EXHIBIT 10.11
NOTIFY TECHNOLOGY CORPORATION
SECURITIES PURCHASE AGREEMENT
MARCH 4, 1999
TABLE OF CONTENTS
PAGE
1. Purchase and Sale of Stock. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Authorization of the Shares. . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Representations and Warranties of the Company . . . . . . . . . . . . . . . 1
2.1 Organization, Good Standing and Qualification. . . . . . . . . . . . . 1
2.2 Corporate Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Valid Issuance of Common Stock . . . . . . . . . . . . . . . . . . . . 2
2.5 SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Representations and Warranties of the Purchasers. . . . . . . . . . . . . . 3
3.1 Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.5 Access to Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.7 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.8 Public Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.9 Tax Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.10 Purchaser Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. Conditions of Purchaser's Obligations at Closing. . . . . . . . . . . . . . 4
4.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . 5
4.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.3 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.4 Opinion of Company Counsel . . . . . . . . . . . . . . . . . . . . . . 5
4.5 Investor Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . 5
5. Conditions of the Company's Obligations at Closing. . . . . . . . . . . . . 5
5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . 5
5.2 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . 5
5.3 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.4 Investor Rights Agreements . . . . . . . . . . . . . . . . . . . . . . 5
5.5 Proceedings and Documents. . . . . . . . . . . . . . . . . . . . . . . 5
-i-
TABLE OF CONTENTS
(CONTINUED)
PAGE
6. Covenants of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.1 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.2 Issuance of Additional Warrants. . . . . . . . . . . . . . . . . . . . 6
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 7
7.4 Entire Agreement; Amendment. . . . . . . . . . . . . . . . . . . . . . 7
7.5 Notices, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.6 Delays or Omissions. . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.7 California Corporate Securities Law. . . . . . . . . . . . . . . . . . 8
7.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.9 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.10 Waiver of Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.11 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Exhibit A-1 Form of Warrant
Exhibit A-2 Form of Section 10(b) of Warrant
Exhibit B Form of Warrant
Exhibit C Investor Rights Agreement
Exhibit D Form of Legal Opinion
-ii-
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT is made as of March 24, 1999, between
Notify Technology Corporation, a California corporation (the "COMPANY") and
Xxxxx X. Xxxxxx ("PURCHASER").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 AUTHORIZATION OF THE SHARES. The Company will on or before
the Closing (as defined below) authorize the sale and issuance pursuant to
this Agreement of 850,000 shares (the "SHARES") of common stock, $.001 par
value, of the Company ("COMMON STOCK") and warrants (the "WARRANTS") to
purchase an aggregate of 1,344,444 shares of Common Stock.
1.2 SALE OF THE SHARES. Subject to the terms and conditions
hereof and in reliance upon the representations, warranties and agreements
contained herein, the Company will issue and sell to Purchaser, and Purchaser
will purchase from the Company, at the Closing, the Shares for a purchase
price of $3.60 per share and the Warrants for a purchase price of $10 for an
aggregate purchase price of $3,060,010 (the "PURCHASE PRICE").
1.3 CLOSING DATE. The closing of the purchase and sale of the
Shares and Warrants hereunder (the "CLOSING") shall be held at the offices of
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx
00000 on March 4, 1999 (the "CLOSING DATE").
1.4 DELIVERY. At Closing, the Company shall deliver to Purchaser
five Warrants. Four of the Warrants shall be exercisable for 155,800 shares
of Common Stock each at a price per share of $3.60 and be in the form
attached hereto as EXHIBIT A-1 except that each of each of such Warrants will
have a different Section 10(b) as detailed in EXHIBIT A-2. The fifth Warrant
will be exercisable for 721,244 shares of Common Stock at a price per share
of $3.60 and will be in the form attached hereto as EXHIBIT B. In addition,
at the Closing, the Company will instruct the transfer agent for the Company
to (i) issue a certificate registered in Purchaser's name representing the
Shares and (ii) deliver said certificate to Purchaser. At the closing,
Purchaser shall deliver the Purchase Price to the Company in the form of a
check payable to the Company or a wire transfer to account of the Company or
the Company's counsel.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants as follows:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under
the laws of the State of California and has all requisite corporate power and
authority to carry on its business as currently conducted. The Company is
duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties.
2.2 CORPORATE POWER. The Company will have at the Closing all
requisite legal and corporate power and authority to (i) execute and deliver
this Agreement; (ii) sell and issue the Shares and Warrants hereunder; (iii)
to issue the Common Stock (the "WARRANT SHARES") issuable upon exercise of
the Warrants; and (iv) carry out and perform its obligations under the terms
of this Agreement.
2.3 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the Investor Rights
Agreement in the form attached hereto as EXHIBIT C (the "INVESTOR RIGHTS
AGREEMENT"), the performance of all obligations of the Company hereunder and
the authorization, issuance (or reservation for issuance), sale and delivery
of the Shares, the Warrants and the Warrant Shares has been taken or will be
taken prior to the Closing. This Agreement, the Investor Rights Agreement
and the Warrants constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms, subject to:
(i) judicial principles limiting the availability of specific performance,
injunctive relief, and other equitable remedies; (ii) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
generally relating to or affecting creditors' rights; and (iii) limitations
on the enforceability of the indemnification provisions of the Investor
Rights Agreement.
2.4 VALID ISSUANCE OF COMMON STOCK. The Shares that are being
purchased by the Purchaser hereunder, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid, and nonassessable, and
will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and the Investor Rights Agreement and under applicable
state and federal securities laws. The Warrant Shares, upon issuance in
accordance with the terms of the Warrants and upon payment of the
consideration described therein, will be duly and validly issued, fully paid,
and nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Investor Rights
Agreement and under applicable state and federal securities laws.
2.5 SEC DOCUMENTS. Company has made available to Purchaser and
its counsel (by filing via XXXXX) correct and complete copies of each report,
schedule, registration statement and definitive proxy statement filed by
Company with the Securities and Exchange Commission (the "SEC") on or after
January 1, 1996 (the "COMPANY SEC DOCUMENTS"), which are all the documents
(other than preliminary material) that Company was required to file with the
SEC on or after January 1, 1996. As of their respective dates or, in the
case of registration statements, their effective dates, none of the Company
SEC Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and there is no
requirement under the Securities Act of 1933, as amended, (the "SECURITIES
ACT") or the Securities Exchange Act of 1934, as amended, (the "EXCHANGE
ACT"), as the case may be, to have
-2-
amended any such filing. The Company SEC Documents complied, when filed, in
all material respects with the then applicable requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations
promulgated by the SEC thereunder. Company has filed all documents and
agreements which Company reasonably believed were required to be filed as
exhibits to the Company SEC Documents.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Purchaser hereby
represents and warrants that:
3.1 EXPERIENCE. Purchaser is experienced in evaluating companies
such as the Company, is able to evaluate and represent its own interests in
transactions such as the one contemplated by this Agreement, has such
knowledge and experience in financial and business matters that Purchaser is
capable of evaluating the merits and risks of Purchaser's prospective
investment in the Company, and has the ability to bear the economic risks of
the investment.
3.2 INVESTMENT. Purchaser is acquiring the Shares, the Warrants,
and the Warrant Shares, for investment for Purchaser's own account and not
with the view to, or for resale in connection with, any distribution thereof.
Purchaser understands that the Shares, the Warrants, and the Warrant Shares
have not been registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent as expressed herein. Purchaser
further represents that it does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participation to
any third person with respect to any of the Shares, the Warrants, or the
Conversion Shares other than a transfer not involving a change of beneficial
ownership. Purchaser understands and acknowledges that the offering of the
Shares and Warrants pursuant to this Agreement will not be registered under
the Securities Act on the ground that the sale provided for in this Agreement
is exempt from the registration requirements of the Securities Act.
3.3 RULE 144. Purchaser acknowledges that the Shares, the
Warrants and the Conversion Shares must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions. Purchaser covenants that, in the absence of an effective
registration statement covering the stock in question, Purchaser will sell,
transfer, or otherwise dispose of the Shares or the Warrant Shares only in a
manner consistent with such Purchaser's representations and covenants set
forth in this Section 3. In connection therewith, Purchaser acknowledges
that the Company will make a notation on its stock books regarding the
restrictions on transfers set forth in this Section 3 and will transfer
securities on the books of the Company only to the extent not inconsistent
therewith.
3.4 LEGENDS. Purchaser understands and acknowledges that the
certificate evidencing its Shares and the Warrant Shares will be imprinted
with a legend in the form set forth in Section 1.3 of the Investor Rights
Agreement.
-3-
3.5 ACCESS TO DATA. Purchaser has received and reviewed
information about the Company and has had an opportunity to discuss the
Company's business, management and financial affairs with its management and
to review the Company's facilities. Purchaser understands that such
discussions, as well as any written information issued by the Company, were
intended to describe the aspects of the Company's business and prospects
which the Company believes to be material, but were not necessarily a
thorough or exhaustive description. The foregoing, however, does not limit
or modify the representations and warranties of the Company in Section 2 of
this Agreement or the right of the Purchasers to rely thereon.
3.6 AUTHORIZATION. This Agreement when executed and delivered by
Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, subject to: (i)
judicial principles respecting election of remedies or limiting the
availability of specific performance, injunctive relief, and other equitable
remedies; (ii) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect generally relating to or affecting
creditors' rights; and (iii) limitations on the enforceability of the
indemnification provisions of the Investor Rights Agreement.
3.7 ACCREDITED INVESTOR. Purchaser acknowledges that he is an
"accredited investor" as defined in Rule 501 of Regulation D as promulgated
by the Securities and Exchange Commission under the Securities Act and shall
submit to the Company such further assurances of such status as may be
reasonably requested by the Company.
3.8 PUBLIC SOLICITATION. Purchaser knows of no public
solicitation or advertisement of an offer in connection with the proposed
issuance and sale of the Shares.
3.9 TAX ADVISORS. Purchaser has reviewed with his own tax
advisors the federal, state and local tax consequences of this investment,
where applicable, and the transactions contemplated by this Agreement.
Purchaser is relying solely on such advisors with respect to tax matters and
not on any statements or representations of the Company or any of its agents
and understands that Purchaser (and not the Company) shall be responsible for
the Purchaser's own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.
3.10 PURCHASER COUNSEL. Purchaser acknowledges that it has had
the opportunity to review this Agreement, the exhibits and the schedules
attached hereto and the transactions contemplated by this Agreement with its
own legal counsel. Purchaser is relying solely on such counsel and not on
any statements or representations of the Company or any of its agents for
legal advice with respect to legal matters related to this investment or the
transactions contemplated by this Agreement.
4. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING. The obligations
of Purchaser under subsection 1.2 of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions:
-4-
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of
the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
4.2 PERFORMANCE. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by it on or before the
Closing.
4.3 BLUE SKY. The Company shall have obtained all necessary
permits and qualifications, if any, or secured an exemption therefrom,
required by any state or country prior to the offer and sale of the Shares.
4.4 OPINION OF COMPANY COUNSEL. Purchaser shall have received
from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, counsel for
the Company, an opinion, dated as of the Closing, in the form attached hereto
as EXHIBIT D.
4.5 INVESTOR RIGHTS AGREEMENT. The Company and Purchaser shall
have entered into the Investor Rights Agreement.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company to Purchaser under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions
by Purchaser:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
5.2 PAYMENT OF PURCHASE PRICE. Purchaser shall have delivered
the Purchase Price against delivery of the Shares and Warrants as set forth
in Section 1.4 by the Company to such Purchaser.
5.3 BLUE SKY. The Company shall have obtained all necessary
permits and qualifications, if any, or secured an exemption therefrom,
required by any state or country for the offer and sale of the Shares.
5.4 INVESTOR RIGHTS AGREEMENTS. Purchaser shall have executed
the Investor Rights Agreement on or prior to the date of the Closing.
5.5 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby, and all documents and instruments incident to these transactions,
shall be reasonably satisfactory in substance to the Company and its counsel.
-5-
6. COVENANTS OF THE COMPANY.
6.1 BOARD OF DIRECTORS. Company will use its best efforts to
present to its shareholders and obtain shareholder approval at its 2000
Annual Meeting of Shareholders of the Company an amendment to its Bylaws to
increase the authorized size of the Company's Board of Directors. Upon
approval of such amendment, the Company will elect Purchaser to the Board of
Directors and will use its best efforts to have Purchaser re-elected at each
Annual Meeting of Shareholders of the Company through 2003. If the there is
a vacancy on the Company's Board of Directors prior to the 2000 Annual
Meeting of Shareholders of the Company, the Company shall appoint Purchaser
to fill such vacancy. The Company's obligations under this section shall
terminate if at any time Purchaser holds less than 250,000 shares of Common
Stock issued pursuant to this Agreement (including shares of Common Stock
issued upon exercise of the Warrants and as appropriately adjusted for stock
splits, stock dividends and recapitalizations).
6.2 ISSUANCE OF ADDITIONAL WARRANTS. Upon the issuance of equity
securities (including the issuance of convertible securities or warrants but
excluding employee stock options or the issuance of shares upon the exercise
of currently outstanding options or warrants) in a Financing (as defined
below) at a price per share less than the price per share at which the Shares
are being sold pursuant to this agreement (or in the case of convertible
securities or warrants with an exercise or conversion price less than such
price per share) then in order to effect an adjustment to Purchaser's
original purchase price:
(i) The exercise price of the outstanding Warrants will be
reduced to the price per share at which such equity securities were sold (or
in the case of the sale convertible securities or warrants reduced to the
exercise or conversion price of such securities) (in all cases, the "ISSUANCE
PRICE"); and
(ii) The Company will issue to Purchaser a warrant in the
form attached hereto as EXHIBIT B with an exercise price of $0.01, a term of
three years and exercisable for that number of shares of Common Stock equal
to:
((P/I)-1) times T
Where P equals the price per share at which the Shares were sold pursuant to
this Agreement, I equals the Issuance Price and T equals the total number of
shares of Common Stock purchased by Purchaser pursuant to this Agreement
including any shares purchased upon the exercise of the Warrants.
For the purposes of this Section 6.2, Financing shall mean an offering
or series of related offerings of securities by the Company for purpose of
raising capital in an amount of $250,000 or more. Financing shall not
include (i) the issuance or sale of shares of Common Stock or options to
purchase Common stock to employees, officers, directors or consultants for
the primary purpose of soliciting or retaining their services as shall have
been approved by the Board of Directors, (ii) the issuance or sale of
Securities to leasing entities or financial institutions in connection with
commercial leasing or borrowing transactions approved by the Board of
Directors, (iv) any issuances of Securities in connection with any stock
split, stock dividend or recapitalization by the Company,
-6-
(v) the issuance of Securities in connection with the acquisition of another
corporation by the Company by merger, consolidation, or purchase of all or
substantially all of the assets or shares of such corporation, or (vi) the
issuance of Securities in connection with a joint venture or a strategic or
marketing alliance with another company.
The Company's obligations under this Section 6.2 shall terminate upon
the earlier of (i) March 3, 2002 or (ii) the Company's calling its
outstanding public Class A Warrants as provided by the terms of such warrants.
7. MISCELLANEOUS.
7.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of California, without regard to any
provisions thereof relating to conflicts of laws among different
jurisdictions.
The parties hereto agree to submit to the jurisdiction of the
federal and state courts of the State of California with respect to the
breach or interpretation of this Agreement or the enforcement of any and all
rights, duties, liabilities, obligations, powers, and other relations between
the parties arising under this Agreement.
7.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser
or the Company and the closing of the transactions contemplated hereby.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties
hereto; provided, however, that the rights of a Purchaser to purchase Shares
shall not be assignable without the consent of the Company.
7.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire
understanding and agreement among the parties with regard to the subjects
hereof and thereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the Company and Purchaser.
7.5 NOTICES, ETC. All notices and other communications required
or permitted hereunder, shall be in writing and shall be personally
delivered, sent by facsimile, mailed by registered or certified mail, postage
prepaid, return receipt requested, or delivered by a nationally recognized
overnight courier, addressed (a) if to a Purchaser, at such Purchaser's
address or facsimile number set forth on the Schedule of Purchasers, or at
such other address or facsimile number as such Purchaser shall have furnished
to the Company in writing, or (b) if to the Company, at its address or
facsimile number set forth on the signature page to this Agreement addressed
to the attention of the Corporate Secretary, or at such other address or
facsimile number as the Company shall have furnished to the Purchasers. Any
such notice or communication shall be deemed to have been
-7-
received (A) in the case of personal delivery or delivery by telecopier, on
the date of such delivery, (B) in the case of a commercial overnight courier,
on the next business day after the date when sent and (C) in the case of
mailing, on the third business day following that on which the piece of mail
containing such communication is posted.
7.6 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any holder of any Shares upon any breach
or default of the Company under this Agreement shall impair any such right,
power or remedy of such holder, nor shall it be construed to be a waiver of
any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval
of any kind or character on the part of any holder of any breach or default
under this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing or as
provided in this Agreement. All remedies, either under this Agreement or by
law or otherwise afforded to any holder, shall be cumulative and not
alternative.
7.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED
WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE
SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102,
OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO
THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING
OBTAINED, UNLESS THE SALE IS SO EXEMPT.
7.8 EXPENSES. The Company and Purchaser shall each bear their
own expenses and legal fees incurred on their behalf with respect to this
Agreement and the transactions contemplated hereby, except that the Company
shall pay the legal expenses of counsel to Purchaser in an amount up to
$5,000 in accordance with said counsel's standard hourly rates.
7.9 FINDER'S FEE. The Company and the Purchasers shall each
indemnify and hold the other harmless from any liability for any commission
or compensation in the nature of a finder's fee (including the costs,
expenses and legal fees of defending against such liability) for which the
Company or the Purchasers, or any of their respective partners, employees, or
representatives, as the case may be, is responsible.
7.10 WAIVER OF CONFLICT. Each party to this Agreement that has
been or continues to be represented by Wilson, Sonsini, Xxxxxxxx & Xxxxxx,
counsel to the Company, hereby acknowledges that Rule 3-310 of the Rules of
Professional Conduct promulgated by the State Bar of California requires an
attorney to avoid representations in which the attorney has or had a
relationship with another party interested in the representation without the
informed written consent of all parties affected. By executing this
Agreement, each such party gives his or its informed
-8-
written consent to the representation of the Company by Wilson, Sonsini,
Xxxxxxxx & Xxxxxx in connection with this Agreement and the transactions
contemplated hereby.
7.11 ARBITRATION. Company and Purchaser agree that any dispute or
controversy arising out of or relating to any interpretation, construction,
performance or breach of this Agreement, the Investor Rights Agreement or the
Warrants shall be settled by arbitration to be held in Santa Xxxxx County,
California, in accordance with the rules then in effect of the American
Arbitration Association. The arbitrator may grant injunctions or other
relief in such dispute or controversy. The decision of the arbitrator shall
be final, conclusive and binding on the parties to the arbitration. Judgment
may be entered on the arbitrator's decision in any court having jurisdiction.
The Company and Puchaser shall each pay one-half of the costs and expenses
of such arbitration, and each shall separately pay their own counsel fees and
expenses.
7.12 SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force
and effect without said provision; provided that no such severability shall
be effective if it materially changes the economic benefit of this Agreement
to any party.
7.13 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which may be executed by less than all Purchasers,
each of which shall be enforceable against the parties actually executing
such counterparts, and all of which together shall constitute one instrument.
-9-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
NOTIFY TECHNOLOGY PURCHASER:
CORPORATION
By:------------------------------------ ------------------------------------
Xxxx XxXxxx (Signature)
President
------------------------------------
(Name of Purchaser)
------------------------------------
(Name and Title of Signatory if
Shareholder is not an Individual)
Address for Notices:
Xxxxx X. Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
cc: Xxxx Xxxxxxx
Xxxxxxxxx Xxxxxxx, et al
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
EXHIBIT A-1
FORM OF WARRANT WITH ACCELERATED TERMINATION
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE PURSUANT TO IT HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
PLEDGED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES
AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
NOTIFY TECHNOLOGY CORPORATION
COMMON STOCK PURCHASE WARRANT
WITH ACCELERATED TERMINATION
1. NUMBER AND PRICE OF SHARES SUBJECT TO WARRANT. Subject to the
terms and conditions set forth herein, Xxxxx X. Xxxxxx or a subsequent
transferee ("HOLDER"), is entitled to purchase from Notify Technology
Corporation, a California corporation (the "COMPANY"), at any time after the
date hereof and on or before the date of termination of this Warrant provided
for in Section 10 hereof, up to 155,800 shares (which number of shares is
subject to adjustment and certain conditions as described below) of fully
paid and nonassessable Common Stock of the Company (the "SHARES") upon
surrender hereof at the principal office of the Company, and upon payment of
the purchase price at said office in cash or by check. Subject to adjustment
as hereinafter provided, the purchase price of one share of Common Stock (or
such securities as may be substituted for one share of Common Stock pursuant
to the provisions hereinafter set forth) shall be $3.60. The purchase price
of one share of Common Stock (or such securities as may be substituted for
one share of Common Stock pursuant to the provisions hereinafter set forth)
payable from time to time upon the exercise of this Warrant (whether such
price be the price specified above or an adjusted price determined as
hereinafter provided) is referred to herein as the "WARRANT PRICE."
2. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and
kind of securities issuable upon the exercise of this Warrant shall be
subject to adjustment from time to time and the Company agrees to provide
notice upon the happening of certain events as follows:
(a) ADJUSTMENT FOR DIVIDENDS IN STOCK. In case at any time or
from time to time on or after the date hereof the holders of the Common Stock
of the Company (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant) shall have received, or, on or
after the record date fixed for the determination of eligible stockholders,
shall have become entitled to receive, without payment therefor, other or
additional securities or other property of the Company by way of dividend or
distribution, then and in each case, the holder of this Warrant shall, upon
the exercise hereof, be entitled to receive, in addition to the number of
shares of Common Stock receivable thereupon, and without payment of any
additional consideration therefor, the amount of such other or additional
securities or other property of the Company which such holder
would hold on the date of such exercise had it been the holder of record of
such Common Stock on the date hereof and had thereafter, during the period
from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional securities or other property
receivable by it as aforesaid during such period, giving effect to all
adjustments called for during such period by this paragraph (a) and
paragraphs (b) and (c) of this Section 2.
(b) ADJUSTMENT FOR RECLASSIFICATION OR REORGANIZATION. In case
of any reclassification or change of the outstanding Common Stock of the
Company or of any reorganization of the Company on or after the date hereof
(other than a merger of the Company with and into another corporation), then
and in each such case the Company shall give the holder of this Warrant at
least ten (10) days notice of the proposed effective date of such
transaction, and the holder of this Warrant, upon the exercise hereof at any
time after the consummation of such reclassification, change or
reorganization, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such holder
would have been entitled upon such consummation if such holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in paragraphs (a), (b) and (c); in each such case, the terms of this
Section 2 shall be applicable to the shares of stock or other securities
properly receivable upon the exercise of this Warrant after such consummation.
(c) STOCK SPLITS AND REVERSE STOCK SPLITS. If at any time on or
after the date hereof the Company shall subdivide its outstanding shares of
Common Stock into a greater number of shares, the Warrant Price in effect
immediately prior to such subdivision shall thereby be proportionately
reduced and the number of shares receivable upon exercise of the Warrant
shall thereby be proportionately increased; and, conversely, if at any time
on or after the date hereof the outstanding number of shares of Common Stock
shall be combined into a smaller number of shares, the Warrant Price in
effect immediately prior to such combination shall thereby be proportionately
increased and the number of shares receivable upon exercise of this Warrant
shall thereby be proportionately decreased.
3. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any subscription hereunder. In lieu of any
fractional shares which would otherwise be issuable, the Company shall pay
cash equal to the product of such fraction multiplied by the fair market
value of one share of Common Stock on the date of exercise, as determined in
good faith by the Company's Board of Directors.
4. NO SHAREHOLDER RIGHTS. This Warrant as such shall not entitle its
holder to any of the rights of a shareholder of the Company.
5. RESERVATION OF STOCK. The Company covenants that during the period
this Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the
issuance of Common Stock upon the exercise of this Warrant. The Company
agrees that its issuance of this Warrant shall constitute full authority to
its officers
-2-
who are charged with the duty of executing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon the exercise
of this Warrant.
6. EXERCISE OF WARRANT. This Warrant may be exercised, in whole or in
part, by Holder by the surrender of this Warrant (with the notice of exercise
form attached hereto as ATTACHMENT A and the Investment Representation
Statement attached hereto as ATTACHMENT B duly executed) at the principal
office of the Company, accompanied by payment in full of the purchase price
of the Shares purchased thereby, as described above. This Warrant shall be
deemed to have been exercised immediately prior to the close of business on
the date of its surrender for exercise as provided above, and the person
entitled to receive the Shares or other securities issuable upon such
exercise shall be treated for all purposes as the holder of such shares of
record as of the close of business on such date. As promptly as practicable
and in any event within five (5) days after such date, the Company shall
issue and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of full shares of Common Stock
issuable upon such exercise, together with cash in lieu of any fraction of a
share as provided above, and a Warrant in like tenor as this Warrant to
purchase the number of Shares in respect of which this Warrant shall not have
been exercised or waived.
7. CERTIFICATE OF ADJUSTMENT. Whenever the Warrant Price or the
number or type of securities issuable upon exercise of this Warrant is
adjusted, as herein provided, the Company shall promptly deliver to the
record holder of this Warrant a certificate of an officer of the Company
setting forth the nature of such adjustment and a brief statement of the
facts requiring such adjustment.
8. TRANSFER OF WARRANT. This Warrant may not be transferred by Holder
without the written consent of the Company, which consent will not be
unreasonably withheld. Any such transfer will require an opinion of counsel
reasonably acceptable the Company stating that such transfer is exempt from
the registration requirements of the Securities Act of 1933.
9. RESTRICTIVE LEGEND. Each certificate representing (i) the Shares,
and (ii) any other securities issued in respect of the Shares upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar
event, shall be stamped or otherwise imprinted with legends in the following
form (in addition to any legend required under applicable state securities
laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). SUCH SHARES MAY
NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
(WHICH MAY BE COUNSEL FOR THE COMPANY) OR OTHER EVIDENCE
REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS
A EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE SECURITIES ACT."
-3-
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A MARKET
STAND-OFF AGREEMENT IN THE EVENT OF A PUBLIC OFFERING, A COPY OF WHICH
IS A ON FILE WITH THE SECRETARY OF THE COMPANY."
10. TERMINATION.
(a) This Warrant (and the right to purchase securities upon exercise hereof)
shall terminate upon the earliest of (a) September 3, 2000 or (b) the sale of
all or substantially all of the assets of the Company, or (c) the acquisition
of the Company by means of merger or consolidation resulting in the exchange
of the outstanding shares of the Company for securities or consideration
issued, or caused to be issued, by the acquiring corporation or its
subsidiary in which the shareholders of the Company hold less than 50% of the
shares of the surviving corporation. The Company shall give Holder of this
warrant written notice of such sale, merger or consolidation at least ten
(10) and no more than ninety (90) days prior to the closing of any such sale,
merger or consolidation.
(b) [From Exhibit A-2 to Purchase Agreement]
11. MISCELLANEOUS. This Warrant shall be governed by the laws of the
State of California. The headings in this Warrant are for purposes of
convenience of reference only, and shall not be deemed to constitute a part
hereof. Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed
by the Company and the registered holder hereof. All notices and other
communications from the Company to the holder of this Warrant shall be
delivered personally or mailed by first class mail, postage prepaid, to the
address furnished to the Company in writing by the last holder of this
Warrant who shall have furnished an address to the Company in writing, and if
mailed shall be deemed given three days after deposit in the U.S. Mail.
ISSUED this 4th day of March, 1999
NOTIFY TECHNOLOGY CORPORATION
a California corporation
---------------------------------------
By: Xxxx X. XxXxxx
Title: President
-4-
ATTACHMENT A
NOTICE OF EXERCISE
TO: NOTIFY TECHNOLOGY CORPORATION
1. The undersigned hereby elects to purchase ____________ shares of
Common Stock of Notify Corporation pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares
of stock in the name of the undersigned or in such other name as is specified
below:
---------------------------------
(Name)
---------------------------------
(Address)
---------------------------------
3. The undersigned represents that the aforesaid shares of stock are
being acquired for the account of the undersigned for investment and not with
a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling
such shares. In support thereof, the undersigned has executed an Investment
Representation Statement included herewith.
------------------------------
WARRANTHOLDER SIGNATURE
------------------------------
(print name)
------------------------------
(Title)
------------------------------
(Date)
-5-
ATTACHMENT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER :
COMPANY : NOTIFY TECHNOLOGY CORPORATION
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed securities (the
"Securities"), I, the Purchaser, represent to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only
and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933
("Securities Act").
(b) I understand that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand
that, in the view of the Securities and Exchange Commission ("SEC"), the
statutory basis for such exemption may be unavailable if my representation
was predicated solely upon a present intention to hold these Securities for
the minimum capital gains period specified under tax statutes, for a deferred
sale, for or until an increase or decrease in the market price of the
Securities, or for a period of one year or any other fixed period in the
future.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or
unless an exemption from registration is otherwise available. Moreover, I
understand that the Company is under no obligation to register the
Securities. In addition, I understand that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not
required in the opinion of counsel for the Company.
(d) I am aware of the provisions of Rule 144, promulgated under
the Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or
-6-
indirectly, from the issuer thereof (or from an affiliate of such issuer), in
a non-public offering subject to the satisfaction of certain conditions.
(e) I further understand that at the time I wish to sell the
Securities there may be no public market upon which to make such a sale.
(f) I further understand that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will
be required; and that, notwithstanding the fact that Rule 144 is not
exclusive, the Staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial
burden of proof in establishing that an exemption from registration is
available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own
risk.
---------------------------
Name of Warrantholder
By:
------------------------
Title:
---------------------
Date: ,
----------------- ---
-7-
EXHIBIT A-2
FORM OF SECTION 10(b) OF WARRANTS WITH ACCELERATED TERMINATION
1. This warrant shall terminate thirty days after (i) either two Target
Telephone Companies issue letters of intent relating to trials of the
Company's "Got Mail" product or four Target Telephone Companies are selling
or distributing one of the Company's Call Manager products (excluding limited
trial programs), and (ii) the Company provides Holder notice of the Company's
achieving the foregoing milestone. For the purpose of this Section 10(b),
the following 18 companies (and their successors) shall be considered Target
Telephone Companies: Ameritech, Xxxx Atlantic (Nynex included), Xxxx South,
GTE, Pacific Xxxx, SNET, Southwestern Xxxx, Sprint (local), US West, Aliant,
Alltel, Century, Cincinnatti Bell, Citizens, Commonwealth, Frontier, Puerto
Rico Telephone Company and TDS.
2. This warrant shall terminate thirty days after (i) either two service
launches of the "Got Mail" product with Target Telephone Companies or the
Company receives a purchase order for one of its Call Manager products of
$500,000 or more, and (ii) the Company provides Holder notice of the
Company's achieving the foregoing milestone. For the purpose of this Section
10(b), the following 18 companies (and their successors) shall be considered
Target Telephone Companies: Ameritech, Xxxx Atlantic (Nynex included), Xxxx
South, GTE, Pacific Xxxx, SNET, Southwestern Xxxx, Sprint (local), US West,
Aliant, Alltel, Century, Cincinnatti Bell, Citizens, Commonwealth, Frontier,
Puerto Rico Telephone Company and TDS.
3. This warrant shall terminate thirty days after (i) the Company receives
purchase orders which in aggregate total $2,000,000 or more in any fiscal
quarter, and (ii) the Company provides Holder notice of the Company's
achieving the foregoing milestone.
4. This warrant shall terminate thirty days after (i) the Company has
fiscal 1999 revenue of $2,800,000 or more, and (ii) the Company provides
Holder notice of the Company's achieving the foregoing milestone.
EXHIBIT B
FORM OF WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE PURSUANT TO IT HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
PLEDGED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES
AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
NOTIFY TECHNOLOGY CORPORATION
COMMON STOCK PURCHASE WARRANT
1. NUMBER AND PRICE OF SHARES SUBJECT TO WARRANT. Subject to the
terms and conditions set forth herein, Xxxxx X. Xxxxxx or a subsequent
transferee ("HOLDER"), is entitled to purchase from Notify Technology
Corporation, a California corporation (the "COMPANY"), at any time after the
date hereof and on or before the date of termination of this Warrant provided
for in Section 10 hereof, up to 721,244 shares (which number of shares is
subject to adjustment and certain conditions as described below) of fully
paid and nonassessable Common Stock of the Company (the "SHARES") upon
surrender hereof at the principal office of the Company, and upon payment of
the purchase price at said office in cash or by check. Subject to adjustment
as hereinafter provided, the purchase price of one share of Common Stock (or
such securities as may be substituted for one share of Common Stock pursuant
to the provisions hereinafter set forth) shall be $3.60. The purchase price
of one share of Common Stock (or such securities as may be substituted for
one share of Common Stock pursuant to the provisions hereinafter set forth)
payable from time to time upon the exercise of this Warrant (whether such
price be the price specified above or an adjusted price determined as
hereinafter provided) is referred to herein as the "WARRANT PRICE."
2. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and
kind of securities issuable upon the exercise of this Warrant shall be
subject to adjustment from time to time and the Company agrees to provide
notice upon the happening of certain events as follows:
(a) ADJUSTMENT FOR DIVIDENDS IN STOCK. In case at any time or
from time to time on or after the date hereof the holders of the Common Stock
of the Company (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant) shall have received, or, on or
after the record date fixed for the determination of eligible stockholders,
shall have become entitled to receive, without payment therefor, other or
additional securities or other property of the Company by way of dividend or
distribution, then and in each case, the holder of this Warrant shall, upon
the exercise hereof, be entitled to receive, in addition to the number of
shares of Common Stock receivable thereupon, and without payment of any
additional consideration therefor, the amount of such other or additional
securities or other property of the Company which such holder would hold on
the date of such exercise had it been the holder of record of such Common
Stock on
the date hereof and had thereafter, during the period from the date hereof to
and including the date of such exercise, retained such shares and/or all
other additional securities or other property receivable by it as aforesaid
during such period, giving effect to all adjustments called for during such
period by this paragraph (a) and paragraphs (b) and (c) of this Section 2.
(b) ADJUSTMENT FOR RECLASSIFICATION OR REORGANIZATION. In case
of any reclassification or change of the outstanding Common Stock of the
Company or of any reorganization of the Company on or after the date hereof
(other than a merger of the Company with and into another corporation), then
and in each such case the Company shall give the holder of this Warrant at
least ten (10) days notice of the proposed effective date of such
transaction, and the holder of this Warrant, upon the exercise hereof at any
time after the consummation of such reclassification, change or
reorganization, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such holder
would have been entitled upon such consummation if such holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in paragraphs (a), (b) and (c); in each such case, the terms of this
Section 2 shall be applicable to the shares of stock or other securities
properly receivable upon the exercise of this Warrant after such consummation.
(c) STOCK SPLITS AND REVERSE STOCK SPLITS. If at any time on or
after the date hereof the Company shall subdivide its outstanding shares of
Common Stock into a greater number of shares, the Warrant Price in effect
immediately prior to such subdivision shall thereby be proportionately
reduced and the number of shares receivable upon exercise of the Warrant
shall thereby be proportionately increased; and, conversely, if at any time
on or after the date hereof the outstanding number of shares of Common Stock
shall be combined into a smaller number of shares, the Warrant Price in
effect immediately prior to such combination shall thereby be proportionately
increased and the number of shares receivable upon exercise of this Warrant
shall thereby be proportionately decreased.
3. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any subscription hereunder. In lieu of any
fractional shares which would otherwise be issuable, the Company shall pay
cash equal to the product of such fraction multiplied by the fair market
value of one share of Common Stock on the date of exercise, as determined in
good faith by the Company's Board of Directors.
4. NO SHAREHOLDER RIGHTS. This Warrant as such shall not entitle its
holder to any of the rights of a shareholder of the Company.
5. RESERVATION OF STOCK. The Company covenants that during the period
this Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the
issuance of Common Stock upon the exercise of this Warrant. The Company
agrees that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for shares of Common Stock upon
the exercise of this Warrant.
-2-
6. EXERCISE OF WARRANT.
(a) MANNER OF EXERCISE. This Warrant may be exercised, in whole
or in part, by Holder by the surrender of this Warrant (with the notice of
exercise form attached hereto as ATTACHMENT A and the Investment
Representation Statement attached hereto as ATTACHMENT C duly executed) at
the principal office of the Company, accompanied by payment in full of the
purchase price of the Shares purchased thereby, as described above. This
Warrant shall be deemed to have been exercised immediately prior to the close
of business on the date of its surrender for exercise as provided above, and
the person entitled to receive the Shares or other securities issuable upon
such exercise shall be treated for all purposes as the holder of such shares
of record as of the close of business on such date. As promptly as
practicable and in any event within five (5) days after such date, the
Company shall issue and deliver to the person or persons entitled to receive
the same a certificate or certificates for the number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share as provided above, and a Warrant in like tenor as this
Warrant to purchase the number of Shares in respect of which this Warrant
shall not have been exercised or waived.
(b) RIGHT TO CONVERT WARRANT. Holder shall have the right to
convert this Warrant, (in whole or in part), by the surrender of this Warrant
(with the Notice of Conversion form attached hereto as ATTACHMENT B) at the
office of the Company at any time during the term of this Warrant into
Shares as provided for in this Section 6(b). Upon exercise of this
conversion right, Holder shall be entitled to receive that number of Shares
of the Company equal to (x) the number of shares of Common Stock specified by
the Holder in its Notice of Conversion up to the maximum number of shares of
Common Stock subject to this Warrant (the "SPECIFIED NUMBER") less (y) the
number of shares of Common Stock equal to the quotient obtained by dividing
(A) the product of the Specified Number and the existing Warrant Price by (B)
the Fair Market Value, as defined below.
"FAIR MARKET VALUE" of a Share shall mean the fair value as determined
in good faith by the Company's Board of Directors; provided, however, that
where there exists a public market for the Company's Common Stock at the time
of Holder's exercise of this conversion right, the Fair Market Value per
Share shall be the average of the closing bid and asked prices of the Common
Stock quoted in the Over-The-Counter Market Summary or the last reported sale
price of the Common Stock or the closing price quoted on the Nasdaq National
Market or on any exchange on which the Common Stock is listed, whichever is
applicable, as published in The Wall Street Journal for the five (5) trading
days prior to the date of determination of fair market value.
Upon conversion of this Warrant, hereof shall be entitled to receive a
certificate for the number of Shares determined as aforesaid.
7. CERTIFICATE OF ADJUSTMENT. Whenever the Warrant Price or the
number or type of securities issuable upon exercise of this Warrant is
adjusted, as herein provided, the Company shall promptly deliver to the
record holder of this Warrant a certificate of an officer of the Company
-3-
setting forth the nature of such adjustment and a brief statement of the
facts requiring such adjustment.
8. TRANSFER OF WARRANT. This Warrant may not be transferred by Holder
without the written consent of the Company, which consent will not be
unreasonably withheld. Any such transfer will require an opinion of counsel
reasonably acceptable the Company stating that such transfer is exempt from
the registration requirements of the Securities Act of 1933.
9. RESTRICTIVE LEGEND. Each certificate representing (i) the Shares,
and (ii) any other securities issued in respect of the Shares upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar
event, shall be stamped or otherwise imprinted with legends in the following
form (in addition to any legend required under applicable state securities
laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). SUCH SHARES MAY
NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
(WHICH MAY BE COUNSEL FOR THE COMPANY) OR OTHER EVIDENCE
REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS
A EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE SECURITIES ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A MARKET
STAND-OFF AGREEMENT IN THE EVENT OF A PUBLIC OFFERING, A COPY OF WHICH
IS A ON FILE WITH THE SECRETARY OF THE COMPANY."
10. TERMINATION. This Warrant (and the right to purchase securities
upon exercise hereof) shall terminate upon the earliest of (a) March 3, 2003
or (b) the sale of all or substantially all of the assets of the Company, or
(c) the acquisition of the Company by means of merger or consolidation
resulting in the exchange of the outstanding shares of the Company for
securities or consideration issued, or caused to be issued, by the acquiring
corporation or its subsidiary in which the shareholders of the Company hold
less than 50% of the shares of the surviving corporation. The Company shall
give Holder of this warrant written notice of such sale, merger or
consolidation at least ten (10) and no more than ninety (90) days prior to
the closing of any such sale, merger or consolidation.
11. MISCELLANEOUS. This Warrant shall be governed by the laws of the
State of California. The headings in this Warrant are for purposes of
convenience of reference only, and shall not be deemed to constitute a part
hereof. Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed
by the Company
-4-
and the registered holder hereof. All notices and other communications from
the Company to the holder of this Warrant shall be delivered personally or
mailed by first class mail, postage prepaid, to the address furnished to the
Company in writing by the last holder of this Warrant who shall have
furnished an address to the Company in writing, and if mailed shall be deemed
given three days after deposit in the U.S. Mail.
ISSUED this 4th day of March, 1999
NOTIFY TECHNOLOGY CORPORATION
a California corporation
----------------------------------
By: Xxxx X. XxXxxx
Title: President
ATTACHMENT A
NOTICE OF EXERCISE
TO: NOTIFY TECHNOLOGY CORPORATION
1. The undersigned hereby elects to purchase ____________ shares of
Common Stock of Notify Corporation pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
stock in the name of the undersigned or in such other name as is specified
below:
_________________________________
(Name)
_________________________________
(Address)
_________________________________
3. The undersigned represents that the aforesaid shares of stock are
being acquired for the account of the undersigned for investment and not with a
view to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement included herewith.
______________________________
WARRANTHOLDER SIGNATURE
______________________________
(print name)
______________________________
(Title)
_______________________________
(Date)
-6-
ATTACHMENT B
NOTICE OF CONVERSION
TO: NOTIFY TECHNOLOGY CORPORATION
(1) The undersigned hereby elects to convert its right to purchase _______
shares of Common Stock pursuant to the attached Warrant into such number of
shares of Common Stock of Notify Corporation as is determined pursuant to
Section 6(b) of such Warrant, which conversion shall be effected pursuant to the
terms of the attached Warrant.
(2) Please issue a certificate of certificates representing said shares of
stock in the name of the undersigned or in such other name as is specified
below:
Name: _____________________________
Address: __________________________
___________________________________
(3) The undersigned represents that the aforesaid shares of stock are
being acquired for the account of the undersigned for investment and not with a
view to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement included herewith.
__________________________ ________________________________
(Date) (Signature)
________________________________
(Name)
_________________________________
(Title, if signatory is an entity)
-7-
ATTACHMENT C
INVESTMENT REPRESENTATION STATEMENT
PURCHASER :
COMPANY : NOTIFY TECHNOLOGY CORPORATION
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed securities (the
"Securities"), I, the Purchaser, represent to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933 ("Securities Act").
(b) I understand that the Securities have not been registered under
the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand that,
in the view of the Securities and Exchange Commission ("SEC"), the statutory
basis for such exemption may be unavailable if my representation was predicated
solely upon a present intention to hold these Securities for the minimum capital
gains period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Securities, or for a period of
one year or any other fixed period in the future.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, I understand
that the Company is under no obligation to register the Securities. In
addition, I understand that the certificate evidencing the Securities will be
imprinted with a legend which prohibits the transfer of the Securities unless
they are registered or such registration is not required in the opinion of
counsel for the Company.
(d) I am aware of the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or
-8-
indirectly, from the issuer thereof (or from an affiliate of such issuer), in
a non-public offering subject to the satisfaction of certain conditions.
(e) I further understand that at the time I wish to sell the
Securities there may be no public market upon which to make such a sale.
(f) I further understand that in the event all of the requirements
of Rule 144 are not satisfied, registration under the Securities Act, compliance
with Regulation A, or some other registration exemption will be required; and
that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the
SEC has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
___________________________
Name of Warrantholder
By:________________________
Title:_____________________
Date:_____________, ______
-9-
EXHIBIT C
INVESTOR RIGHTS AGREEMENT
NOTIFY TECHNOLOGY CORPORATION
INVESTOR RIGHTS AGREEMENT
MARCH 4, 1999
TABLE OF CONTENTS
PAGE
----
SECTION 1 Restrictions on Transferability; Registration Rights. . . . . . . . 1
1.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Restrictive Legend. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Notice of Proposed Transfers. . . . . . . . . . . . . . . . . . . . 3
1.5 Shelf Registration. . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Company Registration. . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 Expenses of Registration. . . . . . . . . . . . . . . . . . . . . . 6
1.8 Registration Procedures . . . . . . . . . . . . . . . . . . . . . . 6
1.9 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.10 Information by Holder . . . . . . . . . . . . . . . . . . . . . . . 9
1.11 Transfer of Registration Rights . . . . . . . . . . . . . . . . . . 9
1.12 Standoff Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 9
1.13 Termination of Rights . . . . . . . . . . . . . . . . . . . . . . .10
1.14 Restriction on Sales. . . . . . . . . . . . . . . . . . . . . . . .10
SECTION 2 Affirmative Covenants of the Company. . . . . . . . . . . . . . . .10
2.1 Observer Rights . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.3 Termination of Covenants. . . . . . . . . . . . . . . . . . . . . .10
SECTION 3 Right of First Offer. . . . . . . . . . . . . . . . . . . . . . . .11
3.1 Right of First Offer. . . . . . . . . . . . . . . . . . . . . . . .11
3.2 Sale of Securities by Company . . . . . . . . . . . . . . . . . . .11
3.3 Offer Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.4 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.5 Termination of Right of First Offer . . . . . . . . . . . . . . . .12
SECTION 4 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.1 Governing Law; Jurisdiction . . . . . . . . . . . . . . . . . . . .12
4.2 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . .12
4.3 Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.4 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . . . .12
4.5 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.6 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.7 Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . . . .13
4.8 Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . .13
4.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.10 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . . . . .13
-i-
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "AGREEMENT") is entered into as of
March 4, 1999 between Notify Technology Corporation, a California corporation
(the "COMPANY"), and Xxxxx X. Xxxxxx ("INVESTOR").
RECITALS
WHEREAS, the Company and Investor are entering into a Securities Purchase
Agreement (the "PURCHASE AGREEMENT") of even date herewith, pursuant to which
the Company shall sell, and the Investor shall acquire, Common Stock of the
Company and warrants to purchase Common Stock of the Company.
WHEREAS, in connection with the Purchase Agreement, the Company has agreed
to grant Investor certain rights as described herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
SECTION 1
RESTRICTIONS ON TRANSFERABILITY; REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"COMMON STOCK" shall mean common stock, $0.001 par value of the
Company.
"COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"HOLDER" shall mean any Investor, any person to whom registration
rights under this Agreement have been transferred in accordance with
Section 1.11 hereof, and any financial institution designated by Investor which
holds registrable securities as collateral.
The terms "REGISTER", "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 1.5 and 1.6 hereof, including, without
limitation, all registration, qualification, stock exchange and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company and accountants and other persons retained by or for the Company (but
excluding the fees of counsel for the Holders, if any), blue sky fees and
expenses, accounting fees and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company).
"REGISTRABLE SECURITIES" means any shares of Common Stock sold
pursuant to the Purchase Agreement or issued upon exercise of any of the
warrants issued pursuant to the Purchase Agreement and any Common Stock issued
with respect to the foregoing upon any stock split, stock dividend,
recapitalization or similar event; PROVIDED, HOWEVER, that shares of Common
Stock shall be treated as Registrable Securities only if and so long as they
have not been (A) sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all transfer restrictions
and restrictive legends with respect thereto are removed upon the consummation
of such sale.
"RESTRICTED SECURITIES" shall mean the Securities required to bear
the legends set forth in Section 1.3 hereof.
"SECURITIES" shall mean shares of or securities convertible into or
exercisable for any shares of, any class of capital stock of the Company.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for the Holders not
included in the definition of Registration Expenses.
1.2 RESTRICTIONS. No Registrable Securities shall be sold, assigned,
transferred or pledged except upon the conditions specified in this Agreement.
Investor and any subsequent Holder will cause any proposed purchaser, assignee,
transferee or pledgee of Registrable Securities to agree to take and hold such
securities subject to the provisions and upon the conditions specified in this
Agreement.
1.3 RESTRICTIVE LEGEND. Each certificate representing Registrable
Securities shall (unless otherwise permitted by the provisions of Section 1.4
below) be stamped or otherwise imprinted with a legend in the following form (in
addition to any legend required under applicable state securities laws):
-2-
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN
OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) OR
OTHER EVIDENCE REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS A EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A MARKET
STAND-OFF AGREEMENT IN THE EVENT OF A PUBLIC OFFERING, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
Each Investor consents to the Company making a notation on its
records and giving instructions to any transfer agent of the Restricted
Securities in order to implement the restrictions on transfer established in
this Section 1.
1.4 NOTICE OF PROPOSED TRANSFERS. Each Holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the restrictions on transfer contained in this Sections 1.2,
1.3, 1.4, 1.11, 1.12 and 1.14 of this Agreement. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, (other than any
transfer not involving a change in beneficial ownership) unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the Holder thereof shall give written notice to the Company of such
Holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied at such Holder's expense by either (i) a written opinion of legal
counsel who shall, and whose legal opinion shall be, reasonably satisfactory to
the Company, addressed to the Company, to the effect that the proposed transfer
of the Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission to the effect
that the transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, or (iii) any other evidence reasonably satisfactory to counsel to the
Company, whereupon the Holder of such Restricted Securities shall be entitled to
transfer such Restricted Securities in accordance with the terms of the notice
delivered by the Holder to the Company. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such
transfer is made pursuant to Rule 144, the appropriate restrictive legend set
forth in Section 1.3 above, except that such certificate shall not bear such
restrictive legend if, in the opinion of counsel for such Holder and the
Company, such legend is not required in order to establish compliance with any
provisions of the Securities Act or this Agreement.
-3-
1.5 SHELF REGISTRATION.
(a) Upon request of Investor, which request may be made any time
after June 3, 1999, the Company will file under the Securities Act, as soon as
practicable after such request but no later than 25 business days therefrom, a
"shelf" registration statement providing for the registration of, and the sale
on a continuous or delayed basis by the Holders, the Registrable Securities,
pursuant to Rule 415 under the Securities Act and/or any similar rule that may
be adopted by the Commission (the "SHELF REGISTRATION"). The Company will
provide Investor with a copy of the Shelf Registration at least three business
days prior to filing. The Company will use its best efforts to cause the Shelf
Registration to become or be declared effective no later than 90 calender days
after receipt of such request and, except as provided in Section 1.5(f) below,
to keep such Shelf Registration continuously effective for a period ending on
the earliest of (i) Xxxxx 0, 0000, (xx) the date on which Investor has sold all
the Registrable Securities owned by it or (iii) the date described in Section
1.13.
(b) The Company will, if necessary, supplement or make amendments
to the Shelf Registration, if required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Shelf
Registration or by the Securities Act or rules and regulations thereunder for
shelf registrations, and the Company will furnish to Investor copies of any such
supplement prior to its being used and/or filed with the Commission.
(c) The Company will upon request of Investor amend or supplement
the Shelf Registration to include any Holder.
(d) Holders will cooperate with the Company in the preparation of
the Shelf Registration and any amendments or supplements thereto and provide the
Company with any information regarding Investor or such Designees as the Company
may reasonably request.
(e) If the Company issues warrants to purchase additional shares
of Common Stock to Investor pursuant to Section 6.2 of the Purchase Agreement,
the Company will amend the Shelf Registration or file an additional shelf
registration (in accordance with the terms of this Section 1.5) for the shares
of Common Stock issuable upon exercise of such warrants.
(f) Upon notice to the Holders, if any, the Company may suspend
use of the Shelf Registration in order to correct any material misstatements
therein or to include any information required to make the Shelf Registration
not materially misleading PROVIDED HOWEVER that the Company may not suspend use
of the Shelf Registration for more than ninety days in any twelve month period
and shall use diligent and good faith efforts to make corrections or inclusions
as promptly as practicable consistent with the Company's business objectives.
1.6 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to time,
the Company shall determine to register any of its Common Stock, either for its
own account or the account of a
-4-
security holder or holders other than (i) a registration relating to employee
benefit plans, (ii) a registration relating to the offer and sale of debt
securities, (iii) a registration relating to a Commission Rule 145
transaction, or (iv) a registration pursuant to Sections 1.5 hereof, the
Company will:
(i) promptly give to each Holder written notice thereof;
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests made within 15 days after receipt of such written notice from the
Company by any Holder.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders in a written notice given pursuant to this
Section 1.6. In such event, the right of any Holder to registration pursuant to
this Section 1.6 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of Registrable Securities in the underwriting to
the extent provided herein.
All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company. Notwithstanding any other provision of this Section 1.6, if the
managing underwriter advises the Company in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company shall so advise all Holders of Registrable Securities and the number of
shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders at the time of filing the registration statement, PROVIDED,
HOWEVER, that shares of Registrable Securities of Holders shall not be excluded
from the underwriting unless all other securities (other than securities being
sold by the Company) are first entirely excluded from the underwriting PROVIDED
FURTHER that the number of Registrable Securities included in any such
registration shall not be reduced below 20% of the shares included in the
registration. No Registrable Securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of shares
allocated to any Holder to the nearest 100 shares. The Company may include
shares of Common Stock held by shareholders other than Holders in a
registration statement pursuant to this Section 1.6 to the extent that the
amount of Registrable Securities otherwise includible in such registration
statement would not thereby be diminished.
If any Holder or other holder disapproves of the terms of any such
underwriting, he or she may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. The Registrable Securities so withdrawn
shall also be withdrawn from such registration, and shall
-5-
not be transferred in a public distribution prior to ninety (90) days after
the effective date of the registration statement relating thereto.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 1.6 prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration.
1.7 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration pursuant to Sections 1.5 and 1.6 shall be borne
by the Company. If a registration proceeding is begun upon the request of
Investor pursuant to Section 1.5, but such request is subsequently withdrawn at
the request of Investor, then Investor may either: (i) bear all Registration
Expenses of such proceeding in which case the Company shall be deemed not to
have effected a registration pursuant to Section 1.5 of this Agreement as
applicable; or (ii) require the Company to bear all Registration Expenses of
such proceeding, in which case the Company shall be deemed to have fulfilled its
obligations under Section 1.5. Unless otherwise stated, all other Selling
Expenses relating to securities registered on behalf of the Holders shall be
borne by the Holders of the registered securities included in such registration
pro rata on the basis of the number of shares so registered.
1.8 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least sixty
(60) days (or such longer period as provided in Section 1.5), or until the
distribution described in the registration statement has been completed.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders participating in such registration and
to the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such Holders or underwriters may reasonably request
in order to facilitate the public offering of such securities.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of
-6-
process in any such states or jurisdictions, unless the Company is already
subject to service in such jurisdiction and except as may be required by the
Securities Act.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange, or quoted in a U.S.
automated inter-dealer quotation system, as the case may be, on which similar
securities issued by the Company are then listed, or quoted.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
1.9 INDEMNIFICATION.
(a) The Company will indemnify and defend each Holder, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Section 1, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, preliminary prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation or any alleged violation by the
Company of the Securities Act or the Exchange Act or any state securities law,
or any rule or regulation promulgated thereunder, applicable to the Company in
connection with any such registration, qualification or compliance, and the
Company will reimburse each such Holder, each of its officers and directors, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, as such expenses are incurred,
-7-
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder, controlling person or
underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, as such expenses are incurred, in each case to the extent,
but only if and to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein;
PROVIDED HOWEVER that the liability of any such Holder shall be limited to the
net amount received by the Holder from the sale of securities pursuant to the
registration statement.
(c) Each party entitled to indemnification under this Section 1.9
(the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense; provided, however, that an Indemnified Party (together with all
other Indemnified Parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and
expenses to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding. The failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 1 unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to
-8-
entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
(d) If recovery is not available under the foregoing
indemnification provisions of this Section 1.9, for any reason other than as
specified therein, the parties entitled to indemnification by the terms thereof
shall be entitled to contribution for liabilities and expenses from the parties
liable for indemnification, except to the extent that contribution is not
permitted under Section 11(f) of the Securities Act. In determining the amount
of contribution to which the respective parties are entitled, there shall be
considered the relative benefits received by each party from the offering of the
securities (taking into account the portion of the proceeds of the offering
realized by each), the parties' relative knowledge and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement of omission, and any other
equivalent considerations appropriate under the circumstances.
1.10 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Securities held by them and
the distribution proposed by such Holder or Holders as the Company may
reasonably request in writing and as shall be required in connection with any
registration referred to in this Section 1.
1.11 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities granted the Investors under Sections 1.5 and 1.6
may be assigned to a transferee or assignee in connection with any transfer or
assignment of at least 150,000 shares of Registrable Securities by an Investor;
PROVIDED that (a) such transfer may otherwise be effected in accordance with
applicable securities laws, (b) notice of such assignment is given to the
Company and (c) such transfer is pursuant to a written agreement acknowledged by
the Company which acknowledgment shall not be withheld if the transfer
provisions of this Agreement are met.
1.12 STANDOFF AGREEMENT. Each Holder agrees in connection with any
registration of the Company's securities (other than a registration of debt
securities, securities in a Rule 145 transaction or with respect to an employee
benefit plan), upon notice by the Company or the underwriters managing any
underwritten public offering of the Company's securities, not to sell, make any
short sale of, loan, pledge (or otherwise encumber or hypothecate), grant any
option for the purchase of, or otherwise directly or indirectly dispose of any
Securities (other than those included in the registration) without the prior
written consent of the Company and such managing underwriters for such period of
time as the Board of Directors establishes pursuant to its good faith
negotiations with such managing underwriters, which period shall not exceed 180
days; PROVIDED THAT the officers and directors of the Company also agree to such
restrictions. Each Holder hereby consents to the placement of stop transfer
orders with the Company's transfer agent in order to enforce the foregoing
provision and agrees to execute a market standoff agreement with said
underwriters in customary form consistent with the provisions of this Section
1.12. This covenant shall not apply to any registration filed after March 3,
2004.
-9-
1.13 TERMINATION OF RIGHTS. The rights of any particular Holder to
cause the Company to register or maintain a registration of securities under
Sections 1.5, and 1.6 shall terminate with respect to such Holder at such
time as Holder may sell all of the Registrable Securities held by him in a
three-month period in the public market to Rule 144.
1.14 RESTRICTION ON SALES. Holders, other than Investor, if any, shall
not sell, whether pursuant to the Shelf Registration or otherwise, in aggregate
more than 15% of the shares of Common Stock purchased by Investor pursuant the
Purchase Agreement in any three month period. For the purposes of the foregoing
calculation, the number of shares of Common Stock purchased by Investor shall
include any shares of Common Stock purchased by Investor upon exercise of any
warrants issued pursuant to the Purchase Agreement. This restriction shall
terminate on March 3, 2002.
SECTION 2
AFFIRMATIVE COVENANTS OF THE COMPANY
2.1 OBSERVER RIGHTS. So long as Investor owns more than 250,000 shares
of Registrable Securities, Investor shall have the right to attend all meetings
of the Board of Directors including the right to participate in any telephonic
board meetings. Investor shall be provided with notice of the meetings in the
same manner at the same time as the members of the Board of Directors. The
foregoing visitation rights may be limited by the Board of Directors if the
Board determines in good faith that Investor has a conflict of interest with
respect to the matters being discussed or, if upon advice of counsel,
limitations are required to maintain attorney-client privilege. In addition,
upon reasonable notice to the Company, Investor shall have the right to inspect
the Company's books and records and discuss the Company's affairs with its
officers and directors.
2.2 CONFIDENTIALITY. Investor agrees that any information obtained by
such Investor pursuant to this Section 2 which may be proprietary to the Company
or otherwise confidential will not be disclosed without the prior written
consent of the Company. Investor further acknowledges and understands that any
information so obtained may be considered "inside" non-public information and
agrees to abide by the Company's Xxxxxxx Xxxxxxx Policy. The provisions of this
Section 2 shall not be in limitation of any rights which Investor may have with
respect to the books and records of the Company, or to inspect its properties or
discuss its affairs, finances and accounts, under the laws of the jurisdictions
in which it is incorporated.
2.3 TERMINATION OF COVENANTS. The covenants set forth in Sections 2.1
shall terminate on, and be of no further force or effect after March 3, 2004.
The rights granted pursuant to this Section 2 are not transferable.
-10-
SECTION 3
RIGHT OF FIRST OFFER
3.1 RIGHT OF FIRST OFFER. Subject to the terms and conditions specified
in this Section 3, the Company hereby grants to Investor, a right of first offer
with respect to future private sales by the Company of its Securities. Each
time the Company proposes to offer any Securities in a Financing (as defined
below), the Company shall first make an offering of such Securities to Investor
in accordance with the following provisions:
(a) The Company shall deliver a notice ("NOTICE") to Investor
stating (i) its intention to offer such Securities for sale, (ii) the number of
such Securities to be offered (the "OFFERED SECURITIES"), (iii) the price, if
any, for which it proposes to offer such Securities, (iv) the terms of such
offer and (v) the Offer Amount (as defined below).
(b) Within fifteen (15) calendar days after receipt of the Notice,
Investor may elect to purchase, at the price and on the terms specified in the
Notice, such Securities in an amount up to the Offer Amount by providing the
Company with written notice of his election.
(c) An election by Investor pursuant to Section 3.1(b) to purchase
Offered Securities shall not be considered a binding commitment unless and until
the Company receives binding commitments to purchase on the terms and conditions
contained in the Notice substantially all of the Offered Securities which the
Investors have not elected to purchase.
3.2 SALE OF SECURITIES BY COMPANY. Within 60 days of the expiration of
the period described in Section 3.1(b), any Offered Securities which the
Investor has not elected to purchase may be sold by the Company to any person
or persons at a price not less than, and upon terms no more favorable to the
offeree than, those specified in the Notice. If the Company does not complete
the sale of all such Offered Securities within said 60 day period, the rights of
the Investor with respect to any such unsold Offered Securities shall be deemed
to be revived.
3.3 OFFER AMOUNT. The Offer Amount shall equal that percentage of the
Offered Securities equal to the percentage of the Company owned by Investor as
determined pursuant to Item 403 of Regulation S-K under the Securities Act.
3.4 FINANCING. Financing shall mean a private offering or series of
related offerings of Securities by the Company for purpose of raising capital in
an amount of $250,000 or more. Financing shall not include (i) the issuance or
sale of shares of Common Stock or options to purchase Common stock to employees,
officers, directors or consultants for the primary purpose of soliciting or
retaining their services as shall have been approved by the Board of Directors,
(ii) the issuance or sale of Securities to leasing entities or financial
institutions in connection with commercial leasing or borrowing transactions
approved by the Board of Directors, (iii) the sale of Securities in a registered
public offering, (iv) any issuances of Securities in connection with any stock
split, stock dividend or recapitalization by the Company, (v) the issuance of
Securities in connection with the acquisition of another corporation by the
Company by merger, consolidation, or purchase of all or substantially all of the
assets or shares of such corporation, or (vi) the issuance of
-11-
Securities in connection with a joint venture or a strategic or marketing
alliance with another company.
3.5 TERMINATION OF RIGHT OF FIRST OFFER. The right of first offer
contained in this Section 3 shall terminate on March 3, 2002. The rights
granted pursuant to this Section 3 are not transferable.
SECTION 4
MISCELLANEOUS
4.1 GOVERNING LAW; JURISDICTION. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the State of
California, as applied to agreements entered into, and to be performed entirely
in such state, between residents of such state.
The parties hereto agree to submit to the jurisdiction of the federal and
state courts of the State of California with respect to the breach or
interpretation of this Agreement or the enforcement of any and all rights,
duties, liabilities, obligations, powers, and other relations between the
parties arising under this Agreement.
4.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
4.3 NOTICES, ETC. All notices and other communications required or
permitted hereunder, shall be in writing and shall be sent by facsimile
personally delivered, mailed by registered or certified mail, postage prepaid,
return receipt requested, or otherwise delivered by a nationally-recognized
overnight courier, addressed (a) if to a Holder, at Holder's facsimile number or
address as set forth in the records of the Company or to such other address as
provided by such Holder, and (b) if to the Company, at its facsimile number or
address set forth in its most recent filing under the Exchange Act addressed to
the attention of the President. Any such notice or communication shall be
deemed to have been received (A) in the case of personal delivery, on the date
of such delivery, (B) in the case of a nationally-recognized overnight courier,
on the next business day after the date when sent, (C) in the case of mailing,
on the third business day following that on which the piece of mail containing
such communication is posted and (D) in the case of delivery via facsimile, one
(1) business day after the date of transmission provided that said transmission
is confirmed telephonically on the date of transmission.
4.4 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Shares upon any breach or default
of the Company under this Agreement shall impair any such right, power or remedy
of such holder, nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or
-12-
approval of any kind or character on the part of any holder of any breach or
default under this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing or as
provided in this Agreement. All remedies, either under this Agreement or by
law or otherwise afforded to any holder, shall be cumulative and not
alternative.
4.5 THIRD PARTIES. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
4.6 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, portions of such provisions, or such
provisions in their entirety, to the extent necessary, shall be severed from
this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
4.7 AMENDMENT AND WAIVER. Any provision of this Agreement may be
amended or waived only with the written consent of the Company and the Holders
of at least a majority of the outstanding shares of the Registrable Securities
then held by Holders. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each Holder of Registrable Securities and the
Company. In the event that an underwriting agreement is entered into between
the Company and any Holder, and such underwriting agreement contains terms
differing from this Agreement, as to any such Holder the terms of such
underwriting agreement shall govern.
4.8 RIGHTS OF HOLDERS. Each Holder of Registrable Securities shall have
the absolute right to exercise or refrain from exercising any right or rights
that such holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
4.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
4.10 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
-13-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
NOTIFY TECHNOLOGY CORPORATION INVESTOR:
By: ________________________ ___________________________________________
Xxxx XxXxxx (Name of Investor)
President
___________________________________________
(Signature)
___________________________________________
(Name and Title of Signatory if Investor is
not an Individual)
[SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT]
EXHIBIT D
FORM OF LEGAL OPINION
March 4, 1999
Xxxxx X. Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Xx. Xxxxxx:
Reference is made to (i) that certain Securities Purchase Agreement,
complete with all listed exhibits thereto, dated as of March 4, 1999 (the
"Purchase Agreement"), between Notify Technology Corporation, a California
corporation (the "Company"), and yourself (the "Purchaser"), which provides for
the issuance by the Company to Purchaser of 850,000 shares of Common Stock of
the Company (the "Shares") and Warrants to purchase an aggregate of 1,344,444
shares of Common Stock of the Company; and (ii) the related Investor Rights
Agreement dated March 4, 1999 (the "Investor Rights Agreement"). All
capitalized terms used herein are used herein as defined in the Purchase
Agreement unless otherwise defined herein. The Investor Rights Agreement and
the Purchase Agreement are collectively referred to herein as the "Agreements."
We have acted as counsel for the Company in connection with the negotiation
of the Agreements and the anticipated issuance of the Shares and the Warrants
As such counsel, we have made such legal and factual examinations and inquiries
as we have deemed advisable or necessary for the purpose of rendering this
opinion. In addition, we have examined originals or copies of such corporate
records of the Company, certificates of public officials and other documents as
we considered necessary or advisable for the purpose of rendering this opinion.
In such examination we assumed the genuineness of all signatures on original
documents, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all copies submitted to us, and the due
execution and delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge" with reference
to matters of fact means that, after an examination of documents made available
to us by the Company, and after inquiries of officers of the Company, but
without any further independent factual investigation, we find no reason to
believe that the opinions expressed herein are factually incorrect. Further,
the expression "to our knowledge" with reference to matters of fact refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Company. Except to the extent expressly set forth herein or as
we otherwise believe to be necessary to our opinion, we have not undertaken any
independent investigation to determine the existence or absence of any fact, and
Xxxxx X. Xxxxxx
March 4, 1999
no inference as to our knowledge of the existence or absence of any fact should
be drawn from our representation of the Company or the rendering of the opinion
set forth below.
For purposes of this opinion, we are assuming that Purchaser has all
requisite power and authority, and has taken any and all necessary corporate or
partnership action, to execute and deliver the Agreements, and that the
representations and warranties made by the Purchaser and the Company in the
Agreements and pursuant thereto are true and correct.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect of applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
relating to or affecting the rights of creditors;
(b) We express no opinion as to the effect of general principles of
equity, including without limitation concepts of materiality, reasonableness,
good faith and fair dealing, and the availability or unavailability of specific
performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law;
(c) We express no opinion as to the enforceability of Section 1.9 of the
Investor Rights Agreement to the extent the provisions thereof may be subject to
limitations of public policy;
(d) We express no opinion with respect to any matters relating to
patents, mask works, copyrights, trademarks or trade names;
(e) We express no opinion as to the compliance with applicable
anti-fraud provisions of state or federal securities laws;
(f) We express no opinion with respect to the applicability to the
Agreement of the Exon-Xxxxxx Amendment to the Defense Production Act of 1950;
(g) We are members of the Bar of the State of California and we are not
expressing any opinion as to any matter relating to the laws of any jurisdiction
other than the federal laws of the United States of America and the laws of the
State of California.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing
under, and by virtue of, the laws of the State of California and is in good
standing under such laws. The Company has requisite corporate power to own and
operate its properties and assets, and to carry on its business as presently
conducted.
-2-
Xxxxx X. Xxxxxx
March 4, 1999
2. The Company has all requisite legal and corporate power to execute
and deliver the Agreements, to sell and issue the Shares and Warrants under the
Purchase Agreement, to issue the Warrant Shares and to carry out and perform its
obligations under the terms of the Agreements. The Shares, when issued in
accordance with the terms of the Purchase Agreement, will be validly issued,
fully paid and nonassessable. The Warrant Shares have been duly and validly
reserved, and when issued in accordance with the terms of the Warrants
(including the payment of the consideration described therein) will be validly
issued, fully paid and nonassessable.
3. All corporate action on the part of the Company, its directors and
shareholders necessary for the authorization, execution and delivery of the
Agreements by the Company, the authorization, sale, issuance and delivery of the
Shares and the Warrants and the performance of the Company's obligations under
the Agreements has been taken. The Agreements have been duly and validly
executed and delivered by the Company and constitutes valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms.
4. No consent, approval or authorization of or designation,
declaration or filing with, any governmental authority on the part of the
Company is required in connection with the valid execution and delivery of
the Agreements, or the offer, sale or issuance of the Shares, except the
filing of a notice pursuant to Section 25102(f) of the California Corporate
Securities Law and filing similar notices under other applicable blue sky
laws (but excluding jurisdictions outside of the United States) of the offer
and sale of the Shares.
5. Subject to the accuracy of the Purchaser's representations in
Article 4 of the Purchase Agreement, the offer, issuance and sale of the Shares
pursuant to the Purchase Agreement, and the issuance of the Common Stock upon
exercise of the Warrants will be exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended, and the qualification
requirements of Section 25110 of the California Corporate Securities Law of
1968, as amended.
This opinion is furnished to the Purchaser solely for his benefit in
connection with the purchase of the Shares and the Warrants, and may not be
relied upon by any other person without our prior written consent.
Very truly yours,
XXXXXX XXXXXXX XXXXXXXX & XXXXXX
Professional Corporation
-3-
