor
By:
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Name:
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Title: Managing Director
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CAPITAL VENTURES INTERNATIONAL
by Heights Capital Management, Inc.,
its authorized agent
By:
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Name:
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Title:
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[Signature Page To Securities Purchase Agreement]