1
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of February
27, 2001, by and among TRICORD SYSTEMS, INC., a Delaware corporation, with
headquarters located at 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 00, Xxxxxxxx, Xxxxxxxxx
00000 (the "COMPANY"), and each of the purchasers set forth on the signature
pages hereto (the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("REGULATION D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT");
B. The Company has authorized a series of preferred stock, designated
as Series E Convertible Preferred Stock (the "SERIES E PREFERRED STOCK"), having
the rights, preferences and privileges set forth in the Certificate of
Designations, Preferences and Rights attached hereto as EXHIBIT "A" (the
"CERTIFICATE OF DESIGNATION");
C. The Preferred Shares (as defined below) are convertible into shares
of common stock, $.01 par value per share, of the Company (the "COMMON STOCK"),
upon the terms and subject to the limitations and conditions set forth in the
Certificate of Designation;
D. The Company has (i) authorized the issuance to the Buyers of
warrants, in the form attached hereto as EXHIBIT "B-1", to purchase within
eighteen months Nine Hundred Eighty-Six Thousand Eight Hundred Forty-Two
(986,842) shares of Common Stock (the "SERIES E-1 WARRANTS") and (ii) authorized
the issuance to the Buyers of warrants, in the form attached hereto as EXHIBIT
"B-2", to purchase within twenty-four months Nine Hundred Eighty-Six Thousand
Eight Hundred Forty-Two (986,842) shares of Common Stock (the "SERIES E-2
WARRANTS" and together with the Series E-1 Warrants, the "WARRANTS").
E. The Buyers desire to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement, (i) an
aggregate of Twenty-Five Thousand (25,000) shares of Series E Preferred Stock
(such shares, together with any shares of Series E Preferred Stock issued in
replacement thereof or as a dividend thereon or otherwise with respect thereto
in accordance with the terms thereof, being hereinafter collectively referred to
as the "PREFERRED SHARES") and (ii) Series E-1 Warrants to purchase Nine Hundred
Eighty-Six Thousand Eight Hundred Forty-Two (986,842) shares of Common Stock and
Series E-2 Warrants to purchase Nine Hundred Eighty-Six Thousand Eight Hundred
Forty-Two (986,842) shares of Common Stock.
2
F. Each Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, the number of Preferred Shares and number of Warrants as is
set forth immediately below its name on the signature pages hereto;
G. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as EXHIBIT "C" (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws; and
NOW THEREFORE, the Company and each of the Buyers severally (and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
a. PURCHASE OF PREFERRED SHARES AND WARRANTS. Subject to the
satisfaction (or waiver) of the conditions thereto set forth in Section 6 and
Section 7 below, on the Closing Date (as defined below), the Company shall issue
and sell to each Buyer and each Buyer severally agrees to purchase from the
Company such number of Preferred Shares and number of Warrants for the aggregate
purchase price as is set forth immediately below such Buyer's name on the
signature pages hereto. The issuance, sale and purchase of the Preferred Shares,
Series E-1 Warrants and Series E-2 Warrants shall take place at the Closing (the
"CLOSING"). The Company shall issue an aggregate of (i) Twenty-Five Thousand
(25,000) Preferred Shares, (ii) Series E-1 Warrants to purchase Nine Hundred
Eighty-Six Thousand Eight Hundred Forty-Two (986,842) shares of Common Stock and
(iii) Series E-2 Warrants to purchase Nine Hundred Eighty-Six Thousand Eight
Hundred Forty-Two (986,842) shares of Common Stock, for an aggregate purchase
price of Twenty-Five Million Dollars ($25,000,000) (the "PURCHASE PRICE").
b. FORM OF PAYMENT. On the Closing Date (as defined below), (i) each
Buyer shall pay the purchase price for the Preferred Shares, Series E-1 Warrants
and Series E-2 Warrants to be issued and sold to it at the Closing by wire
transfer of immediately available funds to the Company in accordance with the
Company's written wiring instructions, against delivery of duly executed
certificates representing such number of Preferred Shares and duly executed
Series E-1 Warrants and Series E-2 Warrants which such Buyer is purchasing and
(ii) the Company shall deliver such certificates and Warrants duly executed on
behalf of the Company, to the Buyer, against delivery of such Purchase Price.
c. CLOSING DATE. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Preferred Shares and the Warrants pursuant to
this Agreement (the "CLOSING DATE") shall be 9:00 a.m. Eastern Standard Time on
February 27, 2001 or such other mutually agreed upon time. The Closing shall
occur on the Closing Date at the offices of Akerman, Senterfitt & Xxxxxx, P.A.,
Xxx Xxxxxxxxx Xxxxx Xxxxxx, Xxxxx, Xxxxxxx 00000, or at such other location as
may be agreed to by the parties.
2
3
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer severally (and
not jointly) represents and warrants to the Company solely as to such Buyer
that:
a. INVESTMENT PURPOSE. As of the date hereof, the Buyer is
purchasing the Preferred Shares and the shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Preferred Shares (including, without
limitation, (i) such additional shares of Common Stock as are issuable as a
result of the events described in Articles V, VI.D(ii) or VI.E of the
Certificate of Designation and Section 2(c) of the Registration Rights Agreement
(such shares of Common Stock being collectively referred to herein as the
"CONVERSION SHARES")) and the Warrants and the shares of Common Stock issuable
upon exercise of or otherwise pursuant to the Warrants (the "WARRANT SHARES"
and, collectively with the Preferred Shares, Conversion Shares and Warrants, the
"SECURITIES") for its own account and not with a present view towards the public
sale or distribution thereof, except pursuant to sales registered or exempted
from registration under the 1933 Act; provided, however, that by making the
representations herein, the Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D (an "ACCREDITED
INVESTOR").
c. RELIANCE ON EXEMPTIONS. The Buyer understands that the Securities
are being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities.
d. INFORMATION. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials, including without limitation the SEC Documents (as
defined in Section 3(h) herein), relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors. The Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall modify, amend
or affect Buyer's right to rely on the Company's representations and warranties
contained in Section 3 below. The Buyer understands that its investment in the
Securities involves a significant degree of risk.
e. GOVERNMENTAL REVIEW. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
f. TRANSFER OR RE-SALE. The Buyer understands that (i) except as
provided in the Registration Rights Agreement, the sale or re-sale of the
Securities has not been and is not being
3
4
registered under the 1933 Act or any applicable state securities laws, and the
Securities may not be transferred unless (a) the Securities are sold pursuant to
an effective registration statement under the 1933 Act, (b) the Buyer shall have
delivered to the Company an opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable transactions
and reasonably satisfactory to the Company) to the effect that the Securities to
be sold or transferred may be sold or transferred pursuant to an exemption from
such registration (c) the Securities are sold or transferred to an "affiliate"
(as defined in Rule 144 promulgated under the 1933 Act (or a successor rule)
("RULE 144")) of the Buyer who agrees to sell or otherwise transfer the
Securities only in accordance with this Section 2(f) and who is an Accredited
Investor or (d) the Securities are sold pursuant to Rule 144; (ii) any sale of
such Securities made in reliance on Rule 144 may be made only in accordance with
the terms of said Rule and further, if said Rule is not applicable, any re-sale
of such Securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 0000 Xxx) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such Securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder (in each case, other
than pursuant to the Registration Rights Agreement). Notwithstanding the
foregoing or anything else contained herein to the contrary, the Securities may
be pledged as collateral in connection with a bona fide margin account or other
lending arrangement.
g. LEGENDS. The Buyer understands that the Preferred Shares and the
Warrants and, until such time as the Conversion Shares and Warrant Shares have
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement or otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can then be
immediately sold, the Conversion Shares and Warrant Shares, will bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities may not be sold, transferred or assigned in the absence
of an effective registration statement for the securities under said
Act, or an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions and
reasonably satisfactory to the Company, that registration is not
required under said Act or unless sold pursuant to Rule 144 under
said Act."
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any Security upon which
it is stamped, if, unless otherwise required by applicable state securities
laws, (a) such Security is registered for resale under an effective registration
statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular date
that can then be immediately sold, or (b) such holder provides the Company with
an opinion of counsel, in form,
4
5
substance and scope customary for opinions of counsel in comparable transactions
and reasonably satisfactory to the Company, to the effect that a public sale or
transfer of such Security may be made without registration under the 1933 Act
and such sale or transfer is effected or (c) such holder provides the Company
with reasonable assurances that such Security can be sold pursuant to Rule 144.
The Buyer agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, in compliance with all
applicable laws and regulations, including without limitation applicable
prospectus delivery requirements, if any.
5
6
h. AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration
Rights Agreement have been duly and validly authorized. This Agreement has been
duly executed and delivered on behalf of the Buyer, and this Agreement
constitutes, and upon execution and delivery by the Buyer of the Registration
Rights Agreement, such agreement will constitute, valid and binding agreements
of the Buyer enforceable in accordance with their terms.
i. RESIDENCY. The Buyer is a resident of the jurisdiction set forth
immediately below such Buyer's name on the signature pages hereto.
j. TRADING IN COMMON STOCK. Neither the Buyer nor any of its
affiliates has engaged in the purchase or sale of the Common Stock (or any
derivative interest thereof) prior to the date hereof.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Buyer that:
a. ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Delaware,
with full power and authority (corporate and other) to own, lease, use and
operate its properties and to carry on its business as and where now owned,
leased, used, operated and conducted. THE COMPANY HAS NO SUBSIDIARIES (AS
DEFINED BELOW). The Company is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its ownership or
use of property or the nature of the business conducted by it makes such
qualification necessary except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT"
means any material adverse effect on (i) the Securities, (ii) the business,
operations, assets, financial condition or prospects of the Company, (iii) the
transactions contemplated hereby or by the agreements or instruments to be
entered into in connection herewith or (iv) the authority or the ability of the
Company to perform its obligation under this Agreement, the Registration Rights
Agreement, the Certificate of Designation or the Warrants. "SUBSIDIARIES" means
any corporation or other organization, whether incorporated or unincorporated,
in which the Company owns, directly or indirectly, any equity or other ownership
interest.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has all requisite
corporate power and authority to file and perform its obligations under the
Certificate of Designation and to enter into and perform this Agreement, the
Registration Rights Agreement and the Warrants and to consummate the
transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company, the filing of the Certificate of Designation and the consummation by it
of the transactions contemplated hereby and thereby (including without
limitation, the issuance of the Preferred Shares and the Warrants and the
issuance and reservation for issuance of the Conversion Shares issuable upon
conversion of or otherwise pursuant to the Preferred Shares and the Warrant
Shares issuable upon exercise of or otherwise
6
7
pursuant to the Warrants) have been duly authorized by the Company's Board of
Directors and no further consent or authorization of the Company, its Board of
Directors, or its stockholders (other than as may be required under Nasdaq
Marketplace Rule 4350) is required, (iii) this Agreement has been duly executed
and delivered by the Company, and (iv) this Agreement constitutes, and upon
execution and delivery by the Company of the Registration Rights Agreement and
the Warrants and upon execution and filing of the Certificate of Designation,
each of such agreements and instruments will constitute, a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms.
c. CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of (i) 75,000,000 shares of Common Stock of which
24,313,242 shares are issued and outstanding, 9,929,243 shares are reserved for
issuance pursuant to the Company's stock option plans and certain non-plan
option agreements, 2,911,500 shares are reserved for issuance pursuant to
securities (other than the Preferred Shares and the Warrants) exercisable for,
or convertible into or exchangeable for shares of Common Stock and 9,960,525
shares are reserved for issuance upon conversion of the Preferred Shares and
exercise of the Warrants (subject to adjustment pursuant to the Company's
covenant set forth in Section 4(h) below); (ii) 2,043,966 shares of Series C
Convertible Preferred Stock, none of which are outstanding, 706,711 of Series D
Convertible Preferred Stock, none of which are outstanding, and 500,000 shares
designated as Series A Junior Preferred Stock, none of which are outstanding,
and (iii) 2,500,000 shares of undesignated stock, none of which are issued and
outstanding. All of such outstanding shares of capital stock are, or upon
issuance will be, duly authorized, validly issued, fully paid and nonassessable.
Except as disclosed in SCHEDULE 3(c), no shares of capital stock of the Company
are subject to preemptive rights or any other similar rights of the stockholders
of the Company or any liens or encumbrances imposed through the actions or
failure to act of the Company. Except as disclosed in SCHEDULE 3(c), as of the
effective date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal,
agreements, understandings, claims or other commitments or rights of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for any shares of capital stock of the Company, or arrangements by
which the Company is or may become bound to issue additional shares of capital
stock of the Company, (ii) there are no agreements or arrangements under which
the Company is obligated to register the sale of any of its or their securities
under the 1933 Act (except the Registration Rights Agreement) and (iii) there
are no anti-dilution or price adjustment provisions contained in any security
issued by the Company (or in any agreement providing rights to security holders)
that will be triggered by the issuance of the Preferred Shares, the Warrants,
the Conversion Shares or Warrant Shares. The Company has furnished to the Buyer
true and correct copies of the Company's Certificate of Incorporation as in
effect on the date hereof ("CERTIFICATE OF INCORPORATION"), the Company's
By-laws, as in effect on the date hereof (the "BY-LAWS"), and has made available
to Buyer all of the Company's option plans and standard forms of option
agreements and all other agreements containing the terms of securities
convertible into or exercisable for Common Stock of the Company and the material
rights of the holders thereof in respect thereto.
d. ISSUANCE OF SHARES. The Preferred Shares are duly authorized and,
upon issuance in accordance with the terms of this Agreement, will be validly
issued, fully paid and
7
8
non-assessable, and free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of stockholders of the Company and will not impose personal
liability upon the holder thereof. The Conversion Shares and Warrant Shares are
duly authorized and reserved for issuance, and, when issued upon conversion of
or otherwise pursuant to the Preferred Shares and upon exercise of or otherwise
pursuant to the Warrants in accordance with the terms thereof, will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances and will not be subject to preemptive rights or other similar
rights of stockholders of the Company and will not impose personal liability
upon the holder thereof.
e. ACKNOWLEDGMENT OF DILUTION. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares upon conversion of or otherwise pursuant to
the Preferred Shares and upon issuance of the Warrant Shares upon exercise of or
otherwise pursuant to the Warrants. The Company's directors and executive
officers have studied and fully understand the nature of the Securities being
sold hereunder. The Company further acknowledges that its obligation to issue
Conversion Shares and Warrant Shares upon conversion of the Preferred Shares or
exercise of the Warrants in accordance with this Agreement, the Certificate of
Designation and the Warrants is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company. Taking the foregoing into account, the Company's
Board of Directors has determined, in its good faith business judgment, that the
issuance of the Securities hereunder and under the Certificate of Designation
and the Warrants and the consummation of the transactions contemplated hereby
and thereby are in the best interest of the Company and its stockholders.
f. SERIES OF PREFERRED STOCK. The terms, designations, powers,
preferences and relative, participating and optional or special rights, and the
qualifications, limitations and restrictions of each series of preferred stock
of the Company (other than the Preferred Shares), if any, are as stated in the
Certificates of Incorporation, filed on or prior to the date hereof, and the
Bylaws. The terms, designations, powers, preferences and relative, participating
and optional or special rights, and the qualifications, limitations and
restrictions of the Preferred Shares are as stated in the Certificate of
Designation.
g. NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement and the Warrants by the Company and
the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the filing of the Certificate of
Designation and the issuance and reservation for issuance, as applicable, of the
Preferred Shares, Conversion Shares and Warrant Shares) will not (i) conflict
with or result in a violation of any provision of the Certificate of
Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which with notice or
lapse of time or both could become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the Company
is a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and regulations of any self-regulatory organizations to which the Company or its
securities are subject) applicable to
8
9
the Company by which any property or asset of the Company is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect). The Company is not in violation of its
Certificate of Incorporation, By-laws or other organizational documents and the
Company is not in default (and no event has occurred which with notice or lapse
of time or both could put the Company in default) under, and the Company has not
taken any action or failed to take any action that would give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company is a party or by which
any property or assets of the Company is bound or affected, except for possible
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect. The businesses of the Company are not being conducted, and shall not be
conducted so long as a Buyer owns any of the Securities, in violation of any
law, ordinance or regulation of any governmental entity (except for such
violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Except for (i) the Amended and Restated Investors' Rights
Agreement by and among the Company and the Investors named therein effective as
of April 13, 2000 (the "INVESTOR RIGHTS AGREEMENT"), (ii) as specifically
contemplated by this Agreement and as required under the 1933 Act, (iii) as
required by any applicable state securities laws and (iv) such actions as are
necessary to comply with Nasdaq Marketplace Rule 4350, the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory agency, self
regulatory organization or stock market or any third party in order for it to
execute, deliver or perform any of its obligations under this Agreement, the
Registration Rights Agreement or the Warrants in accordance with the terms
hereof or thereof or to issue and sell the Preferred Shares and Warrants in
accordance with the terms hereof and to issue the Conversion Shares upon
conversion of or otherwise pursuant to the Preferred Shares and the Warrant
Shares upon exercise of or otherwise pursuant to the Warrants. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company is not in violation of the listing
requirements of the NASDAQ SmallCap Market (the "NASDAQ SMALLCAP") and does not
reasonably anticipate that the Common Stock will be delisted by the Nasdaq
SmallCap in the foreseeable future. The Company and its Subsidiaries are unaware
of any facts or circumstances which could reasonably be expected to give rise to
any of the foregoing.
h. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31, 1998, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits to such documents) incorporated by reference therein, being hereinafter
referred to as the "SEC DOCUMENTS"). The Company has made available (including
by filing SEC Documents via XXXXX) to each Buyer true and complete copies of the
SEC Documents, except for such exhibits and incorporated documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material
9
10
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the statements made in any such SEC Documents is, or has
been, required to be amended or updated under applicable law (except for such
statements as have been amended or updated in subsequent filings prior to the
date hereof). As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the consolidated financial position of the Company and
its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments).
Except as set forth in the financial statements of the Company included in the
SEC Documents, the Company has no liabilities, contingent or otherwise, other
than (i) liabilities incurred in the ordinary course of business subsequent to
December 31, 1999 and (ii) obligations under contracts and commitments incurred
in the ordinary course of business and not required under generally accepted
accounting principles to be reflected in such financial statements, which,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company.
i. ABSENCE OF CERTAIN CHANGES. Since December 31, 1999, there has
been no material adverse change and no material adverse development in the
assets, liabilities, business, properties, operations, financial condition,
results of operations or prospects of the Company or any of its Subsidiaries.
j. ABSENCE OF LITIGATION. Except as set forth in SCHEDULE 3(j),
there is no action, suit, claim, proceeding, inquiry or, to the knowledge of the
Company, investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or its officers or
directors in their capacity as such, that could have a Material Adverse Effect.
SCHEDULE 3(j) contains a complete list and summary description of any pending or
threatened proceeding against or affecting the Company without regard to whether
it would have a Material Adverse Effect. None of the Company's executive
officers are aware of any facts or circumstances which might give rise to any of
the foregoing.
k. PATENTS, COPYRIGHTS, ETC. The Company owns or possesses the
requisite licenses or rights to use all patents, patent applications, patent
rights, inventions, know-how, trade secrets, trademarks, trademark applications,
service marks, service names, trade names and copyrights ("INTELLECTUAL
PROPERTY") necessary to enable it to conduct its business as now operated (and,
except as set forth in SCHEDULE 3(k) hereof, to the best of the Company's
knowledge, as presently contemplated to be operated in the future); there is no
claim or action by any person pertaining to, or proceeding pending, or to the
Company's knowledge threatened, which challenges
10
11
the right of the Company with respect to any Intellectual Property necessary to
enable it to conduct its business as now operated (and, except as set forth in
SCHEDULE 3(k) hereof, to the best of the Company's knowledge, as presently
contemplated to be operated in the future); to the best of the Company's
knowledge, the Company's current and intended products, services and processes
do not infringe on any Intellectual Property or other rights held by any person;
and the Company is unaware of any facts or circumstances which might give rise
to any of the foregoing. The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of their Intellectual Property.
l. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any
of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Except as set forth on SCHEDULE 3(l), the Company is
not a party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
m. TAX STATUS. The Company has made or filed all federal, state and
foreign income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent that the
Company has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim. The Company has not executed a waiver with respect to the statute of
limitations relating to the assessment or collection of any foreign, federal,
state or local tax. None of the Company's tax returns is presently being audited
by any taxing authority.
n. CERTAIN TRANSACTIONS. Except as set forth on SCHEDULE 3(n) and in
the SEC Documents and except for arm's length transactions pursuant to which the
Company makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties and other than the
grant of stock options disclosed on SCHEDULE 3(c), none of the officers,
directors, or employees of the Company is presently a party to any transaction
with the Company (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
o. DISCLOSURE. All information relating to or concerning the Company
set forth
11
12
in this Agreement and provided to the Buyers pursuant to Section 2(d) hereof and
otherwise in connection with the transactions contemplated hereby is true and
correct in all material respects and the Company has not omitted to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not misleading. No
event or circumstance has occurred or exists, nor is the Company in possession
of any information, with respect to the Company or its business, properties,
prospects, operations or financial conditions, which has not been publicly
announced or disclosed but under applicable law, rule or regulation, requires
public disclosure or announcement by the Company (assuming for this purpose that
the Company's reports filed under the 1934 Act are being incorporated into an
effective registration statement filed by the Company under the 1933 Act).
p. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF SECURITIES. The
Company acknowledges and agrees that the Buyers are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and that any statement made by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to the Buyers' purchase of the Securities and has not been relied upon by the
Company, its officers or directors in any way. The Company further represents to
each Buyer that the Company's decision to enter into this Agreement has been
based solely on the independent evaluation of the Company and its
representatives.
q. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration under the
1933 Act of the issuance of the Securities to the Buyers. The issuance of the
Securities to the Buyers will not be integrated with any other issuance of the
Company's securities (past, current or future) for purposes of any stockholder
approval provisions applicable to the Company or its securities.
r. NO BROKERS. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments relating to this Agreement or the transactions contemplated hereby,
except for dealings with Wit Soundview Corporation, whose commissions and fees
will be paid for by the Company.
s. PERMITS; COMPLIANCE. The Company is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted (collectively, the "COMPANY PERMITS"), and there is no action pending
or, to the knowledge of the Company, threatened regarding suspension or
cancellation of any of the Company Permits. The Company is not in conflict with,
or in default or violation of, any of the Company Permits, except for any such
conflicts, defaults or violations which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. Since December 31,
12
13
1999, the Company has not received any notification with respect to possible
conflicts, defaults or violations of applicable laws, except for notices
relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.
t. ENVIRONMENTAL MATTERS.
(i) Except as set forth in SCHEDULE 3(t), there are, to the
Company's knowledge, with respect to the Company or any predecessor of the
Company, no past or present violations of Environmental Laws (as defined below),
releases of any material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual obligations which
may give rise to any common law environmental liability or any liability under
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
or similar federal, state, local or foreign laws and the Company has not
received any notice with respect to any of the foregoing, nor is any action
pending or, to the Company's knowledge, threatened in connection with any of the
foregoing. The term "ENVIRONMENTAL LAWS" means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, "HAZARDOUS MATERIALS") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored, used or disposed
of in compliance with applicable law, to the knowledge of the Company, no
Hazardous Materials are contained on or about any real property currently owned,
leased or used by the Company and no Hazardous Materials were released on or
about any real property previously owned, leased or used by the Company during
the period the property was owned, leased or used by the Company, except in the
normal course of the Company's business.
(iii) Except as set forth in SCHEDULE 3(t), to the knowledge of
the Company, there are no underground storage tanks on or under any real
property owned, leased or used by the Company that are not in compliance with
applicable law.
u. TITLE TO PROPERTY. The Company has good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company, in each
case free and clear of all liens, encumbrances and defects except such as are
described in SCHEDULE 3(u) or such as would not have a Material Adverse Effect.
Any real property and facilities held under lease by the Company are held by it
under valid, subsisting and enforceable leases with such exceptions as would not
have a Material Adverse Effect.
v. INSURANCE. The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company is engaged. The
13
14
Company has no reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at a
cost that would not have a Material Adverse Effect.
w. INTERNAL ACCOUNTING CONTROLS. The Company maintains a system of
internal accounting controls sufficient, in the judgment of the Company's board
of directors, to provide reasonable assurance that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
x. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any director,
officer, agent, employee or other person acting on behalf of the Company has, in
the course of his actions for, or on behalf of, the Company, used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
y. SOLVENCY. The Company (both before and after giving effect to the
transactions contemplated by this Agreement) is solvent (i.e., its assets have a
fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not have the ability to, nor does it intend to
take any action that would impair its ability to, pay its debts from time to
time incurred in connection therewith as such debts mature. The Company did not
receive a qualified opinion from its auditors with respect to its most recent
fiscal year end and does not anticipate or know of any basis upon which its
auditors might issue a qualified opinion in respect of its current fiscal year.
z. NO INVESTMENT COMPANY. The Company is not, and upon the issuance
and sale of the Securities as contemplated by this Agreement and the Certificate
of Designation will not be an "investment company" required to be registered
under the Investment Company Act of 1940 (an "INVESTMENT COMPANY"). The Company
is not controlled by an Investment Company.
aa. TRADING IN COMMON STOCK. Neither the Company nor any officer,
director, affiliate, or other person acting on behalf of the Company or any such
officer, director or affiliate has directly or indirectly engaged in the
purchase or sale of the Common Stock (or any derivative interest thereof) during
the period beginning fifteen (15) Trading Days (as defined in the Certificate of
Designation) prior to the Closing Date and ending on the Closing Date.
14
15
4. COVENANTS.
a. BEST EFFORTS. The parties shall use their best efforts to satisfy
timely each of the conditions described in Section 6 and 7 of this Agreement.
b. FORM D; BLUE SKY LAWS. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Buyers at the
Closing pursuant to this Agreement under applicable securities or "blue sky"
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to each
Buyer on or prior to the Closing Date.
c. REPORTING STATUS; ELIGIBILITY TO USE FORM S-3; PRESS RELEASE. The
Company's Common Stock is registered under Section 12(g) of the 1934 Act. So
long as any Buyer beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. The Company currently
meets, and so long as any Buyer beneficially owns any of the Securities, will
take all necessary action to continue to meet, the "registrant eligibility"
requirements set forth in the general instructions to Form S-3. The Company
shall issue a press release describing the material terms of the transactions
contemplated hereby as soon as practicable following the Closing Date but in no
event later than one (1) Trading Day (as defined in the Certificate of
Designation) following the Closing Date, and shall file with the SEC a Current
Report on Form 8-K describing the material terms of the transactions
contemplated hereby (and attaching as exhibits thereto this Agreement, the
Registration Rights Agreement, the Certificate of Designation and the Warrants)
within two (2) Trading Days of the Closing Date, which press release and Form
8-K shall be subject to prior review by the Buyers.
d. USE OF PROCEEDS. The Company shall use the proceeds from the sale
of the Preferred Shares and the Warrants in the manner set forth in SCHEDULE
4(d) attached hereto and made a part hereof and shall not, directly or
indirectly, use such proceeds for any loan to or investment in any other
corporation, partnership, enterprise or other person (except in connection with
direct or indirect subsidiaries).
e. ADDITIONAL EQUITY CAPITAL. Subject to the exceptions described
below, the Company will not, without the prior written consent of a
majority-in-interest of the Buyers, negotiate or contract with any party to
obtain additional equity financing (including debt financing with an equity
component), during the period (the "LOCK-UP PERIOD") beginning on the Closing
Date and ending One Hundred Twenty (120) days from the date the Registration
Statement (as defined in the Registration Rights Agreement) is first declared
effective by the SEC (subject to extension for any days in which sales of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
cannot be made pursuant to the Registration Statement (as defined in the
Registration Rights Agreement) occurring after the date on which such
Registration Statement is first declared effective by the SEC) (the limitation
referred to in this sentence is referred to as the "CAPITAL RAISING
LIMITATION"). The Capital Raising Limitation shall not apply to any transaction
involving
15
16
(i) issuances of securities in a firm commitment underwritten public offering
(excluding a continuous offering pursuant to Rule 415 under the 1933 Act), or
(ii) issuances of securities as consideration for a merger, consolidation or
purchase of assets, or in connection with any strategic alliance, partnership,
business relationship or joint venture (in each case, the primary purpose of
which is not to raise equity capital), or in connection with the disposition or
acquisition of a business, product or license. The Capital Raising Limitation
also shall not apply to the issuance of securities upon exercise or conversion
of the Company's options, warrants or other convertible securities outstanding
as of the date hereof or to the grant or exercise of additional options or
warrants, or the issuance of additional securities, under any Company stock
option plan, restricted stock plan or employee benefit plan approved by a
majority of the independent members of the Board of Directors of the Company or
a majority of the members of a committee of independent directors established
for such purpose.
f. EXPENSES. The Company shall reimburse Xxxx Xxxx Capital
Management, L.P. ("XXXX XXXX") for all expenses incurred by it in connection
with the negotiation, preparation, execution, delivery and performance of this
Agreement and the other agreements to be executed in connection herewith,
including, without limitation, attorney's and consultant's fees and expenses and
travel expenses. The Company's obligation to reimburse Rose Glen's expenses
under this Section 4(f) shall be limited to Thirty Thousand Dollars ($30,000) of
which Ten Thousand Dollars ($10,000) was advanced previously.
g. FINANCIAL INFORMATION. The Company agrees to send the
following reports to each Buyer until such Buyer transfers, assigns, or sells
all of the Securities: (i) within one (1) day after release, copies of all press
releases issued by the Company or any of its Subsidiaries; and (ii)
contemporaneously with the making available or giving to the stockholders of the
Company, copies of any notices or other information the Company makes available
or gives to such stockholders.
h. RESERVATION OF SHARES. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Preferred Shares and issuance of the Conversion Shares in connection with the
conversion of Preferred Shares (based on the Conversion Price (as defined in the
Certificate of Designation) then in effect) and as otherwise required by the
Certificate of Designation and the full exercise of the Warrants and issuance of
the Warrant Shares in connection therewith (based on the Exercise Price (as
defined in the Warrants) of the Warrants then in effect). The Company shall not
reduce the number of shares of Common Stock reserved for issuance upon
conversion of or otherwise pursuant to the Preferred Shares and upon exercise of
or otherwise pursuant to the Warrants without the consent of each Buyer. The
Company shall use its best efforts at all times to maintain the number of shares
of Common Stock so reserved for issuance at no less than two (2) times the
number that is then actually issuable upon full conversion of the Preferred
Shares (based on the Conversion Price (as defined in the Certificate of
Designation) then in effect) and full exercise of the Warrants (based on the
Exercise Price (as defined in the Warrants) of the Warrants then in effect). If
at any time the number of shares of Common Stock authorized and reserved for
issuance is below the number of Conversion Shares issued and issuable upon
conversion of or otherwise pursuant to the Preferred Shares (based on the
Conversion Price (as defined in the Certificate of Designation) then in effect)
and the aggregate number of Warrant Shares issued and
16
17
issuable upon exercise of or otherwise pursuant to the Warrants (based on the
Exercise Price (as defined in the Warrants) of the Warrants then in effect), the
Company will promptly take all corporate action necessary to authorize and
reserve a sufficient number of shares, including, without limitation, calling a
special meeting of stockholders to authorize additional shares to meet the
Company's obligations under this Section 4(h), in the case of an insufficient
number of authorized shares, and using its best efforts to obtain stockholder
approval of an increase in such authorized number of shares.
i. LISTING. The Company shall promptly secure the listing of the
Conversion Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and, so long as any Buyer owns
any of the Securities, shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Conversion Shares and Warrant
Shares from time to time issuable upon conversion of or otherwise pursuant to
the Preferred Shares or exercise of or otherwise pursuant to the Warrants. The
Company will obtain and, so long as any Buyer owns any of the Securities,
maintain the listing and trading of its Common Stock on the Nasdaq SmallCap, the
NASDAQ National Market ("NNM"), the American Stock Exchange ("AMEX") or the New
York Stock Exchange ("NYSE") and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
National Association of Securities Dealers ("NASD") and such exchanges, as
applicable.
j. CORPORATE EXISTENCE. So long as a Buyer beneficially owns any
Preferred Shares or Warrants, the Company shall maintain its corporate existence
and shall not merge, consolidate or sell all or substantially all of the
Company's assets, except in the event of a merger or consolidation or sale of
all or substantially all of the Company's assets, where (i) the successor or
acquiring entity and, if an entity different from the successor or acquiring
entity, the entity whose securities into which the Preferred Shares shall become
convertible pursuant to Article VI.C(ii) of the Certificate of Designation and
into which the Warrants shall become exercisable pursuant to Section 4(e) of the
Warrants in such transaction, assumes the Company's obligations hereunder and
under the agreements and instruments entered into in connection herewith
(including the Certificate of Designation and the Warrants) and (ii) the entity
whose securities into which the Preferred Shares shall become convertible
pursuant to Article VI.C(ii) of the Certificate of Designation and into which
the Warrants shall become exercisable pursuant to Section 4(e) of the Warrants
is a publicly traded corporation whose Common Stock is listed for trading on
Nasdaq SmallCap, the NNM, NYSE or AMEX.
k. NO INTEGRATION. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
1933 Act or cause the offering of Securities to be integrated with any other
offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.
l. TRADING LIMITATIONS. Each Buyer covenants and agrees that it
will conduct all transactions in the Common Stock in compliance with applicable
securities laws and regulations.
17
18
Each Buyer agrees that neither it nor any of its affiliates shall directly or
indirectly engage in any sales of the Common Stock (including through derivative
transactions) during the period beginning on the fifteenth (15th) Trading Day
(as defined in the Certificate of Designation) immediately preceding the
Maturity Date (as defined in the Certificate of Designation) and ending on the
Maturity Date.
5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates, registered in the name
of each Buyer or its nominee, for the Conversion Shares and Warrant Shares in
such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Preferred Shares or exercise of the Warrants in accordance
with the terms thereof (the "Irrevocable Transfer Agent Instructions"). Prior to
registration of the Conversion Shares and Warrant Shares under the 1933 Act or
the date on which the Conversion Shares or Warrant Shares may be sold pursuant
to Rule 144 without any restriction as to the number of securities as of a
particular date that can then be immediately sold, all such certificates shall
bear the restrictive legend specified in Section 2(g) of this Agreement. The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares and
Warrant Shares, prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares or Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of securities as of a particular date that can then be immediately sold), will
be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way the Buyer's obligations and
agreement set forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sale of the Securities. If a
Buyer provides the Company with (i) an opinion of counsel, in form, substance
and scope customary for opinions of counsel in comparable transactions and
reasonably satisfactory to the Company, to the effect that a public sale or
transfer of such Securities may be made without registration under the 1933 Act
and such sale or transfer is effected or (ii) the Buyer provides reasonable
assurances that the Securities can be sold pursuant to Rule 144, the Company
shall permit the transfer, and, in the case of the Conversion Shares and Warrant
Shares, promptly instruct its transfer agent to issue one or more certificates,
free from any restrictive legend, in such name and in such denominations as
specified by such Buyer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
the Company hereunder to issue and sell the Preferred Shares and Warrants to a
Buyer at Closing is subject to the satisfaction, at or before the Closing Date,
of each of the following conditions thereto, provided that these conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion:
a. The applicable Buyer shall have executed this Agreement and
the Registration Rights Agreement, and delivered the same to the Company.
b. The applicable Buyer shall have delivered the Purchase Price
in accordance with Section 1(b) above.
18
19
c. The Certificate of Designation shall have been accepted for
filing with the Secretary of State of the State of Delaware.
d. The representations and warranties of the applicable Buyer
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date), and the applicable Buyer
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the applicable Buyer at or prior to the Closing
Date.
e. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
f. The Company shall have received from Xxxxxxxxxxx Funds, Inc.
and J. Xxxxxx Xxxxxx waivers of rights of first refusal granted to such parties
under the Investor Rights Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The obligation of
each Buyer hereunder to purchase the Preferred Shares and Warrants at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for such Buyer's
sole benefit and may be waived by such Buyer at any time in its sole discretion:
a. The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer.
b. The Company shall have delivered to such Buyer duly executed
certificates (in such denominations as the Buyer shall request) representing the
Preferred Shares and duly executed Warrants purchased at such Closing in
accordance with Section 1(b) above.
c. The Certificate of Designation shall have been accepted for
filing with the Secretary of State of the State of Delaware, and a copy thereof
certified by such Secretary of State shall have been delivered to such Buyer.
d. The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to a majority-in-interest of the Buyers, shall have been
delivered to and acknowledged in writing by the Company's Transfer Agent.
e. The representations and warranties of the Company shall be
true and correct in
19
20
all material respects as of the date when made and as of the Closing Date as
though made at such time (except for representations and warranties that speak
as of a specific date, which representations and warranties shall be true and
correct as of such date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. The Buyer shall have received a
certificate or certificates, executed by the chief executive officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Buyer including, but not
limited to certificates with respect to the Company's Certificate of
Incorporation, By-laws and Board of Directors' resolutions relating to the
transactions contemplated hereby.
f. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
g. An additional listing application to authorize the Conversion
Shares and the Warrant Shares for quotation on the Nasdaq SmallCap shall have
been filed with the Nasdaq SmallCap and trading in the Common Stock on the
Nasdaq Small Cap shall not have been suspended by the SEC or the Nasdaq
SmallCap.
h. The Buyer shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer and in substantially the same form as EXHIBIT "D"
attached hereto.
i. The Buyer shall have received an officer's certificate
described in Section 3(c) above, dated as of the Closing Date.
j. The Company shall have received from Xxxxxxxxxxx Funds, Inc.
and J. Xxxxxx Xxxxxx waivers of rights of first refusal granted to such parties
under the Investor Rights Agreement.
8. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed in the State of Delaware (without regard to
principles of conflict of laws). Both parties irrevocably consent to the
exclusive jurisdiction of the United States federal courts and the state courts
located in Delaware with respect to any suit or proceeding based on or arising
under this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby and irrevocably agree that all
claims in respect of such suit or proceeding may be determined in such courts.
Both parties irrevocably waive the defense of an inconvenient forum to the
maintenance of such suit or proceeding. Both parties further agree that service
of process upon a party mailed by first class mail shall be deemed in every
respect effective service of process upon the
20
21
party in any such suit or proceeding. Nothing herein shall affect either party's
right to serve process in any other manner permitted by law. Both parties agree
that a final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such judgment
or in any other lawful manner.
b. COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party. This Agreement, once executed by
a party, may be delivered to the other party hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
c. HEADINGS. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. NOTICES. Any notices required or permitted to be given under
the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
If to the Company:
Tricord Systems, Inc.
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 00
Xxxxxxxx, Xxxxxxxxx 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
21
22
With copy to:
Xxxxxxxxxxx Xxxxx & Xxxxxxxx LLP
0000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxx X. Xxxxxx
Facsimile: (000) 000-0000
If to a Buyer: To the address set forth immediately below such Buyer's
name on the signature pages hereto.
With copy to:
Xxxxxxx X. Xxxxxx
Akerman, Senterfitt & Xxxxxx, P.A.
SunTrust International Center
Xxx Xxxxxxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxx, Xxxxxxx 00000-0000
Facsimile: (000) 000-0000
Each party shall provide notice to the other party of any change in
address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to any person that purchases Securities in a private
transaction from a Buyer or to any of its "affiliates," as that term is defined
under the 1934 Act, without the consent of the Company.
h. THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. SURVIVAL. The representations and warranties of the Company
and the agreements and covenants set forth in Sections 3, 4, 5 and 8 shall
survive the closing hereunder notwithstanding any due diligence investigation
conducted by or on behalf of the Buyers. The Company agrees to indemnify and
hold harmless each of the Buyers and all their officers, directors, employees
and agents for loss or damage arising as a result of or related to any breach or
alleged breach by the Company of any of its representations, warranties and
covenants set forth in Sections 3, 4 and 5 hereof or any of its covenants and
obligations under this Agreement or the Registration Rights Agreement, including
advancement of expenses as they are incurred.
j. PUBLICITY. The Company and each of the Buyers shall have the
right to review a reasonable period of time before issuance of any press
releases, filings with the SEC, NASD or any stock exchange or interdealer
quotation system, or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall be
entitled, without
22
23
the prior approval of each of the Buyers, to make any press release or public
filings with respect to such transactions as is required by applicable law and
regulations (although each of the Buyers shall be consulted by the Company in
connection with any such press release or public filing prior to its release or
public filing and shall be provided with a copy thereof and be given an
opportunity to comment thereon). In addition, the Company agrees that it will
not disclose, and will not include in any public filing or other announcement,
the name of any Buyer, unless expressly agreed to in writing by such Buyer or
unless and until such disclosure is, in the reasonable opinion of counsel to the
Company, required by law or applicable regulation, and then only to the extent
of such requirement.
k. FURTHER ASSURANCES. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
m. REMEDIES. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to each Buyer by vitiating the
intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that each
Buyer shall be entitled, in addition to all other available remedies in law or
in equity, to an injunction or injunctions to prevent or cure any breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions of this Agreement, without the necessity of showing economic loss and
without any bond or other security being required.
n. WITHHOLDING. Each Buyer acknowledges that the Company may be
required under applicable foreign, federal, state or local law to withhold from
any cash payment or cash distribution payable to any such Buyer as a dividend or
liquidated damage payment an amount for or on account of any present or future
taxes, levies, imposts, duties, charges or fees of any nature now or hereafter
imposed by any governmental or other authority. All amounts withheld and paid
over by the Company to any governmental or other authority on behalf of any
Buyer shall be treated for all purposes of this Agreement as if such amounts had
been paid or distributed directly to such Buyer and the Company shall provide
appropriate evidence to such Buyer of such payments.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
23
24
IN WITNESS WHEREOF, the undersigned Buyers and the Company
have caused this Agreement to be duly executed as of the date first above
written.
TRICORD SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Xxxx Xxxx Capital Management, L.P., Investment Manager
By: RGC General Partner Corp., as General Partner
By: /s/ Xxxxx X. Xxxxx
----------------------------------
Xxxxx X. Xxxxx
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Xxxx Xxxx Capital Management, L.P.
0 Xxxx Xxxxx Xxxx, Xxxxx 000
000 Xx. Xxxxxx Xxxx
Xxxx Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Preferred Shares: 25,000
-----------
Number of Series E-1 Warrants: 986,842
-----------
Number of Series E-2 Warrants 986,842
-----------
Aggregate Purchase Price: $25,000,000
-----------
24
