Exhibit 10.20
WAVE SYSTEMS CORP.
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT is dated as of the 23rd day of
March, 1999 by and between WAVE SYSTEMS CORP., a Delaware corporation with its
principal office at 000 Xxxxxxxx Xxxxxx, Xxx, Xxxxxxxxxxxxx 00000 (the
"Company"), and the several purchasers named in the attached Exhibit A
(individually, a "Purchaser" and collectively, the "Purchasers").
WHEREAS, the Company desires to issue and sell to the Purchasers, and
the Purchasers, severally, desire to purchase from the Company, the aggregate
quantity of up to 3,000,000 shares (the "Purchased Shares") of the authorized
but unissued shares of Class A common stock, $.01 par value per share, of the
Company (the "Common Stock").
NOW THEREFORE, in consideration of the mutual agreements,
representations, warranties and covenants herein contained, the parties hereto
agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
(a) "Affiliate" of a party means any corporation or other
business entity controlled by, controlling or under common control with such
party. For this purpose "control" shall mean direct or indirect beneficial
ownership of more than fifty percent (50%) of the voting or income interest in
such corporation or other business entity.
(b) "Closing" shall have the meaning ascribed to such term in
Section 2.2 hereof.
(c) "Closing Date" means the date of the Closing.
(d) "Exchange Act" means the Securities Exchange Act of 1934,
as amended, and all of the rules and regulations promulgated thereunder.
(e) "Majority Purchasers" means, at the relevant time of
reference thereto, either (i) those Purchasers holding more than fifty percent
(50%) of the Purchased Shares then held by all of the Purchasers or (ii) those
Purchasers holding commitments hereunder to purchase more than fifty percent
(50%) of the Purchased Shares to be purchased by all Purchasers.
(f) "Purchasers" means all of the Purchasers listed on Exhibit
A hereto.
(g) "Registration Rights Agreement" shall mean that certain
Registration Rights Agreement, dated as of the date hereof, among the Company
and the Purchasers.
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(h) "SEC" shall mean the Securities and Exchange Commission.
(i) "Securities Act" shall mean the Securities Act of 1933, as
amended, and all of the rules and regulations promulgated thereunder.
2. Purchase and Sale of Purchased Shares.
2.1 Purchase and Sale. Subject to and upon the terms and
conditions set forth in this Agreement, the Company agrees to issue and sell to
each Purchaser, and each Purchaser, severally, hereby agrees to purchase from
the Company, at the Closing, the number of shares of Common Stock set forth
opposite the name of such Purchaser under the heading "Number of Purchased
Shares to be Purchased" on Exhibit A hereto, at a purchase price of $11.00 per
share. The total purchase price payable by each Purchaser for the number of
shares of Common Stock that such Purchaser is hereby agreeing to purchase is set
forth opposite the name of such Purchaser under the heading "Purchase Price" on
Exhibit A hereto. The aggregate purchase price payable by all of the Purchasers
to the Company for all of the Purchased Shares at the Closing shall be
$22,945,494.
2.2 Closing. The closing of the transactions contemplated
under this Agreement (the "Closing") shall take place at the New York offices of
Xxxxxxx Xxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 a.m. on the
earlier of (i) the business day after the Company shall have given written
notice (the "Closing Notice") to the Purchasers that it believes all of the
conditions precedent set forth in Section 5.1 have been satisfied in full or
(ii) thirty (30) days from the date hereof, or at such other location, date and
time as may be agreed upon between the Purchasers and the Company.
2.3 Sale to Strategic Investor. Each of the Purchasers
acknowledges and agrees that 500,000 shares of Common Stock out of the aggregate
number of shares being offered by the Company hereunder are being reserved for
issuance and sale by the Company to a strategic investor. The strategic investor
has not made any commitment to purchase such shares of Common Stock as of the
Closing Date. However, it is the Company's present intention to sell such shares
to the strategic investor on the same terms and conditions as the sale of
Purchased Shares being sold to the Purchasers on the Closing Date, provided that
the strategic investor makes a commitment to the Company to purchase such shares
on or before April 5, 1999. On the date of the closing of the issuance and sale
of shares to the strategic investor hereunder, (i) the strategic investor will
become a "Purchaser" hereunder by executing an accession agreement hereto, (ii)
Exhibit A will be amended to add the name of the strategic investor, and (iii)
the strategic investor will become an "Initial Investor" under the Registration
Rights Agreement by executing an accession agreement thereto. No further action
on the part of the Purchasers shall be required to complete the issuance and
sale by the Company of the shares of Common Stock described above to the
strategic investor, or for the accession by the strategic investor to this
Agreement and the Registration Rights Agreement. Each of the Purchasers
acknowledges that the Company is not in a position to determine whether the
strategic investor will make any investment in the Company, that the Company has
not made and is not making any representation or warranty to such Purchaser as
to the likelihood that the strategic investor will make any investment in the
Company, and that such Purchaser has been instructed by the
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Company not to base its investment decision on the possibility that the
strategic investor will make any such investment.
3. Representations and Warranties of the Company. The Company
hereby represents and warrants to each of the Purchasers as follows:
3.1 Incorporation. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualification, except where the failure to so qualify would not have a material
adverse effect upon the Company. The Company has all requisite corporate power
and authority to carry on its business as now conducted. The Company has no
active subsidiaries.
3.2 Capitalization. The authorized capital stock of the
Company consists of (i) 75,000,000 shares of Class A common stock, par value
$0.01 per share, (ii) 13,000,000 shares of Class B common stock, par value $0.01
per share, and (iii) 2,000,000 shares of preferred stock, shares of each of
which class of the capital stock of the Company have been issued and are
outstanding as set forth in Schedule 3.2 hereto. The terms, preferences and
privileges of the outstanding shares of Class A Common Stock, Class B Common
Stock and Preferred Stock are set forth in the Company's Certificate of
Incorporation or, in the case of Preferred Stock of any series, in the
applicable Certificate of Designations for such series. Except as set forth in
Schedule 3.2 hereto, there are no existing options, warrants, calls, preemptive
(or similar) rights, subscriptions or other rights, agreements, arrangements or
commitments of any character obligating the Company to issue, transfer or sell,
or cause to be issued, transferred or sold, any shares of the capital stock of
the Company or other equity interests in the Company or any securities
convertible into or exchangeable for such shares of capital stock or other
equity interests (collectively, "Securities"), and there are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of its capital stock or other equity interests. The Company
has reserved 12,447,405 shares of Class A Common Stock for issuance upon
exercise of rights under or conversion of outstanding Securities. Schedule 3.2
sets forth the number of stock options outstanding under the Company's stock
incentive plans, and the number of shares reserved for issuance under such plans
that are not subject to outstanding options. Except as set forth in Schedule 3.2
no holder of any capital stock or Securities of the Company has any outstanding
registration rights.
3.3 Authorization. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement and the
Registration Rights Agreement and the consummation of the transactions
contemplated herein and therein has been taken. When executed and delivered by
the Company, each of this Agreement and the Registration Rights Agreement shall
constitute the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such may be limited
by bankruptcy, insolvency, reorganization or other laws affecting creditors'
rights generally and by general equitable principles. The Company has all
requisite corporate power to enter into this Agreement and the Registration
Rights Agreement and to carry out and perform its obligations under the terms of
this Agreement and the Registration Rights Agreement.
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3.4 Valid Issuance of the Purchased Shares. The Purchased
Shares being purchased by the Purchasers hereunder will, upon issuance pursuant
to the terms hereof, be duly authorized and validly issued, fully paid,
nonassessable and free of any liens or encumbrances created by the Company and
will, assuming the accuracy of the representations and warranties made by each
of the Purchasers to the Company, be in compliance with applicable state and
federal securities laws.
3.5 SEC Documents. The Company has furnished to each
Purchaser a true and complete copy of the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 and the Company's Quarterly Reports on Form
10-Q for the three month periods ended, respectively, on March 31, June 30 and
September 30, 1998, and any other statement, report, registration statement
(other than registration statements on Form S-8) or definitive proxy statement
filed by the Company with the SEC during the period commencing September 30,
1998 and ending on the date hereof. The Company will, promptly upon the filing
thereof, also furnish to each Purchaser all statements, reports (including,
without limitation, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K), registration statements and definitive proxy
statements filed by the Company with the SEC during the period commencing on the
date hereof and ending on the Closing Date (all such materials required to be
furnished to each Purchaser pursuant to this sentence or pursuant to the next
preceding sentence of this Section 3.5 being called, collectively, the "SEC
Documents"). The Company will file its Annual Report on Form 10-K on or before
March 31, 1999. In addition to the foregoing SEC Documents, the Company will
deliver to each Purchaser a copy of its Annual Report to Stockholders as and
when such report is delivered to stockholders. As of their respective filing
dates, the SEC Documents complied or will comply in all material respects with
the requirements of the Exchange Act or the Securities Act, as applicable, and
none of the SEC Documents 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 made therein, in light of the circumstances under
which they were made, not misleading, as of their respective filing dates,
except to the extent corrected by a subsequently filed SEC Document. The Company
has not filed any amendment to its Annual Report on Form 10-K for the year ended
December 31, 1997 or its Quarterly Reports on Form 10-Q for the three month
periods ended, respectively, on March 31, June 30 and September 30, 1998 except
for the three-months ended June 30, 1998. The Company has not filed any Current
Reports on Form 8-K with respect to any event occurring between September 30,
1998 and the date hereof.
3.6 Financial Statements. The Company's audited Statements of
Income, Stockholders' Equity and Cash Flows for the fiscal year ended December
31, 1997 and the Company's audited Balance Sheet as of December 31, 1997 are
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997, a copy of which has been delivered to the Purchasers. The Company's
unaudited Statements of Income, Stockholders' Equity and Cash Flows for the
three month periods ended March 31, June 30 and September 30, 1998 and the
Company's unaudited Balance Sheets as of March 31, June 30 and September 30,
1998 are included in the Company's Quarterly Reports on Form 10-Q for the three
month periods ended, respectively, on March 31, June 30 and September 30 of
1998, copies of which have been delivered to the Purchasers. All of the
financial statements referred to above in this Section 3.6 are hereinafter
referred to, collectively, as the "Financial Statements". The Financial
Statements have been prepared in accordance with generally accepted accounting
principles
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applied on a consistent basis during the periods involved, and fairly present,
in all material respects, the financial position of the Company and the results
of its operations as of the date and for the periods indicated thereon, except
that those Financial Statements that are unaudited may not have been prepared in
accordance with generally accepted accounting principles because of the absence
of footnotes normally contained therein and may be subject to normal year-end
audit adjustments which, individually, and in the aggregate, will not be
material.
3.7 Consents. All consents, approvals, orders,
authorizations, registrations, qualifications, and filings required on the part
of the Company to be obtained or made prior to the Closing in connection with
the execution, delivery or performance of this Agreement and the Registration
Rights Agreement, and the consummation of the transactions contemplated herein
and therein have been obtained or made or will be obtained or made, prior to the
Closing.
3.8 No Conflict. The execution and delivery of this Agreement
and the Registration Rights Agreement by the Company and the consummation of the
transactions contemplated hereby and thereby will not conflict with or result in
any violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to a loss of a material benefit or give rise to an event which
results in the creation of any lien, charge or encumbrance upon any of the
Company's properties or assets under (i) any provision of the Certificate of
Incorporation or By-laws of the Company or (ii) any agreement or instrument,
permit, franchise, license, judgment, order, statute, law, ordinance, rule or
regulations, applicable to the Company or its respective properties or assets.
3.9 Absence of Litigation. There is no action, suit or
proceeding or, to the Company's knowledge, any investigation, pending, or to the
Company's knowledge, threatened against the Company and in which an unfavorable
outcome, ruling or finding in any said matter, or for all matters taken as a
whole, might have a material adverse effect on the Company. The foregoing
includes, without limitation, any such action, suit, proceeding or investigation
that questions this Agreement or the Registration Rights Agreement or the right
of the Company to execute, deliver and perform under same.
3.10 Over-the-Counter Trading. The Common Stock is traded on
the Nasdaq Over-the-Counter Bulletin Board. On January 29, 1999, the Company
filed an application for listing of the Class A Common Stock on the NASDAQ
National Market System.
3.11 Brokers or Finders. Except for Pacific Growth Equities,
Inc., the Company has not dealt with any broker or finder in connection with the
transactions contemplated by this Agreement, and the Company has not incurred,
and shall not incur, directly or indirectly, any liability for any brokerage or
finders' fees or agents commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby. All fees payable to
Pacific Growth Equities, Inc. will be paid by the Company.
3.12 Compliance With Charter, Laws, etc. The Company is in
compliance in all material respects with the terms of its Certificate of
Incorporation and By-laws as currently in effect, true and complete copies of
which will be made available to each Purchaser upon request, and each of the
Certificate of Incorporation and By-laws of the Company is in full force and
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effect as of the Closing Date. The Company has complied, and is in compliance
with, all federal, state, county, local and foreign laws, rules, regulations,
ordinances, decrees and orders applicable to the operation of its business or to
the real property or personal property that it owns or leases (including,
without limitation, all such laws, rules, ordinances, decrees and orders
relating to antitrust, currency exchange, environmental protection, occupational
safety and health, equal opportunity, pension, securities and
trading-with-the-enemy matters), except where any failure to comply could not
reasonably be expected to have a material adverse effect on the Company.
3.13 Private Offering. During the six months preceding the
date of this Agreement, neither the Company nor any person acting on its behalf
has, directly or through any agent, sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of any security (as defined in the
Securities Act) that is or may be integrated with the sale of the Purchased
Shares in a manner that would require the registration of the issuance and sale
by the Company of the Purchased Shares under the Securities Act. During the six
months preceding the date of this Agreement, neither the Company nor any person
acting on its behalf has offered or sold any Purchased Shares by means of any
general solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act. Assuming the accuracy of the Purchasers'
representations in Section 4 hereof, the offering and sale of the Purchased
Shares will satisfy the requirements of Rule 506 under the Securities Act.
3.14 Changes.
(a) Since September 30, 1998, except as set forth in
Schedule 3.14, there has not been:
(i) any damage, destruction or loss (whether or not
covered by insurance) to its assets which has had or is expected to have a
material adverse effect on the Company;
(ii) any material change in the accounting methods or
practices followed by the Company;
(iii) any material debt, obligation or liability
(whether absolute or contingent) incurred by the Company (whether or not
presently outstanding) except (x) current liabilities incurred, and obligations
under agreements entered into, in the ordinary course of business and (y)
obligations or liabilities entered into or incurred in connection with the
execution of this Agreement;
(iv) any sale, lease, abandonment or other disposition
by the Company of any real property or, other than in the ordinary course of
business, of any equipment or other operating properties or, other than in the
ordinary course of business, any sale, assignment, transfer, license or other
disposition by the Company of any intellectual property or other intangible
asset;
(v) any dividends or other distributions of cash or
other property paid by the Company in respect of any of its capital stock
(except for the issuance of shares of the
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Company's Class A Common Stock upon exercise of rights under, or conversion of,
the Company's Preferred Stock, Class B Common Stock or other Securities);
(vi) any waivers or releases by the Company of any
material debt or obligation owed to the Company; or
(vii) to the best of the Company's knowledge, any
other event that could reasonably be expected to result in a material adverse
effect on the Company.
(b) Notwithstanding anything to the contrary in this
Agreement, if, after the date of this Agreement the Company discloses to the
Purchasers or the Purchasers otherwise become aware of any information
concerning an event that renders the representation and warranty set forth in
this Section 3.14 inaccurate, and such information is material and not otherwise
available to the public generally, the Purchasers agree not to sell, assign or
otherwise transfer any of the Purchased Shares based on such material non-public
information until such material non-public information is made available to the
public generally. In the event that the Closing contemplated hereby actually
occurs, the Company shall disclose such material non-public information in the
Registration Statement required to be filed pursuant to the Registration Rights
Agreement.
3.15 Material Contracts. Except as set forth on Schedule 3.15
hereto, the contracts listed as exhibits to the Company's Annual Report on Form
10-K for the year ended December 31, 1997 and the Company's Quarterly Reports on
Form 10-Q for the three month periods ended, respectively, on March 31, June 30
and September 30, 1998, are all of the material contracts (as defined in the
Securities Exchange Act of 1934 as amended) to which the Company is a party or
by which it or its assets may be bound. The Company is, and, to the best of the
Company's knowledge, all other parties to such material contracts are, in
compliance in all material respects with their obligations thereunder. Except as
set forth in Schedule 3.15, none of such material contracts have been amended or
modified in any material respect.
3.16 Title to Properties and Assets, Liens, etc. The Company
has good and marketable title to its properties and assets, and good title to
its leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance, or charge, other than (i) those resulting from taxes which have not
yet become delinquent, (ii) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or have a material
adverse effect on the Company, and (iii) those that have otherwise arisen in the
ordinary course of business.
3.17 Patents and Trademarks. The Company owns or has rights
to use such trade names, copyrights, trade secrets, information, patents,
trademarks, service marks, rights and processes (including all applications
therefor) as are necessary for its business as now conducted and as proposed to
be conducted, without any conflict with or infringement of the rights of others,
except where any such conflict or infringement could not reasonably be expected
to have a material adverse effect on the Company. Except as set forth on
Schedule 3.17 hereto, there are no material options, licenses, or agreements of
any kind relating to the foregoing, nor is the Company bound by or a party to
any material options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses,
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proprietary rights and processes of any other person or entity. The Company has
not received any communications alleging that the Company has violated or, by
conducting its business as now conducted or proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity. The Company is not aware
that any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of his or her best efforts to promote the interests of
the Company or that would conflict with the Company's business as now conducted
or proposed to be conducted. To the best of the Company's knowledge, no person
or entity is infringing or threatening to infringe the patents, trademarks,
service marks, trade names, copyrights or trade secrets or other proprietary
rights of the Company. All employees, officers, directors and consultants, other
than those employees or consultants who are not privy to any of the Company's
confidential information, are bound by confidentiality and assignment of
intellectual property and technology agreements and such agreements and
obligations do not confer on any such person any rights of the intellectual
property of the Company.
3.18 Labor Matters. The Company has no collective bargaining
agreement with any of its employees and, to the Company's knowledge, there is no
labor union organizing activity pending or threatened with respect to the
Company. There are no disputes pending or, to the knowledge of the Company,
threatened between the Company, on the one hand, and any of its employees, on
the other hand, other than employee grievances arising in the ordinary course of
business which would not, individually or in the aggregate, have a material
adverse effect on the Company. Except as set forth on Schedule 3.18, the Company
has no agreements providing for the payment of severance with any of its
officers, directors or employees. The Company has complied in all material
respects with the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and does not maintain any plans subject to the filing requirements of
Section 302 of ERISA or the provisions of Title IV of ERISA.
4. Representations and Warranties of the Purchasers. Each
Purchaser severally for itself, and not jointly with the other Purchasers,
represents and warrants to the Company as follows:
4.1 Authorization. All action on the part of such Purchaser
and, if applicable, its officers, directors, partners and shareholders necessary
for the authorization, execution, delivery and performance of this Agreement and
the Registration Rights Agreement and the consummation of the transactions
contemplated herein and therein has been taken. When executed and delivered,
each of this Agreement and the Registration Rights Agreement will constitute the
legal, valid and binding obligation of such Purchaser, enforceable against such
Purchaser in accordance with its terms, except as such may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors' rights
generally and by general equitable principles. Such Purchaser has all requisite
corporate, trust or partnership (as the case may be) power to enter into each of
this Agreement and the Registration Rights Agreement and to carry out and
perform its obligations under the terms of this Agreement and the Registration
Rights Agreement.
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4.2 Purchase Entirely for Own Account. Such Purchaser is
acquiring the Purchased Shares being acquired by it hereunder, for investment,
for its own account, and not for resale or with a view to distribution thereof
in violation of the Securities Act.
4.3 Investor Status; Etc. Such Purchaser certifies and
represents to the Company that, at the time such Purchaser acquires any of the
Purchased Shares, such Purchaser will be an "Accredited Investor" as defined in
Rule 501 of Regulation D promulgated under the Securities Act. Such Purchaser's
financial condition is such that it is able to bear the risk of holding any and
all of the Purchased Shares acquired by it for an indefinite period of time and
the risk of loss of its entire investment. Such Purchaser has been afforded the
opportunity to ask questions of and receive answers from the management of the
Company concerning the Company and its business and this investment, and has
also been afforded the opportunity to review any relevant documents and records
concerning the business of the Company. Such Purchaser has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the Company.
4.4 Purchased Shares Not Registered. Such Purchaser
understands that because the Purchased Shares are issued by the Company in a
transaction exempt from the registration requirements of the Securities Act, the
Purchased Shares have not been registered under the Securities Act, and that the
Purchased Shares must continue to be held by such Purchaser unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
such registration. The Purchaser understands that the exemptions from
registration afforded by Rule 144 (the provisions of which are known to it)
promulgated under the Securities Act depend on the satisfaction of various
conditions, and that, if applicable, Rule 144 may afford the basis for sales
only in limited amounts.
4.5 Additional Investment Representations. Such Purchaser
shall deliver to the Company a Certificate of Additional Investment
Representations in the form of Exhibit C hereto (in each case, an "Investment
Representations Certificate"). Such Purchaser acknowledges that the Company is
relying on the truth and accuracy of the representations and warranties
contained in its Investment Representations Certificate in the offering of those
Purchased Shares being offered for sale to such Purchaser without having first
registered such Purchased Shares under the Securities Act.
4.6 No Conflict. The execution and delivery of this
Agreement and the Registration Rights Agreement by such Purchaser and the
consummation of the transactions contemplated hereby and thereby will not
conflict with or result in any violation of or default by such Purchaser (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to a loss of a
material benefit under (i) any provision of the organizational documents of such
Purchaser or (ii) any agreement or instrument, permit, franchise, license,
judgment, order, statute, law, ordinance, rule or regulations, applicable to
such Purchaser or its respective properties or assets, except where any such
event under clause (ii) could not reasonably be requested to have a material
adverse effect on the transactions contemplated by this Agreement.
4.7 Consents. All consents, approvals, orders and
authorizations required on the part of such Purchaser in connection with the
execution, delivery or performance of this
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Agreement and the consummation of the transactions contemplated herein have been
obtained or will be obtained prior to the Closing.
4.8 Brokers. Such Purchaser has not retained, utilized or
been represented by any broker or finder in connection with the transactions
contemplated by this Agreement.
5. Conditions Precedent.
5.1 Conditions to the Obligation of the Purchasers to
Consummate the Closing. The obligation of each Purchaser to consummate the
Closing and to purchase and pay for the Purchased Shares being purchased by it
pursuant to this Agreement is subject to the satisfaction of the following
conditions precedent (any of which conditions may be waived by the Majority
Purchasers):
(a) The representations and warranties contained herein of the
Company shall be true and correct on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date.
(b) The Registration Rights Agreement shall have been executed
and delivered by the Company.
(c) The Company shall not have been adversely affected in any
material way prior to the Closing Date; and the Company shall have performed all
obligations and conditions herein required to be performed or observed by the
Company on or prior to the Closing Date.
(d) Such Purchaser shall have received from Xxxxxxx Xxxx LLP,
counsel to the Company, an opinion addressed to the Purchasers, dated the
Closing Date and substantially in the form of Exhibit D hereto.
(e) Each of the members of the Board of Directors, the Chief
Executive Officer, the Chief Operating Officer and the Chief Financial Officer
shall have entered into a Lock-up Agreement in the form of Exhibit E hereto with
the Company agreeing not to sell any shares of the Company's Common Stock during
the period commencing on the Closing Date and ending on the earlier to occur of
(i) 90 days after the effective date of the registration statement required to
be filed pursuant to the Registration Rights Agreement and (ii) 120 days after
the Closing Date.
(f) No proceeding challenging this Agreement or the
Registration Rights Agreement or the transactions contemplated hereby or
thereby, or seeking to prohibit, alter, prevent or materially delay the Closing,
shall have been instituted before any court, arbitrator or governmental body,
agency or official and shall be pending.
(g) The purchase of and payment for the Purchased Shares by
the Purchasers shall not be prohibited by any law or governmental order or
regulation. All necessary consents, approvals, licenses, permits, orders and
authorizations of, or registrations, declarations and filings with, any
governmental or administrative agency or of any other person with respect to
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any of the transactions contemplated by the Agreement shall have been duly
obtained or made and shall be in full force and effect.
(h) All instruments and corporate proceedings in connection
with the transactions contemplated by this Agreement and the Registration Rights
Agreement to be consummated at the Closing shall be satisfactory in form and
substance to such Purchaser, and such Purchaser shall have received copies
(executed or certified, as may be appropriate) of all documents which such
Purchaser may have reasonably requested in connection with such transactions.
(i) The offer and sale of the Purchased Shares to the
Purchasers pursuant to this Agreement shall be exempt from registration under
the Securities Act.
(j) The Company shall have delivered to the Purchasers a
certificate dated as of the Closing Date signed by an authorized officer of the
Company certifying the satisfaction of the conditions set forth in Section
5.1(a) and (c).
5.2 Conditions to the Obligation of the Company to
Consummate the Closing. The obligation of the Company to consummate the Closing
and to issue to each Purchaser the Purchased Shares to be purchased by it at the
Closing is subject to the satisfaction of the following conditions precedent
(any of which conditions may be waived by the Company):
(a) The representations and warranties contained herein of
such Purchaser shall be true and correct on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date.
(b) Such Purchaser shall have performed all obligations and
conditions herein required to be performed or observed by such Purchaser on or
prior to the Closing Date.
(c) The Registration Rights Agreement shall have been executed
and delivered by such Purchaser.
(d) Such Purchaser shall have executed and delivered to the
Company such Purchaser's Investment Representations Certificate.
(e) No proceeding challenging this Agreement or the
transactions contemplated hereby, or seeking to prohibit, alter, prevent or
materially delay the Closing, shall have been instituted before any court,
arbitrator or governmental body, agency or official and shall be pending.
(f) The sale and/or issuance of any of the Purchased Shares by
the Company shall not be prohibited by any law or governmental order or
regulation.
(g) Such Purchaser shall have delivered to the Company a
certificate dated as of the Closing Date signed by an authorized officer of such
Purchaser certifying the satisfaction of the conditions set forth in Section
5.2(a) and that such Purchaser has performed all obligations and conditions
herein required to be performed or observed by it on or prior to the Closing
Date.
-12-
6. Conduct of Business Pending Closing. The Company covenants and
agrees that, between the date of this Agreement and the earlier of the
termination of this Agreement or the Closing Date, unless the Majority
Purchasers shall otherwise agree in writing, the businesses of the Company shall
be conducted only in, and the Company shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice. By
way of amplification and not limitation, except as contemplated by this
Agreement, the Company shall not, between the date of this Agreement and the
earlier of the termination of this Agreement or the Closing Date, directly or
indirectly do, or propose to do, any of the following without the prior written
consent of the Majority Purchasers:
(a) amend or otherwise change the Company's Certificate of
Incorporation or By-laws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, encumber, or
authorize the issuance, sale, pledge, disposition, grant or encumbrance of any
shares of Common Stock, or Preferred Stock, or any options, warrants,
convertible securities or other rights of any kind to acquire shares of Common
Stock or Preferred Stock, or any other ownership interest (including, without
limitation, any phantom interest), of the Company at a purchase price per share
that is less than the purchase price per Purchased Share to be paid by the
Purchasers, except (i) pursuant to issued, outstanding or authorized options,
warrants or other Securities, or (ii) for the issuance of capital stock or other
securities in connection with the establishment of corporate relationships for
purposes other than capital raising;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership,
other business organization or any division thereof or any material amount of
assets; (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans or
advances, except in the ordinary course of business and consistent with past
practice; (iii) enter into any contract or agreement material to the business,
results of operations or financial condition of the Company other than in the
ordinary course of business, consistent with past practice; (iv) authorize any
capital expenditure in excess of $100,000; or (v) enter into or amend any
contract, agreement, commitment or arrangement with respect to any matter set
forth in this subsection (e);
(f) sell, assign or otherwise transfer all or substantially
all of the assets of the Company; or
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(g) take any action, other than reasonable and usual actions
in the ordinary course of business and consistent with past practice, with
respect to accounting policies or procedures.
7. Restrictions on Transfer; Delivery of Purchased Shares.
7.1 Restrictions on Transfer of the Purchased Shares.
(a) No Purchaser shall offer, sell, assign, transfer, endorse,
pledge, mortgage, hypothecate or otherwise convey or dispose of any of the
Purchased Shares purchased by it, or any interest therein, unless (i) any such
offer, sale, assignment, transfer, endorsement, pledge, mortgage, hypothecation
or other conveyance or disposition shall be effected (A) pursuant to and in
conformity with an effective registration statement under the Securities Act (a
"Registered Sale") or any then available exemption from the registration
requirements of the Securities Act, and (B) pursuant to and in conformity with
any applicable state securities or blue sky laws, and (ii) in the case of any
offer, sale, assignment, transfer, endorsement, pledge, mortgage, hypothecation
or other conveyance or disposition other than pursuant to a Registered Sale, if
requested by the Company, such Purchaser shall have obtained and delivered to
the Company a written legal opinion of counsel (reasonably satisfactory to the
Company as to such counsel and as to the substance of such opinion) to the
effect that any such proposed offer, sale, assignment, transfer, endorsement,
pledge, mortgage, hypothecation or other conveyance or disposition by such
Purchaser does not violate the registration provisions of the Securities Act and
any applicable state securities or blue sky law.
(b) No Purchaser shall sell, assign, transfer, endorse,
pledge, mortgage, hypothecate or otherwise convey or dispose of any of the
Purchased Shares purchased by it, or any interest therein, unless the proposed
transferee thereof shall have executed and delivered to the Company a written
agreement or instrument, in form and substance satisfactory to the Company,
providing for such proposed transferee's written acknowledgment and agreement
that he, she or it shall be bound by all of the provisions of this Section 7,
provided, however, that if such sale, assignment, transfer, endorsement, pledge,
mortgage, hypothecation or other conveyance or disposition is made pursuant to a
Registered Sale or in accordance with Rule 144 of the Securities Act, such
written agreement or instrument shall not be required.
7.2 Effect of Violation of Transfer Restrictions; Preventive
Measures. Any offer, sale, assignment, transfer, endorsement, pledge, mortgage,
hypothecation, or other conveyance or disposition of any Purchased Shares, or of
any interest therein, in violation of this Section 7 shall be null and void. The
Company may make a notation on its records or give instructions to any of its
transfer agents in order to implement the restrictions on transfer set forth in
this Section 7. The Company shall not incur any liability for any delay in
recognizing any transfer of any Purchased Shares if the Company reasonably
believes that any such transfer may have been or would be in violation of the
provisions of the Securities Act, applicable blue sky laws or this Section 7.
-14-
7.3 Legends.
(a) Each certificate evidencing any of the Purchased Shares
shall be endorsed with the legend set forth below, and each Purchaser covenants
that, except to the extent such restrictions are waived by the Company, it shall
not transfer the Purchased Shares represented by any such certificate without
complying with the restrictions on transfer described in this Agreement and the
legends endorsed on such certificate:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD,
ASSIGNED, TRANSFERRED, ENDORSED, PLEDGED, MORTGAGED,
HYPOTHECATED OR OTHERWISE CONVEYED OR DISPOSED OF, UNLESS SUCH
SHARES ARE (1) SO REGISTERED OR (2) AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE AND, IF REQUESTED BY THE COMPANY, A
WRITTEN LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE COMPANY IS PROVIDED BY THE TRANSFEROR. IF THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE NOT TRANSFERRED PURSUANT
TO AND IN CONFORMITY WITH AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 OR IN ACCORDANCE WITH RULE
144 OF THE SECURITIES ACT OF 1933, SUCH SHARES ARE ALSO
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN
SECTION 7 OF A SECURITIES PURCHASE AGREEMENT DATED MARCH 23
1999, AND NO TRANSFER OF SUCH SHARES SHALL BE VALID OR
EFFECTIVE IF IT IS NOT EFFECTED IN COMPLIANCE WITH ALL OF SUCH
RESTRICTIONS ON TRANSFER. A COPY OF SUCH SECURITIES PURCHASE
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE
BY THE HOLDER OF RECORD OF SUCH SHARES TO THE SECRETARY OF
WAVE SYSTEMS CORP. "
(b) Each certificate evidencing any of the Purchased Shares
shall be endorsed with any legend required under any applicable state securities
or blue sky laws.
8. Termination; Liabilities Consequent Thereon. This Agreement
may be terminated and the transactions contemplated hereunder abandoned at any
time prior to the Closing only as follows:
(a) by any Purchaser, upon notice to the Company if the
Closing has not occurred on or prior to March 30, 1999; provided, however, that
the right to terminate this Agreement pursuant to this Section 8(a) shall not be
available to any Purchaser whose failure to fulfill any obligation of such
Purchaser under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or prior to such date; or
-15-
(b) by the Company, upon notice to the Purchasers if the
Closing has not occurred on or prior to March 30, 1999; provided, however, that
the right to terminate this Agreement pursuant to this Section 8(b) shall not be
available to the Company if the Company's failure to fulfill any obligation of
the Company under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or prior to such date; or
(c) at any time by mutual agreement of the Company and the
Majority Purchasers; or
(d) by any Purchaser in respect of the Purchased Shares to be
purchased by such Purchaser, if there has been any material breach of any
representation, warranty or covenant of the Company contained herein and the
same has not been cured prior to March 30, 1999; or
(e) by the Company in respect of the Purchased Shares to be
purchased by a Purchaser, if there has been any material breach of any
representation, warranty or covenant of such Purchaser contained herein and the
same has not been cured prior to March 30, 1999.
Any termination pursuant to this Section 8 shall be without liability
on the part of any party, unless such termination is the result of a material
breach of this Agreement by a party to this Agreement in which case such
breaching party shall remain liable for such breach notwithstanding any
termination of this Agreement.
9. Miscellaneous Provisions.
9.1 Public Statements or Releases. None of the parties to
this Agreement shall make, issue, or release any announcement, whether to the
public generally, or to any of its employees, suppliers, or customers, with
respect to this Agreement or the transactions provided for herein, or make any
statement or acknowledgment of the existence of, or reveal the status of, this
Agreement or the transactions provided for herein, without the prior consent of
the other parties, which shall not be unreasonably withheld or delayed,
provided, that nothing in this Section 9.1 shall prevent any of the parties
hereto from making such public announcements as it may consider necessary in
order to satisfy its legal obligations, but to the extent not inconsistent with
such obligations, it shall provide the other parties with an opportunity to
review and comment on any proposed public announcement before it is made.
9.2 Further Assurances. Each party agrees to cooperate fully
with the other parties, to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by the other party to better evidence and reflect the transactions
described herein and contemplated hereby, and to carry into effect the intents
and purposes of this Agreement, and to use its best efforts to cause the
conditions precedent set forth in Sections 5.1 and 5.2 to be satisfied.
9.3 Rights Cumulative. Each and all of the various rights,
powers and remedies of the parties shall be considered to be cumulative with and
in addition to any other rights, powers and remedies which such parties may have
at law or in equity in the event of the breach of any of the terms of this
Agreement. The exercise or partial exercise of any right,
-16-
power or remedy shall neither constitute the exclusive election thereof nor the
waiver of any other right, power or remedy available to such party.
9.4 Pronouns. All pronouns or any variation thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
9.5 Notices.
(a) Any notices, reports or other correspondence (hereinafter
collectively referred to as "correspondence") required or permitted to be given
hereunder shall be sent by courier (overnight or same day) or telecopy or
delivered by hand to the party to whom such correspondence is required or
permitted to be given hereunder. The date of giving any notice shall be the date
of its actual receipt.
(b) All correspondence to the Company shall be addressed as
follows:
Wave Systems Corp.
000 Xxxxxxxx Xxxxxx
Xxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx,
President and Chief Operating Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
Xxxxxxx Xxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(c) All correspondence to any Purchaser shall be sent to such
Purchaser at the address set forth in Exhibit A.
(d) Any entity may change the address to which correspondence
to it is to be addressed by notification as provided for herein.
9.6 Captions. The captions and paragraph headings of this
Agreement are solely for the convenience of reference and shall not affect its
interpretation.
9.7 Severability. Should any part or provision of this
Agreement be held unenforceable or in conflict with the applicable laws or
regulations of any jurisdiction, the invalid or unenforceable part or provisions
shall be replaced with a provision which accomplishes, to the extent possible,
the original business purpose of such part or provision in a
-17-
valid and enforceable manner, and the remainder of this Agreement shall remain
binding upon the parties hereto.
9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal and substantive laws of the State of
New York and without regard to any conflicts of laws concepts which would apply
the substantive law of some other jurisdiction.
9.9 Waiver. No waiver of any term, provision or condition of
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be, or be construed as, a further or continuing waiver of any
such term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
9.10 Expenses. Each party will bear its own costs and
expenses in connection with this Agreement.
9.11 Assignment. The rights and obligations of the parties
hereto shall inure to the benefit of and shall be binding upon the successors
and permitted assigns of each party. No Purchaser may assign its rights or
obligations under this Agreement or designate another person other than an
Affiliate of such Purchaser (i) to perform all or part of such Purchaser's
obligations under this Agreement or (ii) to have all or part of such Purchaser's
rights and benefits under this Agreement, in each case without the prior written
consent of the Company. The Company may not assign its rights or obligations
under this Agreement or designate another person (i) to perform all or part of
its obligations under this Agreement or (ii) to have all or part of its rights
and benefits under this Agreement, in each case without the prior written
consent of the Purchasers. Notwithstanding anything expressed or implied in this
Agreement to the contrary, the Purchasers' rights under Section 9 hereof may not
be assigned or transferred to, or exercised by, any other person other than an
Affiliate of any such Purchaser.
9.12 Survival. The respective representations and warranties
given by the parties hereto, and the other covenants and agreements contained
herein, shall survive the Closing Date and the consummation of the transactions
contemplated herein, without regard to any investigation made by any party.
9.13 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto respecting the subject matter hereof and
supersedes all prior agreements, negotiations, understandings, representations
and statements respecting the subject matter hereof, whether written or oral. No
modification, alteration, waiver or change in any of the terms of this Agreement
shall be valid or binding upon the parties hereto unless made in writing and
duly executed by the parties hereto.
9.14 Use of Proceeds. The proceeds from the sale of the
Purchased Shares hereunder will be used by the Company for working capital,
general corporate purposes, repayment of certain indebtedness in the amount of
approximately $2,000,000, the repurchase of certain capital stock in the amount
of approximately $600,000, and acquisitions and/or payments pursuant to joint
venture agreements.
-18-
9.15 Information Rights. For so long as such Purchaser holds
any of the Purchased Shares, the Company shall deliver to each of such
Purchaser, copies of its quarterly and annual disclosure statements (including
financial statements and exhibits) as filed by the Company with the SEC and all
press releases issued by the Company.
9.16 Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
9.17 Listing of Shares. The Company shall list for trading on
The Nasdaq National Market a sufficient number of shares to cover the Purchased
Shares at such time as the Company's listing application to list the Common
Shares on The Nasdaq National Market shall have been approved by The Nasdaq.
[Remainder of Page Intentionally Left Blank]
-19-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the day and year first above written.
WAVE SYSTEMS CORP.
By: ____________________________________
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
[Purchasers Signature Pages Follow]
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
-20-
SCHEDULE 1
----------
WAVE SYSTEMS CORP.
------------------
INVESTORS
Number of
Purchased Shares
INVESTOR Purchased
-------- ---------
COMMERZBANK AG 454,545
XXXXXXX X. XXXXXXX 3,000
XXXXXXXX CAPITAL PARTNERS LP 20,000
ENDEAVOR ASSET MANAGEMENT, LP 15,000
CLARION CAPITAL CORPORATION 31,818
CLARION OFFSHORE FUND LTD. 13,000
CLARION PARTNERS, L.P. 46,091
MARCUARD XXXX & CIE S.A. 50,000
FIDELITY NATIONAL TITLE INSURANCE COMPANY OF NEW YORK 125,000
XXXXXX XXXXX, INC. 10,000
XXXXXX X. XXXXX 11,000
CASCADE CAPITAL PARTNERS, L.P. 165,200
JOB & CO. 12,800
GRYPHON OFFSHORE FUND 22,000
XXXXXXX XXXXX 5,000
LANCASTER INVESTMENT PARTNERS, L.P. 50,000
XXX X. XXXXXX 10,000
-21-
Number of
Purchased Shares
INVESTOR Purchased
-------- ---------
XXXX XXXXXXXX 25,000
XXXX XXXXXXXXX 65,000
XXXX X. XXXX REVOCABLE TRUST 9,000
SECURITY TREND PARTNERS 25,000
TRELLUS PARTNERS, L.P. 100,000
VERITAS SG INVESTMENT TRUST GMBH 100,000
V/F SKAGEN GLOBAL 50,000
XXXXXX & XXXXXXX INTERNATIONAL 11,000
XXX X. XXXXXX 6,500
XXXXXXX INC. 2,000
HARE & CO. A/C #651653 FOR TTES OF XXXXXXXX COLLEGE 2,000
XXXX XXXXXXXX AND XXXXXXX XXXXXXXX COMMUNITY PROPERTIES A/C #2 1,500
LAGUNITAS PARTNERS, LP 27,000
THE XXXXXX REVOCABLE TRUST, DTD 3/22/96 XXXX XXXXXX & XXXXXX XXXXXX, TRUSTEES 25,000
XXXXX X. XXXX 20,000
XXXXX X. XXXXX 100,000
M. XXX XXXXXXXXXXX 10,000
WHITNEY PARTNERS, LP 150,000
XXXX XXXXX SSB XXXXX CUSTODIAN AKA XXXX XXXXX 3,500
-22-
Number of
Purchased Shares
INVESTOR Purchased
-------- ---------
XXXXX XXXXXX REVOCABLE TRUST U/A DATED 6/11/91 XXXX XXXXX AND XXXXXX 500
XXXXXX TRUSTEES
SECURITY TRUST CO FBO: XXXX XXXXXX, MD 13,000
SECURITY TRUST CO FBO: J. XXXX XXXXXX 7,000
XXXXX XXXXXX CUSTODIAN/XXXX XXXXX XXX 2,000
X.X. XXXXX 3,000
XXXX X. XXXXXXX, XX. 10,000
XXXXXX XXXXX 10,000
XXXXXXX X. XXXXXX 10,000
XXXXXXX X. XXXXXXXX 20,000
PACIFIC GROWTH EQUITIES INC 401K PROFIT SHARING PLAN FBO XXXXXXX X. XXXXXXXX 50,000
XXXXXXX XXXXX 3,500
XXXXXX X. XXXXXXXXXXX, XX. 5,000
XXXXXXX INVESTMENT GROUP 50,000
XXXXXX CAPITAL 50,000
XXXXXX PARTNERS, LP 30,000
SPECIAL SITUATIONS PRIVATE EQUITY FUND, LP 50,000
