1
Exhibit 10.15
AGREEMENT
BETWEEN COM21, INC.
AND XXXXXXXX INTERNATIONAL, LTD.
DATED AS OF FEBRUARY 28, 2001
2
INDEX OF DEFINED TERMS
PAGE
----
65 Day Notice ......................................................................13
Acquirer ......................................................................18
Agreement .....................................................................1-1
Audit Report .......................................................................6
Average Price ......................................................................12
Benefit Plans .......................................................................5
Blackout Period......................................................................9
Blackout Violation...................................................................9
Claim .......................................................................6
Closing .......................................................................1
Closing Date .......................................................................1
Com21 .......................................................................1
Com21 Indemnified Party.............................................................21
Combination ......................................................................18
Common Shares .......................................................................1
Common Stock ..............................................................1, 25, B-1
Covered Security.....................................................................7
Debt .......................................................................6
Excess Notice Date..................................................................12
Excess Rights ......................................................................12
Excess Rights Notice................................................................12
Exchange Act .......................................................................1
Exercisable Number..................................................................13
First Refusal Stockholders..........................................................14
Xxxxxxxx .....................................................................1-1
Xxxxxxxx Indemnified Party..........................................................20
Increase ......................................................................13
Increase Notice.....................................................................13
Indemnification Amount..............................................................10
Indemnified Party...................................................................22
Indemnifying Party..................................................................22
Investment Securities................................................................1
Issuance Blockage...................................................................11
Maximum Number......................................................................13
NASDAQ ......................................................................17
Notice Period ......................................................................13
Offer Notice ......................................................................15
i
3
Offered Shares......................................................................14
Original Number.....................................................................11
Preferred Stock......................................................................5
Proceeding ......................................................................21
Prospectus .......................................................................7
Registrable Number...................................................................7
Registration Requirement.............................................................7
Registration Statement...............................................................7
Related Proceeding..................................................................26
Required Consent....................................................................11
Required Registration Date...........................................................7
Rule 144 .......................................................................7
Sales Contract.......................................................................9
SEC .......................................................................4
SEC Filing .......................................................................4
Securities Act.......................................................................4
Trading Day .......................................................................1
Trigger Date ......................................................................11
Warrant .......................................................................1
Warrant Exercise Delivery Notice....................................................11
Warrant Exercise Notice.............................................................11
ii
4
TABLE OF CONTENTS
PAGE
----
1. Purchase and Sale...............................................1
2. Closing.........................................................2
3. Representations and Warranties of Com21.........................2
4. Registration Provisions.........................................6
5. "Market Stand-Off" Agreement...................................10
6. Exercise of Warrant............................................11
7. Representations and Warranties of Xxxxxxxx.....................13
8. Right of First Refusal.........................................14
9. Covenants of Com21.............................................17
10. Consolidation, Merger, Etc.....................................18
11. Covenants of Xxxxxxxx..........................................18
12. Legend.........................................................19
13. Conditions Precedent to Xxxxxxxx'x Obligations.................19
14. Conditions Precedent to Com21's Obligations....................20
15. Fees and Expenses..............................................20
16. Non-Performance................................................20
17. Indemnification................................................20
18. Survival of the Representations, Warranties, etc...............23
19. Notices........................................................23
iii
5
20. Miscellaneous..................................................25
21. Com21's Obligations............................................27
22. Time of Essence................................................27
ANNEX A.....................................................................A-1
ANNEX B.....................................................................B-1
ANNEX C.....................................................................C-1
ANNEX D.....................................................................D-1
iv
6
AGREEMENT
This Agreement (this "Agreement") dated as of February 28, 2001
is entered into by and between Com21, Inc., a corporation organized under the
laws of Delaware (together with its successors, "Com21"), and Xxxxxxxx
International, Ltd., a company domiciled in Bermuda (together with its
successors, "Xxxxxxxx").
The parties hereto agree as follows:
1. Purchase and Sale. In consideration of and upon the basis of
the representations, warranties and agreements and subject to the terms and
conditions set forth in this Agreement:
x. Xxxxxxxx agrees to purchase from Com21, and Com21
agrees to sell to Xxxxxxxx on the Closing Date (as defined below), in
accordance with Section 2 below, 2,450,000 shares of Com21's common
stock, par value $.001 per share (the "Common Stock"), at a per share
purchase price equal to $3.1227. In addition, Com21 shall issue to
Xxxxxxxx on the Closing Date one warrant in the form attached hereto as
Annex A (a "Warrant") to purchase from time to time up to an aggregate
of 2,450,000 shares (subject to the adjustments contained in the Warrant
and this Agreement) at a per share purchase price equal to $9.0951 per
share. Xxxxxxxx shall have the right to exercise the Warrant in the
manner, and subject to the terms, specified in this Agreement and in the
Warrant.
b. The closing (the "Closing") of the sale of the shares
of Common Stock to be issued hereunder shall occur on the Trading Day
following the satisfaction or, if applicable, waiver of the conditions
set forth in Sections 13 and 14 hereof, but in no event later than March
5, 2001, or at such other date and time as Xxxxxxxx and Com21 shall
mutually agree (the "Closing Date"). As used herein, the term "Common
Shares" means all shares of Common Stock issued and/or issuable under
any provision of this Agreement or upon exercise of the Warrant; the
term "Investment Securities" means the Warrant and all Common Shares;
the term "Trading Day" means any day on which the Common Stock may be
traded on the NASDAQ; and the term "NASDAQ" means the NASDAQ National
Market, provided, however, that if the NASDAQ is not then the principal
U.S. trading market for the Common Stock, then "NASDAQ" shall be deemed
to mean the principal U.S. national securities exchange (as defined in
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) on
which the Common Stock is then traded, or if such Common Stock is not
then listed or admitted to trading on any national securities exchange
but is designated as a national market system security or a Nasdaq
SmallCap Market Security by the NASD, then such market system, or if
such
7
Common Stock is not listed or quoted on any of the foregoing, then the
OTC Bulletin Board.
2. Closing. The Closing shall take place initially via facsimile
on the Closing Date in the manner set forth below; provided that original
certificates representing the Common Shares sold and purchased on the Closing
Date shall be delivered via Federal Express on the second Trading Day following
the Closing Date to Xxxxxxxx as Xxxxxxxx instructs in writing. At the Closing,
the following deliveries shall be made:
a. Common Stock and Warrant. Com21 shall deliver to
Xxxxxxxx twenty-four (24) stock certificates, each representing 100,000
shares of Common Stock and one (1) stock certificate representing 50,000
shares of Common Stock, together with one Warrant duly executed by Com21
in definitive form, in each case duly registered on the books of Com21
as instructed by Xxxxxxxx.
b. Purchase Price. Xxxxxxxx shall cause to be wire
transferred to Com21, in accordance with the instructions set forth in
Section 19, the aggregate purchase price of $7,650,615.00 in immediately
available United States dollars.
c. Closing Documents. The closing documents required by
Sections 13 and 14 shall be delivered to Xxxxxxxx and Com21,
respectively.
d. Delivery Notice. An executed copy of the delivery
notice in the form attached hereto as Annex B shall be delivered to
Xxxxxxxx.
The deliveries specified in this Section 2 shall be deemed to occur
simultaneously as part of a single transaction, and no delivery shall be deemed
to have been made until all such deliveries have been made.
3. Representations and Warranties of Com21. Except as set forth
on the Schedule of Exceptions attached hereto, Com21 hereby represents and
warrants to Xxxxxxxx on the Closing Date and on each Warrant Date (as defined in
the Warrant), as follows:
a. Com21 has been duly incorporated and is validly
existing in good standing under the laws of Delaware or, after the
Closing Date, if another entity has succeeded Com21 in accordance with
the terms hereof, under the laws of one of the states of the United
States.
b. The execution, delivery and performance of this
Agreement and the Warrant by Com21 (including the issuance of the
Investment Securities) have been duly authorized by all requisite
corporate action and no further consent or authorization of Com21, its
Board of Directors or its stockholders is required.
2
8
c. This Agreement has been duly executed and delivered by
Com21 and, when this Agreement is duly authorized, executed and
delivered by Xxxxxxxx, will be a valid and binding agreement enforceable
against Com21 in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and
to general principles of equity.
d. Com21 has full corporate power and authority necessary
to execute and deliver this Agreement and to perform its obligations
hereunder and under the Warrant (including the issuance of the
Investment Securities).
e. No consent, approval, authorization or order of any
court, governmental agency or other body is required for execution and
delivery by Com21 of this Agreement or the performance by Com21 of any
of its obligations hereunder and under the Warrant other than such as
may already have been received.
f. Neither the execution and delivery by Com21 of this
Agreement nor the performance by Com21 of any of its obligations
hereunder and under the Warrant:
(i) violates, conflicts with, results in a breach
of, or constitutes a default (or an event which with the giving
of notice or the lapse of time or both would be reasonably likely
to constitute a default) under (A) the certificates of
incorporation or by-laws of Com21 or any of its subsidiaries, (B)
any decree, judgment, order, law, treaty, rule, regulation or
determination of which Com21 is aware (or would be aware after
due inquiry) of any court, governmental agency or body, or
arbitrator having jurisdiction over Com21 or any of its
subsidiaries or any of their respective properties or assets, (C)
the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar
plan, indenture, lease, mortgage, deed of trust or other
instrument to which Com21 or any of its subsidiaries is a party,
by which Com21 or any of its subsidiaries is bound, or to which
any of the properties or assets of Com21 or any of its
subsidiaries is subject, (D) the terms of any "lock-up" or
similar provision of any underwriting or similar agreement to
which Com21 or any of its subsidiaries is a party or (E) any rule
or regulation of the National Association of Securities Dealers,
Inc. or the NASDAQ (subject to obtaining any Required Consent
under circumstances contemplated by Section 6(b) of this
Agreement) or any rule or regulation of the markets where Com21's
securities are publicly traded applicable to Com21 or the
transactions contemplated hereby; or
(ii) results in the creation or imposition of any
lien, charge or encumbrance upon any Investment Securities or
upon any of the properties or assets of Com21 or any of its
subsidiaries.
3
9
g. Com21 has validly reserved for issuance to Xxxxxxxx
2,450,000 shares of Common Stock pursuant to this Agreement and
2,450,000 shares of Common Stock for issuance upon exercise of the
Warrant. When issued to Xxxxxxxx against payment therefor, each
Investment Security:
(1) will have been duly and validly authorized,
duly and validly issued, fully paid and non-assessable;
(2) will be free and clear of any security
interests, liens, claims or other encumbrances; and
(3) will not have been issued or sold in violation
of any preemptive or other similar rights of the holders of any
securities of Com21.
h. Com21 satisfies all listing and maintenance criteria of
the NASDAQ or, after the Closing Date, has a valid exemption from such
criteria of which it has previously notified Xxxxxxxx in writing. To the
Company's knowledge, no present set of facts or circumstances as of the
date hereof that would (with the passage of time or the giving of notice
or both or neither) cause any of the Common Stock to be delisted from
the NASDAQ. As of the date hereof, the Company knows of no reason that
would prevent all of the Covered Securities (as defined in Section
4(b)), when issued, from being duly listed and admitted for trading on
all of the markets where shares of Common Stock are traded, including
the NASDAQ.
i. There is no pending or, to the best knowledge of Com21,
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over
Com21 or any of its affiliates that would affect the execution by Com21
of, or the performance by Com21 of its obligations under, this Agreement
or the Warrant.
j. Since December 31, 1997, none of Com21's filings with
the United States Securities and Exchange Commission (the "SEC") under
the Securities Act of 1933, as amended (the "Securities Act") or under
Section 13(a) or 15(d) of the Exchange Act (each an "SEC Filing")
contained any untrue statement of a material fact or omitted to state
any material fact necessary in order to make the statements, in the
light of the circumstances under which they were made, not misleading.
Since the date of Com21's most recent SEC Filing, there has not been,
and Com21 is not aware of, any development that is reasonably likely to
result in any material adverse change in the condition, financial or
otherwise, or in the business affairs or prospects of Com21, whether or
not arising in the ordinary course of business.
4
10
k. The offer and sale of the Investment Securities to
Xxxxxxxx pursuant to this Agreement will, subject to compliance by
Xxxxxxxx with the applicable represen tations and warranties contained
in Section 7 hereof and with the applicable covenants and agreements
contained in Section 11 hereof, be made in accordance with the
provisions and requirements of Securities Act Section 4(2) or Regulation
D promulgated under the Securities Act and any applicable state law.
l. As of the date hereof, the authorized capital stock of
Com21 consists of 160,000,000 shares of Common Stock and 5,000,000
shares of preferred stock, par value $.001 ("Preferred Stock"). As of
February 28, 2001, (A) 24,947,696 shares of Common Stock and no shares
of Preferred Stock were issued and outstanding, (B) 6,079,115 shares of
Common Stock are currently reserved and subject to issuance upon the
exercise of outstanding stock options, warrants or other convertible
rights, (C) no shares of Common Stock are held in the treasury of Com21,
(D) up to 1,287,356 additional shares of Common Stock may be issued
under the 1998 Stock Option/Stock Issuance Plan and the 2000 Stock
Option/Stock Issuance Plan (collectively, the "Benefit Plans"), and (E)
up to 469,134 shares of Common Stock may be issued under the 1998
Employee Stock Purchase Plan. As of the Closing Date, before the
transactions contemplated hereby no less than 24,500,000 shares of
Common Stock are issued and outstanding. All of the outstanding shares
of Common Stock are, and all shares of capital stock which may be issued
pursuant to stock options, warrants or other convertible rights will be,
when issued and paid for in accordance with the respective terms
thereof, duly authorized, validly issued, fully paid and non-assessable
and free of any preemptive rights in respect thereof. As of the date
hereof, except as set forth above, and except for shares of Common Stock
or other securities issued upon conversion, exchange, exercise or
purchase associated with the securities, options, warrants, rights and
other instruments referenced above, no shares of capital stock or other
voting securities of Com21 were outstanding, no equity equivalents,
interests in the ownership or earnings of Com21 or other similar rights
were outstanding, and there were no existing options, warrants, calls,
subscriptions or other rights or agreements or commitments relating to
the capital stock of Com21 or any of its subsidiaries or obligating
Com21 or any of its subsidiaries to issue, transfer, sell or redeem any
shares of capital stock, or other equity interest in, Com21 or any of
its subsidiaries or obligating Com21 or any of its subsidiaries to
grant, extend or enter into any such option, warrant, call, subscription
or other right, agreement or commitment. Attached hereto as Schedule
3(l) is a true and correct list as of the date of this Agreement of all
outstanding options, warrants, calls, subscriptions and other rights or
agreements or commitments relating to the issuance of additional shares
of capital stock of Com21 and with respect to each a description of the
number and class of securities and the exercise price thereof; provided
that with respect to options or shares issued or issuable under the
Benefit Plans, such schedule may summarize the total number of shares
subject to, the range of exercise prices under and the average exercise
prices of such options, warrants, calls, or other rights issued under
the Benefit Plans.
5
11
m. Solvency. The sum of the assets of Com21, both at a
fair valuation and at present fair salable value, exceeds its
liabilities, including contingent liabilities, Com21 has sufficient
capital with which to conduct its business as presently conducted and as
proposed to be conducted and Com21 has not incurred debts, and does not
intend to incur debts, beyond its ability to pay such debts as they
mature. For purposes of this paragraph, "debt" means any liability on a
claim, and "claim" means (x) a right to payment, whether or not such
right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured, or (y) a right to an equitable remedy for breach
of performance if such breach gives rise to a payment, whether or not
such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured, or
unsecured. With respect to any such contingent liabilities, such
liabilities are computed at the amount which, in light of all the facts
and circumstances existing at the time, represents the amount which can
reasonably be expected to become an actual or matured liability.
n. Audited Financials. Attached hereto as Annex C is a
true, correct and complete copy of (i) the report of Deloitte & Touche
to the board of directors and stockholders of Com21, dated January 21,
2000, together with the consolidated statements of operations and
comprehensive loss, stockholders' equity and cash flows for the fiscal
years ended December 31, 1997, December 31, 1998, and December 31, 1999,
and the consolidated balance sheets at December 31, 1998 and at December
31, 1999, as such report appears in the Annual Report on Form 10-K for
the fiscal year ended December 31, 1999 (the "Audit Report"), and (ii)
the condensed consolidated statements of operations, and the pro forma
condensed consolidated statements of operations for each of the three
month and twelve month periods ending December 31, 1999 and December 31,
2000, and the condensed consolidated balance sheets as at December 31,
1999 and December 31, 2000, in each case as contained in its press
release filed on February 15, 2001 on Form 8-K with the SEC. To the best
of Com21's knowledge, the unaudited financials attached at subsection
(ii) hereof: (x) were prepared in accordance with the books of account
and other financial records of Com21 and its subsidiaries, (y) present
fairly in all material respects the consolidated financial condition,
results of operations and pro forma results of operations of Com21 and
its subsidiaries as of the dates thereof or for the periods covered
thereby and (z) have been prepared in accordance with U.S. generally
accepted accounting principles applied on a basis consistent with the
past practices of Com21.
o. No Non-Public Information. Xxxxxxxx has not requested
from Com21, and Com21 has not furnished to Xxxxxxxx, any material
non-public information concerning Com21 or its subsidiaries.
4. Registration Provisions.
6
12
a. Com21 shall as soon as practicable and at its own
expense, but in no event later than thirty (30) days after the Closing
Date, file a Registration Statement (as defined below) under the
Securities Act covering the resale of all of the Common Shares and shall
use its best efforts to cause such Registration Statement to be declared
effective as soon as practicable, but not later than the ninetieth
(90th) day following the Closing Date (the "Required Registration
Date"). The obligations to have the Registration Statement declared
effective and to maintain such effectiveness as provided in this Section
4 (subject to any Blackout Period that does not constitute a Blackout
Violation) are referred to herein as the "Registration Requirement."
Pursuant to the preceding sentence, Com21 shall register pursuant to
such Registration Statement not less than the number of shares of Common
Stock equal at least to the sum of (x) the Common Shares issuable under
the Warrant plus (y) 2,450,000 (as of any given date, the "Registrable
Number"). Com21 shall promptly amend such Registration Statement (or, if
necessary, file a new Registration Statement) at any time that the
number of Common Shares issued and issuable under this Agreement and the
Warrant exceeds the number of shares then registered so that the
Registrable Number (as determined on such date) of Common Shares shall
be registered and freely tradable.
b. Each Common Share is a "Covered Security" and the
registration statement filed or required to be filed under the
Securities Act in accordance with Section 4.a hereof is referred to as
the "Registration Statement". Com21 shall provide prompt written notice
to Xxxxxxxx when the Registration Statement has been declared effective
by the SEC.
c. Com21 will use its best efforts to: (A) keep the
Registration Statement effective until the earlier of (x) the later of
(i) the second anniversary of the issuance of the last Covered Security
that may be issued, or (ii) such time as all of the Covered Securities
issued or issuable to Xxxxxxxx can be sold by Xxxxxxxx or any of its
affiliates within a three (3)-month period without compliance with the
registration requirements of the Securities Act pursuant to Rule 144
under the Securities Act ("Rule 144") or (y) the date all of the Covered
Securities issued or issuable shall have been sold by Xxxxxxxx; (B)
prepare and file with the SEC such amendments and supple ments to the
Registration Statement and the prospectus used in connection with the
Registration Statement (as so amended and supplemented from time to
time, the "Prospectus") as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
Covered Securities by Xxxxxxxx or any of its affiliates; (C) furnish
such number of Prospectuses and other documents incident thereto,
including any amendment of or supplement to the Prospectus, as Xxxxxxxx
from time to time may reasonably request; (D) cause all Covered
Securities to be listed on each securities exchange and quoted on each
quotation service on which similar securities issued by Com21 are then
listed or quoted; (E) provide a transfer agent and registrar for all
Covered Securities and a CUSIP number for all Covered Securities; (F)
otherwise comply with all applicable rules and regulations of the SEC,
the NASDAQ and any other exchange or
7
13
quotation service on which the Covered Securities are obligated to be
listed or quoted under this Agreement; and (G) file the documents
required of Com21, if any, and otherwise obtain and maintain requisite
blue sky clearance in (x) New York, Delaware and all other jurisdictions
in which any of the shares of Common Stock were originally sold and (y)
all other states specified in writing by Xxxxxxxx, provided, however,
that as to this clause (y), Com21 shall not be required to qualify to do
business or consent to service of process in any state in which it is
not now so qualified or has not so consented. Xxxxxxxx shall have the
right to approve the description of the plan of distribution and all
other references to Xxxxxxxx contained in any Registration Statement and
any Prospectus; provided, however, that Xxxxxxxx shall approve or reject
such descriptions or references within two (2) Trading Days after being
provided with the final forms of such descriptions and references, and
if such approval or rejection is not given within two Trading Days,
Xxxxxxxx shall be deemed to have given such approval.
d. Com21 shall furnish to Xxxxxxxx upon request a
reasonable number of copies of a supplement to or an amendment of any
Prospectus as may be necessary in order to facilitate the public sale or
other disposition of all or any of the Covered Securities by Xxxxxxxx or
any of its affiliates pursuant to the Registration Statement.
e. With a view to making available to Xxxxxxxx and its
affiliates the benefits of Rule 144 and Form S-3 under the Securities
Act, Com21 covenants and agrees to: (A) make and keep available adequate
current public information (within the meaning of Rule 144(c))
concerning Com21, until the earlier of (x) the second anniversary of the
issuance of the last Covered Security to be issued or (y) such date as
all of the Covered Securities shall have been resold by Xxxxxxxx or any
of its affiliates; and (B) furnish to Xxxxxxxx upon request, as long as
Xxxxxxxx owns any Covered Securities, (x) a written statement by Com21
that it has complied with the reporting requirements of the Securities
Act and the Exchange Act, (y) a copy of the most recent annual or
quarterly report of Com21, and (z) such other information as may be
reasonably requested in order to avail Xxxxxxxx and its affiliates of
Rule 144 or Form S-3 with respect to such Covered Securities.
f. Notwithstanding anything else in this Section 4, if, at
any time during which a Prospectus is required to be delivered in
connection with the sale of any Covered Security, Com21 determines in
good faith that a development has occurred or a condition exists as a
result of which the Registration Statement or the Prospectus contains a
material misstatement or omission, or that a material transaction in
which Com21 is engaged or proposes to engage would require an amendment
to the Registration Statement or a supplement to the Prospectus and the
disclosure of such transaction would be premature or injurious to the
consummation of the transaction, Com21 will immediately notify Xxxxxxxx
thereof by telephone and in writing. Upon receipt of such notification,
Xxxxxxxx and its affiliates will immediately suspend all offers and
sales of any Covered Security pursuant to the Registration Statement. In
such event, Com21 will
8
14
amend or supplement the Registration Statement as promptly as
practicable and will use its best efforts to take such other steps as
may be required to permit sales of the Covered Securities thereunder by
Xxxxxxxx and its affiliates in accordance with applicable federal and
state securities laws. Com21 will promptly notify Xxxxxxxx after it has
determined in good faith that such sales have become permissible in such
manner and will promptly deliver copies of the Registration Statement
and the Prospectus (as so amended or supplemented) to Xxxxxxxx in
accordance with paragraphs (c) and (d) of this Section 4.
Notwithstanding the foregoing, (A) under no circumstances shall Com21 be
entitled to exercise its right to suspend sales of any Covered
Securities pursuant to the Registration Statement more than twice in any
twelve (12)-month period, (B) the period during which such sales may be
suspended (each a "Blackout Period") shall not exceed thirty (30) days,
and (C) no Blackout Period may commence less than thirty (30) days after
the end of the preceding Blackout Period. If any Blackout Period shall
exceed the duration or frequency limits set forth in clause (A), (B) or
(C) (a "Blackout Violation"), then on each such occasion the number of
shares issuable pursuant to the Warrant shall be increased by an amount
equal to five percent (5%) of the sum of the number of outstanding
Common Shares held by Xxxxxxxx at that time and the number of Common
Shares then issuable pursuant to the Warrant at that time. If the
Blackout Violation continues for more than thirty (30) days beyond the
first day of the Blackout Violation, or if a second Blackout Violation
occurs before the first anniversary of the first day of the original
Blackout Violation, then the number of shares issuable pursuant to the
Warrant shall again be increased by an amount equal to five percent (5%)
of the sum of the number of outstanding Common Shares held by Xxxxxxxx
at that time and the number of Common Shares then issuable pursuant to
the Warrant at that time, provided that not more than one such
additional increase shall take effect in any twelve (12)-month period
and provided further that a Blackout Violation that continues on the
anniversary of the first day of such Blackout Violation shall be treated
as a new Blackout Violation hereunder. The provisions of this section
shall be in addition to any other remedies that may be available to
Xxxxxxxx under law or under this Agreement.
Upon the commencement of a Blackout Period pursuant to this
Section 4, Xxxxxxxx will notify Com21 of any contract to sell, assign,
deliver or otherwise transfer any Covered Security (each a "Sales
Contract") that Xxxxxxxx or any of its affiliates has entered into prior
to the commencement of such Blackout Period and that would require
delivery of such Covered Securities during such Blackout Period, which
notice will contain the aggregate sale price and volume of Covered
Securities pursuant to such Sales Contract. Upon receipt of such notice,
Com21 will notify Xxxxxxxx by the close of business on the next Trading
Day of its election either (i) to terminate the Blackout Period and, as
promptly as practicable, amend or supplement the Registration Statement
or the Prospectus in order to correct the material misstatement or
omission and deliver to Xxxxxxxx copies of such amended or supplemented
Registration Statement and Prospectus in accordance with paragraphs (c)
and (d) of this Section 4, or (ii) to continue the Black out Period in
accordance with this paragraph. If Com21 elects to continue the Blackout
9
15
Period (and, in any case, if a Blackout Violation occurs), and Xxxxxxxx
or any of its affiliates are therefore unable to consummate the sale of
Covered Securities pursuant to the Sales Contract (such unsold Covered
Securities being the "Unsold Securities"), Com21 will promptly indemnify
each Xxxxxxxx Indemnified Party (as such term is defined in Section
17(a) below) against any Proceeding (as such term is defined in Section
17(a) below) that each Xxxxxxxx Indemnified Party may incur arising out
of or in connection with Xxxxxxxx'x breach or alleged breach of any such
Sales Contract, and Com21 shall reimburse each Xxxxxxxx Indemnified
Party for any reasonable costs or expenses (includ ing reasonable legal
fees) incurred by such party in investigating or defending any such
Proceeding (collectively, the "Indemnification Amount"); provided,
however, that the Indemnification Amount shall be reduced by an amount
equal to the number of Unsold Securities multiplied by the positive
difference, if any, between (x) the actual per share price received by
Xxxxxxxx or any of its affiliates upon the sale of the Unsold Securities
(if such sale occurs within three Trading Days of the end of the
Blackout Period) or the closing sale price of the Common Stock on NASDAQ
or other national securities exchange on which the Common Stock is then
listed on the third Trading Day after the end of the Blackout Period (if
the unsold Securities are not sold by Xxxxxxxx or any of its affiliates
within three Trading Days of the end of the Blackout Period) and (y) the
per share sales price for the Unsold Securities provided in such Sales
Contract.
g. In addition to any other remedies available to Xxxxxxxx
under this Agreement, if the Registration Statement has not been
declared effective by the Required Registration Date or such
Registration Statement is not available with respect to all Covered
Securities (except during a Blackout Period or a Blackout Violation),
then the number of shares issuable pursuant to the Warrant shall be
increased by an amount equal to five percent (5%) of the sum of the
number of outstanding Common Shares held by Xxxxxxxx at that time and
the number of Common Shares then issuable pursuant to the Warrant at
that time for each month (or portion thereof), compounded monthly, that
such Registration Statement shall not have been declared effective or
such Registration Statement is not available with respect to all Covered
Securities (except during a Blackout Period or a Blackout Violation).
5. "Market Stand-Off" Agreement. If requested by Com21 and an
underwriter in a firm commitment underwritten public offering of Common Stock
with net proceeds of at least $25,000,000 to Com21, after underwriter's
discounts or commissions and other fees or expenses, Xxxxxxxx shall not sell or
otherwise transfer or dispose of any Common Stock (other than Common Stock
included in the registration) during the ninety (90) day period (or such shorter
period, if so notified by Com21 in writing) following the effective date of a
registration statement of Com21 filed under the Securities Act, provided that:
a. such agreement shall only apply to registration
statements of Com21 including securities to be sold on its behalf to the
public in an underwritten offering where the effective date of any such
registration statement shall not occur before
10
16
the first anniversary of the effective date of the immediately prior
registration statement with respect to which Xxxxxxxx was required to
provide such agreement;
b. all officers and directors of Com21 have entered into
similar agreements;
c. all other purchasers of Common Stock (other than
subsequent holders who acquire such securities through bona fide
purchases in the public markets or holders that, individually or
together as part of an affiliated group, hold less than 100,000 shares
of Common Stock) or Preferred Stock (or any securities or other
instruments convertible into Common Stock) have entered into agreements
substantially similar to this section;
d. Com21 shall (and shall cause such underwriter to) use
best efforts to cause such stand-off period not to exist or, if it does
exist, to terminate at the earliest practicable date;
x. Xxxxxxxx shall own more than 100,000 shares on the
effective date of such registration statement; and
f. the Warrant shall have not expired. . The obligations
described in this Section 5 shall not apply to a registration relating
solely to employee benefit plans on Form S-1 or Form S-8 or similar
forms that may be promulgated in the future, or a registration relating
solely to a transaction on Form S-4 or similar forms that may be
promulgated in the future.
6. Exercise of Warrant.
a. The Warrant is exercisable into Common Shares in
accordance with the terms and conditions set forth in the Warrant. The
form of the "Warrant Exercise Notice" to be executed and delivered by
Xxxxxxxx to Com21 as specified therein is attached as Exhibit 1 to the
Warrant and the form of the "Warrant Exercise Delivery Notice" to be
executed and delivered by Com21 to Xxxxxxxx as specified therein is
attached as Exhibit 2 to the Warrant.
b. In the event the number of Common Shares issued and/or
issuable on any date (a "Trigger Date") without regard to any 65 Day
Notice requirements, would result in Xxxxxxxx receiving more than
seventeen and one-half percent (17.5%) of the shares of Common Stock
outstanding as of the date of this Agreement (the "Original Number"),
Com21 (A) shall not issue Common Shares (the "Issuance Blockage") to the
extent that the total number of Common Shares issued hereunder would
exceed nineteen and ninety-nine one-hundredths percent (19.99%) of the
Original Number and such circumstance would require the approval (the
"Required Consent") of the holders of
11
17
Common Stock pursuant to the listing requirements or rules of the NASDAQ
(whether or not listed on NASDAQ) (or such other U.S. national
securities exchange on which Common Stock is then listed), (B) shall
notify Com21's stockholders of a stockholder meeting for the purpose of
voting on the Required Consent within twenty (20) Trading Days from the
Trigger Date, which meeting shall be held on or before the sixtieth
(60th) calendar day after the Trigger Date, and (C) shall otherwise use
its best efforts to obtain, on or before the sixtieth (60th) day after
the Trigger Date, the Required Consent for the issuance of all Common
Shares issued or issuable under this Agreement (including, but not
limited to, all previously issued Common Shares and any unexercised
rights under the Warrant) including, but not limited to, recommending to
Com21's stockholders that such stockholders give the Required Consent
and not withdrawing such recommendation. If the Required Consent has not
been obtained within such sixty (60)-day period, or Com21 otherwise does
not have sufficient authorized shares to fulfill its obligation,
Xxxxxxxx shall have the right to:
(x) instruct Com21 to apply to the payment required by Section 1
of the Warrant such number of the shares of Common Stock
otherwise issuable to Xxxxxxxx upon such exercise as shall be
specified by Xxxxxxxx, in which case an amount equal to the
excess of (i) (A) the daily volume-weighted average price on the
NASDAQ or, if no such sale takes place on such date, the average
of the closing bid and asked prices on the NASDAQ thereof on
such date, in each case as reported by Bloomberg, L.P. (or by
such other entity as Xxxxxxxx and Com21 may agree), or (B) if
such Common Stock is not then listed or admitted to trading on
the NASDAQ, the higher of (1) the book value thereof as
determined by any firm of independent public accountants of
recognized standing selected by the Board of Directors of the
Issuer as of the last day of any month ending within sixty (60)
days preceding the date as of which the determination is to be
made or (2) the fair value thereof determined in good faith by
the Board of Directors of the Issuer as of a date which is
within eighteen (18) days of the date as of which the
determination is to be made (the "Average Price") over (ii) the
portion of the payment required by Section 1 of the Warrant
attributable to such shares shall be deemed to have been paid to
Com21 and the number of Common Shares issuable upon such
exercise shall be reduced by such specified number, provided,
however, that such instructions shall not be honored and shall
have no effect to the extent that as a result of following such
instructions, the total number of Common Shares issued hereunder
would cause a Required Consent to be required;
(y) exercise any portion of the Warrant, the exercise of which
would result in the total number of shares issued hereunder
exceeding nineteen and ninety-nine one-hundredths percent
(19.99%) of the Original Number or that number which is
unavailable for issuance, as the case may be, into the rights
described herein (the "Excess Rights"). Xxxxxxxx shall exercise
such right to obtain Excess Rights by delivering one or more
written notices in the form attached hereto as Annex D (an
12
18
"Excess Rights Notice") to Com21 from time to time. The date an
Excess Rights Notice is delivered shall be an "Excess Notice
Date." The stated value of the Excess Rights shall be an amount
equal to the product of (A) the positive excess of the Average
Price on the Excess Notice Date over the Warrant Price (as
defined in the Warrant) per Common Share and (B) the number of
Common Shares that would be issuable in respect of such exercise
but for the Issuance Blockage (without regard to any requirement
to deliver a 65 Day Notice). From creation until the first
anniversary of the date on which the Required Consent is
obtained, Excess Rights may, in whole or in part, from time to
time, in any combination be applied in lieu of payment, with
each dollar of stated value of Excess Rights applied as a dollar
of payment, of the Warrant Price under Section 1 of the Warrant,
or
(z) any combination of clauses (x) and (y).
c. The aggregate number of Common Shares issuable upon
exercise of the Warrant shall not exceed the Maximum Number of shares of
Common Stock. The "Maximum Number" equals the sum of zero plus the
Exercisable Number. The "Exercisable Number" is initially zero and
thereafter may be increased upon expiration of a sixty-five (65) day
period (the "Notice Period") after Xxxxxxxx delivers a notice (a"65 Day
Notice") to Com21 designating an aggregate number of Common Shares in
excess of the Maximum Number which shall be issuable upon exercise of
the Warrant. Com21 shall deliver a notice (an "Increase Notice") stating
the aggregate number of Common Shares outstanding as of the last day of
the preceding month, the second preceding month and the increase, if any
(the "Increase"), from the second preceding month (or in the case of the
last day of the month immediately following the Closing Date, the number
of shares outstanding specified in Section 3(l)) to the preceding month.
A 65 Day Notice may be given at any time. Unless expressly waived by
Xxxxxxxx, Com21 shall deliver an Increase Notice to Xxxxxxxx on or
before the 10th day of every calendar month from and including the
Closing Date. From time to time following the Notice Period, Common
Stock may be issued to Xxxxxxxx on any Business Day for any quantity of
Common Stock, such that the aggregate number of shares of Common Stock
issued hereunder is less than or equal to the Maximum Number. Nothing in
this Section 6(d) shall limit or apply to the creation or conversion of
Excess Rights under Section 6(c)(y).
d. Com21 shall use best efforts to obtain from the Com21
stockholders, if required, the requisite authority to issue Common
Shares to Xxxxxxxx in accordance with the terms of this Agreement.
7. Representations and Warranties of Xxxxxxxx. Xxxxxxxx hereby
represents and warrants to Com21 on the Closing Date:
13
19
x. Xxxxxxxx has been duly incorporated and is validly
existing in good standing under the laws of Bermuda.
b. The execution, delivery and performance of this
Agreement by Xxxxxxxx have been duly authorized by all requisite
corporate action and no further consent or authorization of Xxxxxxxx,
its Board of Directors or its shareholders is required. This Agreement
has been duly executed and delivered by Xxxxxxxx and, when duly
authorized, executed and delivered by Com21, will be a valid and binding
agreement enforceable against Xxxxxxxx in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity.
x. Xxxxxxxx understands that no United States federal or
state agency has passed on, reviewed or made any recommendation or
endorsement of the Investment Securities.
d. Subject to Section 4 hereof, Xxxxxxxx understands that
the Investment Securities have not been registered under the Securities
Act and may not be re-offered or resold in the United States other than
pursuant to registration thereunder or an available exemption therefrom.
x. Xxxxxxxx is an "accredited investor" as such term is
defined in Regulation D promulgated under the Securities Act.
x. Xxxxxxxx is purchasing the Investment Securities for
its own account for investment only and not with a view to, or for
resale in connection with, the public sale or distribution thereof in
the United States, except pursuant to sales registered under the
Securities Act or an exemption therefrom.
x. Xxxxxxxx understands that the Investment Securities are
being or will be offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal
securities laws and that Com21 is relying on the truth and accuracy of,
and Xxxxxxxx'x compliance with, the representations, warranties,
agreements, acknowledgments and understandings of Xxxxxxxx set forth
herein in order to determine the availability of such exemptions and the
eligibility of Xxxxxxxx to acquire the Investment Securities.
8. Right of First Refusal. Subject to the terms and conditions
specified in this Section 8, Com21 hereby grants to (i) Xxxxxxxx, (ii) any
wholly-owned subsidiary or affiliate of Xxxxxxxx, or (iii) any of Xxxxxxxx'x
designees, which designees, along with the entities in clauses (i) and (ii)
above, then hold not less than one-half of the number of shares of Common Stock
originally issued pursuant to this Agreement (the "First Refusal Stockholders"),
a right of first offer with respect to future sales by Com21 of its Offered
Shares (as hereinafter defined).
14
20
Each time Com21 has a bona fide proposal from a third party to acquire any
shares of, or securities convertible into or exercisable or exchangeable for any
shares of, any class of its capital stock ("Offered Shares") and Com21 wishes to
sell the Offered Shares to such third party, Com21 shall first offer such
Offered Shares to the First Refusal Stockholders in accordance with the
following provisions:
a. Com21 shall deliver a notice in accordance with Section
19 of this Agreement ("Offer Notice") to Xxxxxxxx stating (i) its bona
fide intention to offer such Offered Shares, (ii) the number of such
Offered Shares to be offered, (iii) the price and terms, if any, upon
which it proposes to offer such Offered Shares, and (iv) the identity of
the proposed purchasers of such shares and, if requested by Xxxxxxxx,
such purchasers' affiliates and associates.
b. For eight (8) Trading Days after delivery of the Offer
Notice, Com21 shall negotiate exclusively and in good faith with the
First Refusal Stockholders with respect to the proposed sale of Offered
Shares and Com21 shall not enter into or continue negotiations with,
respond to, furnish information to, or consummate any transaction with
any person or entity concerning any transaction regarding any shares of,
or securities convertible into or exercisable or exchangeable for any
shares of, any class of its capital stock.
c. Within eight (8) Trading Days after delivery of the
Offer Notice, the First Refusal Stockholders may elect by delivering a
written notice to Com21, to purchase or obtain, at the price and on the
terms specified in the Offer Notice (or on terms that are substantially
similar to, or more favorable to Com21 than, the terms contained in the
Offer Notice), all (and not less than all unless a third party agrees to
purchase the remainder of such securities on terms that are
substantially similar to, or more favorable to Com21 than, the terms
contained in the Offer Notice) of the Offered Shares. If the Offer
Notice specifies consideration other than cash is to be paid for the
Offered Securities, the First Refusal Stockholders may, at their sole
option, (if they choose to purchase such Offered Shares) deliver either
of (i) such consideration or (ii) cash equal to the fair market value of
such consideration on the date and at the time such offer is accepted.
The closing of any such transaction shall occur not later than eight (8)
Trading Days after Com21 receives written notice of such election. If
the First Refusal Stockholders do not so elect within eight (8) Trading
Days after delivery of the Offer Notice, then Com21 may sell the Offered
Shares to any Person at the price and on terms that are no less
favorable to Com21 than the terms contained in the Offer Notice within
seventy (70) days after the date of the Offer Notice.
d. The right of first offer in this Section 8 shall not be
applicable to any issuance or sale of any of the following securities:
15
21
(i) Common Stock issued as consideration for the
acquisition of at least fifty percent (50%) of the voting capital
stock or assets of a bona fide operating company in a similar or
complementary line of business to that of Com21, as determined
reasonably and in good faith by Com21's board of directors
whether through purchase, merger, consolidation, tender offer or
otherwise, provided that the purpose of Com21 entering into any
such transaction shall not be to raise capital, directly or
indirectly, or otherwise to avoid the requirements of this
Section 8,
(ii) Common Stock issued pursuant to any stock
split, dividend or distribution payable in additional shares of
Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock without payment of any
consideration by such holder,
(iii) Common Stock issuable or issued to employees,
consultants or directors of Com21 directly or pursuant to a stock
option plan, employee stock purchase plan or restricted stock
plan, or other similar arrangements related to compensation for
services in effect on the date of this Agreement or approved by
Com21's board of directors, in each case in the ordinary course
of business consistent with Com21's past practice, provided that
the purpose of Com21 entering into any such transaction shall not
be to raise capital, directly or indirectly, or otherwise to
avoid the requirements of this Section 8,
(iv) Common Stock issued in a bona fide firm
commitment underwritten offering to the public with net proceeds
of at least $25,000,000 to Com21, after underwriter's discounts
or commissions and other fees or expenses,
(v) Common Stock issued in connection with a
Combination,
(vi) Common Stock issued or issuable pursuant to a
recapitalization or as a dividend or distribution on shares of
equity securities, provided that the purpose of Com21 entering
into any such transaction shall not be to raise capital, directly
or indirectly, or otherwise to avoid the requirements of this
Section 8, or
(vii) capital stock or convertible securities (or
warrants or options therefor) issued or issuable to vendors,
lessors, customer or suppliers or pursuant to any equipment
leasing arrangement, provided that the aggregate amount of stock
issued or issuable pursuant to this subsection (vii) shall not
exceed 3% of the number of shares of Common Stock then
outstanding on a fully diluted basis.
16
22
e. The right of first offer hereunder shall be of no
further force or effect from and after the first day upon which the
number of Common Shares held by Xxxxxxxx together with the number of
Common Shares then issuable under the Warrant shall be less than five
percent (5%) of the Original Number, as such numbers may be adjusted for
stock splits, stock dividends, reverse stock splits, recapitalizations
or other, similar adjustments.
9. Covenants of Com21. Com21 covenants and agrees with Xxxxxxxx
as follows:
a. For so long as Xxxxxxxx owns any Investment Securities,
and in any case for a period of one (1) year thereafter, Com21 will use
its best efforts to (i) maintain the eligibility of the Common Stock for
listing on the NASDAQ and (ii) regain the eligibility of the Common
Stock for listing or quotation on all markets and exchanges including
the NASDAQ in the event that the Common Stock is delisted by the NASDAQ
or any other applicable market or exchange; and will use commercially
reasonable efforts to (iii) cause the representations and warranties
contained in Section 3 to be and remain true and correct.
b. Com21 will provide Xxxxxxxx with an opportunity to
review and comment on any public disclosure by Com21 of information
regarding this Agreement and the transactions contemplated hereby, prior
to such public disclosure. No later than five (5) Trading Days following
the Closing Date, Com21 shall make a public disclosure of the material
terms of this Agreement in consultation with Xxxxxxxx. Beginning on the
date hereof and for so long as Xxxxxxxx owns any Investment Securities
and for a period of ninety (90) days thereafter, Com21 will (i) promptly
notify Xxxxxxxx immediately following any public disclosure by Com21 of
material information regarding Com21 or its financial condition,
prospects or results of operation and (ii) provide Xxxxxxxx with copies
of all SEC filings.
c. Com21 will make all filings required by law with
respect to the transactions contemplated hereby.
d. Prior to or simultaneously with the filing of each of
its quarterly reports on Form 10-Q with the SEC, Com21 shall cause
Deloitte & Touche (or its auditor at the time) to deliver to Xxxxxxxx a
review report relating to the final consolidated unaudited financial
statements contained therein, prepared in accordance with Statements of
Auditing Standard No. 71.
e. If on any date the Registrable Number exceeds the
number of Common Shares then reserved for issuance, then Com21 shall
reserve for issuance within
17
23
three (3) Trading Days of such date a number of Common Shares not less
than the Registrable Number.
f. Com21 shall use its best efforts to ensure that all
Common Shares issued and issuable under this Agreement (including all
shares issued or issuable under the Warrant) become listed as soon as
practicable and thereafter remain listed and/or quoted. Moreover, Com21
will immediately notify Xxxxxxxx in writing, pursuant to Section 19,
upon approval of listing or in the event that any such shares are
delisted from NASDAQ. If any such shares are delisted or removed from
quotation, Com21 shall use its best efforts to cause such shares to
again be listed or quoted at the earliest possible date.
g. Com21 shall use commercially reasonable efforts to
cause the Common Shares to be eligible for book-entry transfer through
The Depository Trust Company (or any successor thereto) as soon as
practicable after the date of this Agreement and thereafter to use
commercially reasonable efforts to maintain such eligibility.
10. Consolidation, Merger, Etc. In case Com21 shall be a party to
any transaction with any other entity or entities (the "Acquirer") providing for
(i) any acquisition of Com21 by means of merger or other form of corporate
reorganization in which outstanding shares of Com21 are exchanged for securities
or other consideration issued, or caused to be issued, by the acquiring entity
or its subsidiary or (ii) a sale of all or substantially all of the assets of
Com21 (on a consolidated basis) in a single transaction or series of related
transactions or (iii) any other transaction or series of related transactions by
Com21 in which the power to cast the majority of the eligible votes at a meeting
of Com21's stockholders at which directors are elected is transferred to a
single entity or group acting in concert (each of the foregoing being referred
to as a "Combination"), Xxxxxxxx and its assigns shall have the rights set forth
in the Warrant regarding Combinations in addition to the rights contained in
this Agreement. Com21 agrees that it will not enter into an agreement with an
Acquirer for a Combination unless such agreement expressly obligates the
Acquirer to assume all of Com21's obligations under this Agreement and the
Warrant and to give Xxxxxxxx written notice that the Acquirer has assumed such
obligations. Com21 shall provide Xxxxxxxx with written notice of any proposed
Combination as soon as the existence of a proposed Combination is publicly
announced, and shall notify Xxxxxxxx promptly of any material developments with
respect to such Combination that are made public, including reasonable advance
notice of the date the Combination is expected to become effective.
11. Covenants of Xxxxxxxx. Xxxxxxxx hereby covenants and agrees
with Com21 that:
a. Neither Xxxxxxxx nor any of its affiliates nor any
person acting on its or their behalf will at any time offer or sell any
Investment Securities other than
18
24
pursuant to registration under the Securities Act or pursuant to an
available exemption therefrom.
x. Xxxxxxxx shall not engage an underwriter for an
underwritten public offering of Common Shares, unless such underwriter
shall be reasonably satisfactory to Com21.
12. Legend. Subject to Section 4, Xxxxxxxx understands that the
certificates or other instruments representing the Investment Securities shall
bear a restrictive legend in the following form (and a stop transfer order may
be placed against transfer of such certificates or other instruments):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, ASSIGNED OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT IN THE CIRCUMSTANCES REQUIRED.
The legend set forth above shall be removed and Com21 shall issue
a certificate without such legend to any holder of Investment Securities if,
unless otherwise required by state securities laws, (a) such shares are sold
pursuant to an effective Registration Statement under the Securities Act, or (b)
such shares may be publicly sold pursuant to an exemption from such registration
requirements without restriction.
13. Conditions Precedent to Xxxxxxxx'x Obligations. The
obligations of Xxxxxxxx hereunder are subject to the performance by Com21 of its
obligations hereunder and to the satisfaction of the following additional
conditions precedent, unless expressly waived in writing by Xxxxxxxx:
a. On the Closing Date, (i) the representations and
warranties made by Com21 in this Agreement shall be true and correct;
(ii) Com21 shall have complied fully with all of the covenants and
agreements in this Agreement; and (iii) Xxxxxxxx shall have received a
certificate of the Chief Executive Officer and the Chief Financial
Officer of Com21 dated such date and to such effect.
b. On the Closing Date, Com21 shall have delivered to
Xxxxxxxx an opinion of Xxxxxxx, Phleger & Xxxxxxxx LLP reasonably
satisfactory to Xxxxxxxx, dated the date of delivery, substantially in
the form attached hereto.
19
25
c. On or before the Closing Date, Com21 shall have made an
application to list and admit for trading the Registrable Number on the
NASDAQ.
d. On the Closing Date, before the transactions
contemplated hereby not less than 24,500,000 shares of Common Stock
shall be issued and outstanding.
e. By the Closing Date, Com21 shall have filed a Form 8-K
with the SEC with respect to any material and previously non-public
information contained in the Schedule of Exceptions.
14. Conditions Precedent to Com21's Obligations. The obligations
of Com21 hereunder are subject to the performance by Xxxxxxxx of its obligations
hereunder and to the satisfaction (unless expressly waived in writing by Com21)
of the additional conditions precedent that, on the Closing Date: (i) the
representations and warranties made by Xxxxxxxx in this Agreement shall be true
and correct; (ii) Xxxxxxxx shall have complied fully with all the covenants and
agreements in this Agreement; and (iii) Com21 shall have received on such date a
certificate of an appropriate officer of Xxxxxxxx dated such date and to such
effect.
15. Fees and Expenses. Each of Xxxxxxxx and Com21 agrees to pay
its own expenses incident to the performance of its obligations hereunder,
including, but not limited to the fees, expenses and disbursements of such
party's counsel, except as is otherwise expressly provided in this Agreement.
16. Non-Performance. If on the Closing Date Com21 shall fail to
deliver the Investment Securities to Xxxxxxxx required to be delivered pursuant
to this Agreement for any reason other than the failure of any condition
precedent to Com21's obligations hereunder or the failure by Xxxxxxxx to comply
with its obligations hereunder, then Com21 shall:
a. indemnify and hold Xxxxxxxx harmless against any loss,
claim or damage (including without limitation, incidental and
consequential damages) arising from or as a result of such failure by
Com21; and
b. reimburse Xxxxxxxx for all of its reasonable
out-of-pocket expenses, including fees and disbursements of its counsel,
incurred by Xxxxxxxx in connection with this Agreement and the
transactions contemplated herein and therein.
17. Indemnification.
a. Indemnification of Xxxxxxxx. Com21 hereby agrees to
indemnify Xxxxxxxx and each of its officers, directors, employees,
agents and affiliates and each person that controls (within the meaning
of Section 20 of the Exchange Act) any of the foregoing persons (each a
"Xxxxxxxx Indemnified Party") against any claim, demand, action,
liability, damages, loss, cost or expense (including, without
limitation, reasonable
20
26
legal fees and expenses) (a "Proceeding"), that it may incur in
connection with any of the transactions contemplated hereby arising out
of or based upon:
(1) any untrue or alleged untrue statement of a
material fact in any Registration Statement, the
Prospectus or any SEC Filing incorporated by reference
into a Registration Statement or any SEC Filing made
after the date of this Agreement and before any
Registration Statement is filed with the SEC or this
Agreement by Com21 or any of its affiliates or any
person acting on its or their behalf or omission or
alleged omission to state therein or herein any material
fact necessary in order to make the statements, in the
light of the circumstances under which they were made,
not misleading by Com21 or any of its affiliates or any
person acting on its or their behalf, provided that the
indemnity provided in this Section 17(a)(1) shall not
apply to any information both supplied by and approved
in its final form by Xxxxxxxx;
(2) any of the representations or warranties
made by Com21 herein or under the Warrant being untrue
or incorrect at the time such representation or warranty
was made; and
(3) any breach or non-performance by Com21 of
any of its covenants, agreements or obligations under
this Agreement;
and Com21 hereby agrees to reimburse each Xxxxxxxx Indemnified Party for
any reason able legal or other expenses incurred by such Xxxxxxxx
Indemnified Party in investigating or defending any such Proceeding;
provided, however, that the foregoing indemnity shall not apply to any
Proceeding to the extent that it arises out of or is based upon the
gross negligence or wilful misconduct of Xxxxxxxx in connection
therewith.
b. Indemnification of Com21. Xxxxxxxx hereby agrees to
indemnify Com21 and each of its officers, directors, employees, agents
and affiliates and each person that controls (within the meaning of
Section 20 of the Exchange Act) any of the foregoing persons (each a
"Com21 Indemnified Party") against any Proceeding, that it may incur in
connection with any of the transactions contemplated hereby arising out
of or based upon:
(1) any untrue or alleged untrue statement of a
material fact by Xxxxxxxx or any of its affiliates or
any person acting on its or their behalf or omission or
alleged omission to state any material fact necessary in
order to make the statements, in the light of the
circumstances under which they were made, not misleading
by Xxxxxxxx or any of its affiliates or any person
acting on its or their behalf;
21
27
(2) any of the representations or warranties
made by Xxxxxxxx herein being untrue or incorrect at the
time such representation or warranty was made; and
(3) any breach or non-performance by Xxxxxxxx of
any of its covenants, agreements or obligations under
this Agreement;
and Xxxxxxxx hereby agrees to reimburse each Com21 Indemnified Party for
any reason able legal or other expenses incurred by such Com21
Indemnified Party in investigating or defending any such Proceeding;
provided, however, that the foregoing indemnity shall not apply to any
Proceeding to the extent that it arises out of or is based upon the
gross negligence or wilful misconduct of Com21 in connection therewith.
c. Conduct of Claims.
(1) Whenever a claim for indemnification shall
arise under this Section 17, the party seeking
indemnification (the "Indemnified Party"), shall notify
the party from whom such indemnification is sought (the
"Indemnifying Party") in writing of the Proceeding and
the facts constituting the basis for such claim in
reasonable detail;
(2) Upon delivery of such notice, such
Indemnified Party shall have a duty to take all
reasonable steps to mitigate any losses, liabilities,
costs, charges and expenses relating to any such
Proceeding;
(3) Such Indemnifying Party shall have the right
to retain the counsel of its choice in connection with
such Proceeding and to participate at its own expense in
the defense of any such Proceeding; provided, however,
that counsel to the Indemnifying Party shall not (except
with the consent of the relevant Indemnified Party) also
be counsel to such Indemnified Party. In no event shall
the Indemnifying Party be liable for fees and expenses
of more than one counsel (in addition to any local
counsel) separate from its own counsel for all
Indemnified Parties in connection with any one action or
separate but similar or related actions in the same
jurisdiction arising out of the same general allegations
or circum stances; and
(4) No Indemnifying Party shall, without the
prior written consent of the Indemnified Parties (which
consent shall not be unrea sonably withheld), settle or
compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or
proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever in respect of
which indemnification could be sought
22
28
under this Section unless such settlement, compromise or
consent (A) includes an unconditional release of each
Indemnified Party from all liability arising out of such
litigation, investigation, proceeding or claim and (B)
does not include a statement as to or an admission of
fault, culpability or a failure to act by or on behalf
of any Indemnified Party.
18. Survival of the Representations, Warranties, etc. The
respective representations, warranties, and agreements made herein by or on
behalf of the parties hereto shall remain in full force and effect, regardless
of any investigation made by or on behalf of the other party to this Agreement
or any officer, director or employee of, or person controlling or under common
control with, such party and will survive delivery of and payment for any
Investment Securities issuable hereunder.
19. Notices. All communications hereunder shall be in writing and
delivered as set forth below.
a. If sent to Xxxxxxxx, all communications shall be
delivered by hand, sent by reputable overnight courier or transmitted
and confirmed by facsimile to Xxxxxxxx, unless otherwise notified in
writing of a substitute address, at:
Xxxxxxxx International, Ltd.
c/o A. S. & K. Services Ltd.
Xxxxx Xxxxx
00 Xxxxx Xxxxxx
Xxxxxxxx XX XX
Bermuda
Attention: Xxxxxxxx Xxxxxx, Corporate Administrator
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy to:
Xxxxxxxx Asset Management, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
23
29
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0000 Xxx Xxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To the extent that any funds shall be delivered to Xxxxxxxx by wire
transfer, unless otherwise instructed by Xxxxxxxx, such funds should be
delivered in accordance with the following wire instructions:
Xxxxxxxx International, Ltd.
Bank: HSBC Bank USA, New York, NY
ABA Number: 000-000-000
For the benefit of: Xxxxxx Brothers Inc.
Account Number: 000-000-000
For credit to: Xxxxxxxx International, Ltd.
Account Number: 000-000-000
b. If sent to Com21, all communications shall be delivered
by hand, sent by reputable overnight courier or transmitted and
confirmed by facsimile to Com21, unless otherwise notified in writing of
a substitute address, at:
Com21, Inc.
000 Xxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
24
30
Xxxxxxx, Phleger & Xxxxxxxx LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To the extent that any funds shall be delivered to Com21 by wire
transfer, unless otherwise instructed by Com21, such funds should be
delivered in accordance with the following wire instructions:
Bank: Citibank, F.S.B.
For the benefit of:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP Client Trust Account
Xxx Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
ABA Number: 000000000
Account Number 200017747
SWIFT Number XXXXXX00
CMID Number: 024077.0001
BPH Contact: Xxxxx Xxxxxxx
20. Miscellaneous.
a. This Agreement may be executed in one or more
counterparts and it is not necessary that signatures of all parties
appear on the same counterpart, but such counterparts together shall
constitute but one and the same agreement.
b. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their respective successors and assigns
and, with respect to Section 17 hereof, shall inure to the benefit of
their respective officers, directors, employees, agents, affiliates and
controlling persons, and no other person shall have any right or
obligation hereunder. Com21 may not assign this Agreement. Xxxxxxxx may
assign, pledge, hypothecate or transfer any of the rights and associated
obligations contemplated by this Agreement (including, but not limited
to, the Warrant and the Common Shares), in whole or in part, at its sole
discretion (including, but not limited to, assignments, pledges,
hypothecations and transfers in connection with hedging transactions
with respect to this Agreement, the Warrant and the Common Shares). No
Person acquiring Common Stock
25
31
from Xxxxxxxx pursuant to a public market purchase shall thereby obtain
any of the rights contained in this Agreement.
c. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
d. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York, and each of
the parties hereto hereby submits to the non-exclusive jurisdiction of
any State or Federal court in the State of New York and any court
hearing any appeal therefrom, over any suit, action or proceeding
against it arising out of or based upon this Agreement (a "Related
Proceeding"). Each of the parties hereto hereby waives any objection to
any Related Proceeding in such courts whether on the grounds of venue,
residence or domicile or on the ground that the Related Proceeding has
been brought in an inconvenient forum.
e. The parties shall take all actions reasonably necessary
to cause the transactions contemplated hereby to be consummated in
accordance with the terms hereof.
f. The headings of the sections of this document have been
inserted for convenience of reference only and shall not be deemed to be
a part of this Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties hereto with respect to the subject
matter of this Agreement. Except as provided in Section 20(b), this
Agreement is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
g. Each party represents and acknowledges that, in the
negotiation and drafting of this Agreement and the other instruments and
documents required or contemplated hereby, it has been represented by
and relied upon the advice of counsel of its choice. Each party hereby
affirms that its counsel has had a substantial role in the drafting and
negotiation of this Agreement and such other instruments and documents.
Therefore, each party agrees that no rule of construction to the effect
that any ambiguities are to be resolved against the drafter shall be
employed in the interpretation of this Agreement and such other
instruments and documents.
h. Without prejudice to other rights or remedies hereunder
(including any specified interest rate), and except as otherwise
expressly set forth herein, interest shall be due on any amount that is
due pursuant to this Agreement and has not been paid when due,
calculated for the period from and including the due date to but
excluding the date on which such amount is paid at the prime rate of
U.S. money center banks as published in The Wall Street Journal (or if
The Wall Street Journal does not exist or
26
32
publish such information, then the average of the prime rates of three
U.S. money center banks agreed to by the parties) plus two percent (2%).
x. Xxxxxxxx and Com21 stipulate that the remedies at law
of the parties hereto in the event of any default or threatened default
by the either party in the performance of or compliance with any of the
terms of this Agreement and the Warrant are not and will not be adequate
and that, to the fullest extent permitted by law, such terms may be
specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of
any of the terms hereof or otherwise.
j. Any and all remedies set forth in this Agreement and
the Warrant: (i) shall be in addition to any and all other remedies
Xxxxxxxx or Com21 may have at law or in equity, (ii) shall be
cumulative, and (iii) may be pursued successively or concurrently as
each of Xxxxxxxx and Com21 may elect. The exercise of any remedy by
Xxxxxxxx or Com21 shall not be deemed an election of remedies or
preclude Xxxxxxxx or Com21, respectively, from exercising any other
remedies in the future.
x. Xxxxxxxx acknowledges that Xxxx Xxxxxxxx Xxxxxxx is
acting as placement agent (the "Placement Agent") for the Investment
Securities being offered hereby and will be compensated exclusively by
Com21 for acting in such capacity. Xxxxxxxx further acknowledges that
the Placement Agent has acted solely as placement agent in connection
with the offering of the Investment Securities by Com21, that the
information and data provided to Xxxxxxxx in connection with the
transactions contemplated hereby have not been subjected to independent
verification by the Placement Agent, and that the Placement Agent makes
no representation or warranty with respect to the accuracy or
completeness of such information, data or other related disclosure
material.
21. Com21's Obligations. Com21 agrees that the parties have
negotiated in good faith and at arms' length concerning the transactions
contemplated herein, and that Xxxxxxxx would not have agreed to the terms of
this Agreement without each and every of the terms, conditions, protections and
remedies provided herein and in the Warrant. Except as specifically provided
otherwise in this Agreement or in the Warrant, Com21's obligations to indemnify
and hold Xxxxxxxx harmless in accordance with Section 17 of this Agreement are
obligations of Com21 that Com21 promises to pay to Xxxxxxxx when and if they
become due. Com21 shall record any such obligations on its books and records in
accordance with Generally Accepted Accounting Principles.
22. Time of Essence. Time shall be of the essence in this
Agreement.
[SIGNATURE PAGE FOLLOWS]
27
33
]
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement, all as of the day and year first above written.
COM21, INC.
By: /s/ XXXXX X. XXXXXXXXX
------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: CFO
XXXXXXXX INTERNATIONAL, LTD., by its
duly authorized investment
advisor, XXXXXXXX ASSET MANAGEMENT, INC.
By: /s/ XXXXX X. XXXXX
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Deputy Chief Executive Officer
By: /s/ XXX-XXXX XXXX
------------------------------------
Name: Xxx-Xxxx Xxxx
Title: Chief Financial Officer
[AGREEMENT SIGNATURE PAGE]
28
34
ANNEX A
[FORM OF WARRANT CERTIFICATE]
A-1
35
ANNEX B
[FORM OF DELIVERY NOTICE]
[date]
Xxxxxxxx International, Ltd.
c/x Xxxxxxxx Asset Management, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Ladies and Gentlemen:
Reference is made to the Agreement (the "Agreement") dated as of
February 28, 2001 by and between Com21, Inc. ("Com21") and Xxxxxxxx
International, Ltd. ("Xxxxxxxx"). Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Agreement.
Attached are copies of the front and back of (i) the ___ original stock
certificates, each representing ____ shares of Common Stock, purchased by
Xxxxxxxx on the date hereof and (ii) Warrant No. W-1 issued to Xxxxxxxx,
together with a copy of the overnight courier air xxxx which will be used to
ship such stock certificates and warrant. We have the executed original stock
certificates and the warrant and other documents required to be delivered in
connection with the Closing Date. Upon our confirmation of the payment of the
$______ aggregate purchase price therefor, we will send the original stock
certificates and the warrant by overnight courier to the following address:
Xx. Xxxxxxxx Xxxxx
c/x Xxxxxx Brothers Inc.
Three World Financial Center
Xxx Xxxx, XX 00000
and we will send the other original documents by overnight courier to the
following address:
Xxxxxxxx International, Ltd.
c/o A. S. & K. Services Ltd.
Xxxxx Xxxxx
00 Xxxxx Xxxxxx
Xxxxxxxx XX XX
Xxxxxxx
X-0
36
Attention: Xxxxxxxx Xxxxxx, Corporate Administrator
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy to:
Xxxxxxxx International, Ltd.
c/x Xxxxxxxx Asset Management, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxxx Xxxxxxx
Attached hereto as Exhibit 1 is a true, correct and complete copy of the
most recent report of Deloitte & Touche to the Board of Directors and
Shareholders of Com21, together with the accompanying consolidated financial
statements and schedules of Com21, as such report appears in the most recent
Annual Report on Form 10-K filed by Com21 with the SEC, as well as all Quarterly
Reports on Form 10-Q filed by Com21 with the SEC since the date of such Form
10-K, together with all amendments thereto.
Com21, Inc.
By:
---------------------------------
Name:
Title:
B-2
37
Exhibit 1
AUDITOR REPORT
[see attached]
38
ANNEX C
Auditor Report
C-1
39
ANNEX D
[FORM OF EXCESS RIGHTS NOTICE]
-------------, --
Com21, Inc.
[ ]
[ ]
[ ]
Attention: [Chief Financial Officer]
Ladies and Gentlemen:
Xxxxxxxx International, Ltd. ("Xxxxxxxx") hereby elects to
exercise its right to convert some or all of its Warrant rights (as defined in
the Agreement (the "Agreement")) dated as of February 28, 2001 by and between
Com21, Inc. ("Com21") and Xxxxxxxx and, in lieu exercise of _______ Common
Shares on the face of the Warrant, hereby requests creation of Excess Rights
with a stated value of $________ in accordance with the terms of the Agreement.
Capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Agreement.
XXXXXXXX INTERNATIONAL, LTD., by its
duly authorized investment advisor,
XXXXXXXX ASSET MANAGEMENT, INC.
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
AGREED AND ACKNOWLEDGED:
COM21, INC.
By:
--------------------------------
Name:
Title:
D-1
