1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of September 25,
1997, by and among JTS CORPORATION, a Delaware corporation, with headquarters
located at 000 Xxxxxxxxx Xxxxxxx, Xxx Xxxx, Xxxxxxxxxx 00000 (the "Company"),
and the investors listed on the Schedule of Investors attached hereto
(individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("Regulation D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
B. The Company has authorized the following new series of its Preferred
Stock, $.001 par value per share (the "Preferred Stock"): the Company's Series D
Convertible Preferred Stock (the "Series D Preferred Shares"), which shall be
convertible into shares of the Company's Common Stock, $.001 par value per share
(the "Common Stock") (as converted, the "Conversion Shares"), in accordance with
the terms of the Company's Certificate of Designations, Preferences and Rights
of the Series D Preferred Shares, substantially in the form attached hereto as
Exhibit A (the "Certificate of Designations");
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, an aggregate of up to 28,802 shares of Series D Preferred Shares
in the respective amounts set forth opposite each Buyer's name on the Schedule
of Investors; and
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit B (the "Registration Rights
Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws, a Lock-Up Agreement (the
"Lock-Up Agreement") substantially in the form attached hereto as Exhibit C
pursuant to which the Buyers have agreed to restrict sale of fifty percent (50%)
of the Series D Preferred Shares and the Conversion Shares and an Escrow
Agreement (the "Escrow Agreement") substantially in the form attached hereto as
Exhibit D pursuant to which the Buyers and the Company have agreed to establish
an escrow account in connection with the purchase and sale of the Series D
Preferred Shares contemplated hereby.
E. Contemporaneously with the execution and delivery of this Agreement,
the Buyers and certain shareholders of the Company are executing a stockholders
agreement in the form of Exhibit E (the "Stockholders Agreement").
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1.
2
1. PURCHASE AND SALE OF SERIES D PREFERRED SHARES.
a. PURCHASE OF SERIES D PREFERRED SHARES. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 5 and 6 below,
the Company shall deposit in the escrow account the number of shares of Series D
Preferred Shares and the Buyers shall deposit the dollar amount stated in the
Escrow Agreement (the "Closing"). Subject to the terms of the Escrow Agreement,
the Escrow Agent (as that term is defined in the Escrow Agreement) shall release
to the Buyers any or all of the Series D Preferred Shares and to the Company the
corresponding dollar amount from each Buyer from time to time. The per share
purchase price (the "Purchase Price") of the Series D Preferred Shares shall be
$875.00.
b. CLOSING DATE. The date and time of the Closing (the "Closing
Date") shall be at 6:00 p.m. Pacific Standard Time on Thursday, September 25,
1997 or at such other time and place as the Company and the Buyers shall
mutually agree. The Closing shall occur on the Closing Date at the offices of
Cooley Godward LLP, Five Xxxx Xxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000.
c. FORM OF PAYMENT. On the Closing Date, (i) each Buyer shall
deposit the Purchase Price with the Escrow Agent for the Series D Preferred
Shares to be issued and sold to such Buyer, by wire transfer of immediately
available funds in accordance with the Escrow Agent's written wire instructions,
and (ii) as soon thereafter as practicable, the Company shall deposit with the
Escrow Agent, a stock certificate representing such number of the Series D
Preferred Shares which such Buyer is purchasing (as indicated opposite such
Buyer's name on the Schedule of Investors), duly executed on behalf of the
Company and registered in the name of such Buyer or its designee (the "Stock
Certificates").
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
a. INVESTMENT PURPOSE. Such Buyer (i) is acquiring the Series D
Preferred Shares and (ii) upon conversion of the Series D Preferred Shares, will
acquire the Conversion Shares then issuable, for its own account for investment
only, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof. By executing this Agreement, each Buyer
further represents that such Buyer does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Series D Preferred Shares or the Conversion Shares.
b. ACCREDITED INVESTOR STATUS. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
2.
3
c. CERTAIN PROVISIONS UNDER 16 C.F.R. RULE 802.64. Consistent with
Rule 802.64(b), Amber Arbitrage LDC ("Amber") is acquiring the Series D
Preferred Shares "solely for the purposes of investment" as that term is defined
in Rule 801.1(i)(1). Amber is an "Institutional Investor" for the purposes of
16.C.F.R. Rule 802.64(a).
d. RELIANCE ON EXEMPTIONS. Such Buyer understands that the Series D
Preferred Shares and the Conversion Shares are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in part
upon the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the Series D Preferred
Shares and the Conversion Shares.
e. INFORMATION. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Series D
Preferred Shares and the Conversion Shares which have been requested by such
Buyer. Such Buyer and its advisors, if any, have been afforded the opportunity
to ask questions of the Company. Neither such inquiries nor any other due
diligence investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to rely on the
Company's representations and warranties contained in Section 3 below. Such
Buyer understands that its investment in the Series D Preferred Shares and the
Conversion Shares involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Series D
Preferred Shares and the Conversion Shares.
f. NO GOVERNMENTAL REVIEW. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Series D
Preferred Shares or the Conversion Shares or the fairness or suitability of the
investment in the Series D Preferred Shares or the Conversion Shares nor have
such authorities passed upon or endorsed the merits of the offering of the
Series D Preferred Shares or the Conversion Shares.
g. TRANSFER OR RESALE. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Series D Preferred Shares
and the Conversion Shares have not been and are not being registered under the
1933 Act or any state securities laws, and may not be sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) such Buyer shall
have delivered to the Company an opinion of counsel, in a generally acceptable
form, to the effect that such securities to be sold, assigned or transferred may
be sold, assigned or transferred pursuant to an exemption from such
registration, or (C) such Buyer provides the Company with reasonable assurance
that such securities can be sold, assigned or transferred
3.
4
pursuant to Rule 144 promulgated under the 1933 Act (or a successor rule
thereto); (ii) any sale of such securities made in reliance on Rule 144
promulgated under the 1933 Act (or a successor rule thereto) ("Rule 144") may be
made only in accordance with the terms of Rule 144 and further, if Rule 144 is
not applicable, any resale of such securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.
h. LEGENDS. Such Buyer understands that the certificates or other
instruments representing the Series D Preferred Shares and, until such time as
the sale of the Conversion Shares have been registered under the 1933 Act as
contemplated by the Registration Rights Agreement, the stock certificates
representing the Conversion Shares, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL, ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SAID ACT.
Such Buyer also understands that pursuant to the Lock-Up Agreement, certificates
or other instruments representing fifty percent (50%) of the Series D Preferred
Shares and the stock certificates representing the Conversion Shares issuable
upon conversion of such fifty per cent (50%) of the Series D Preferred Shares
shall bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock certificates):
UNTIL SEPTEMBER 25, 1998, THE SALE, TRANSFER OR ASSIGNMENT OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OR HIS PREDECESSOR
IN INTEREST. COPIES OF SUCH AGREEMENT MAY BE OBTAINED BY
4.
5
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE COMPANY.
i. AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with its
terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
j RESIDENCY. Such Buyer is a resident of that country specified in
its address on the Schedule of Investors.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. ORGANIZATION AND QUALIFICATION. The Company and its significant
subsidiaries (as defined in Rule 1-02 (w) of Regulation S-X promulgated by the
SEC under the 1933 Act and which are set forth in Schedule 3(a)) (the
"Significant Subsidiaries") are corporations duly organized and validly existing
in good standing under the laws of the jurisdictions in which they are
incorporated, and have the requisite corporate power to own their properties and
to carry on their business as now being conducted. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a whole. As used in
this Section 3, the term "Company" shall include all of its Significant
Subsidiaries.
b. AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Registration Rights Agreement, the Certificate
of Designations of the Series D Preferred Shares (the "Certificate of
Designations") and the Escrow Agreement (the "Transaction Documents"), and to
issue the Series D Preferred Shares and, upon authorization in the Certificate
of Incorporation, the Conversion Shares in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation the issuance of the Series D Preferred
Shares and the reservation for issuance and the issuance of the Conversion
Shares issuable upon conversion thereof, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its stockholders other than the
amendment of the Certificate of Incorporation to increase the authorized number
of shares of Common Stock of the Company to cover the issuance of the Conversion
Shares, (iii) the Transaction Documents have been duly
5.
6
executed and delivered by the Company, (iv) this Agreement, the Registration
Rights Agreement, and the Escrow Agreement constitute the valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies, and (v) prior to the Closing Date, the
Certificate of Designations has been filed with the Secretary of State of the
State of Delaware and will be in full force and effect, enforceable against the
Company in accordance with its terms. The Buyers have brought the Stockholders
Agreement to the attention of the Company, and the Company agrees not to take
any actions not consistent with the intent of the Stockholders Agreement.
c. CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of 250,000,000 shares of Common Stock, of which
158,283,990 shares are issued and outstanding, and 10,000,000 shares of
Preferred Stock, of which 4,600 shares of Series C Convertible Preferred Stock
(the "Series C Preferred Shares") are issued and outstanding. All of such
outstanding shares have been validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(c), no shares of Common Stock
or Preferred Stock are subject to preemptive rights or any other similar rights
or any liens or encumbrances suffered or permitted by the Company. Except as
disclosed in Schedule 3(c), as of the effective date of this Agreement, (i)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company, (ii) there are no outstanding debt securities and (iii) there are no
agreements or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement). There are no securities or
instruments containing anti- dilution or similar provisions that will be
triggered by the issuance of the Series D Preferred Shares or the Conversion
Shares as described in this Agreement.
d. ISSUANCE OF SECURITIES. The Series D Preferred Shares are duly
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable, (ii) free from all taxes, liens
and charges with respect to the issue thereof and (iii) entitled to the rights
and preferences set forth in the Certificate of Designations. Upon authorization
in the Certificate of Incorporation of not less than an additional 81,000,000
shares of Common Stock, the Conversion Shares issuable upon conversion of the
Series D Preferred Shares will have been duly authorized and reserved for
issuance and upon conversion or exercise in accordance with the Certificate of
Designations will be validly issued, fully paid
6.
7
and nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock.
e. NO MATERIAL ADVERSE CHANGE. Since May 4, 1997, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial conditions, results of operations or prospects
of the Company, except as disclosed in the SEC reports (including the Form 10-Q
for the quarter ended August 3, 1997, which Form 10-Q has been disclosed to the
Buyers).
f. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since September 25, 1996,
the Company has filed timely all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein and the Company's Registration Statements on
Form S-4 filed on June 24, 1996, as amended, and on Form S-1's filed on November
29, 1996 and February 14, 1997 and all prospectuses related thereto, all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein, being hereinafter referred to as
the "SEC Documents"). The Company has delivered to the Buyer or its
representative true and complete copies of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "1933 Act") and the
1934 Act, as applicable, and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their respective
dates, the financial statements of the Company included in the SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyer which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made, not misleading.
7.
8
g. OFFERING VALID. Assuming the accuracy of the representations and
warranties of the Buyers contained in Section 2 hereof, the offer, sale and
issuance of the Shares and the Conversion Shares will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the "Act")
upon the filing of a Form D under the Act and will have been registered or
qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable state
securities laws. Neither the Company nor any agent on its behalf has solicited
or will solicit any offers to sell or has offered to sell or will offer to sell
all or any part of the Shares to any person or persons so as to bring the sale
of such Shares by the Company within the registration provisions of the Act or
any state securities laws.
h. ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, the Preferred Stock, the
Common Stock or any of the Company's subsidiaries, wherein an unfavorable
decision, ruling or finding would (i) have a material adverse effect on the
transactions contemplated hereby (ii) adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein or
(iii), except as expressly set forth in Schedule 3(h), have a material adverse
effect on the business, operations, properties, financial condition or results
of operation of the Company and its subsidiaries taken as a whole.
i. NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby will not (i) result in a violation of the
Certificate of Incorporation or Bylaws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company or any of its subsidiaries is a party, or result in a
violation of any law, rule, regulation, order, judgment, decree, license or
permit (including federal and state securities laws and regulations and the
rules and regulations of the principal market or exchange on which the Common
Stock is traded or listed) applicable to the Company or any of its subsidiaries
or by which any property or asset of the Company or any of its subsidiaries is
bound or affected. The Company is not in violation of any term of or in default
under its Certificate of Incorporation or By-laws, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company. The business
of the Company is not being conducted, and shall not be conducted so long as the
Buyers hold any Series D Preferred Shares or Conversion Shares, in violation of
any law, ordinance, or regulation of any governmental entity. Except as
specifically contemplated by this Agreement, including, but not limited to
Section 4(e), and as required under the 1933 Act and any applicable state
securities laws, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any third party in order for it to execute, deliver or
perform any of its
8.
9
obligations under or contemplated by the Transaction Documents in accordance
with the terms hereof or thereof.
j. TEN LARGEST STOCKHOLDERS. The list of stockholders of the Company
attached hereto as Exhibit E constitute the ten (10) largest holders of the
Company's Common Stock as of the date hereof who are affiliated with the
Company.
k. NO GENERAL SOLICITATION. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Series D Preferred Shares or the Conversion Shares.
4. COVENANTS.
a. FORM D. The Company agrees to file a Form D with respect to the
Series D Preferred Shares and the Conversion Shares as required under Regulation
D and to provide a copy thereof to each Buyer promptly after such filing. The
Company shall, on or before the Closing Date, take such action as the Company
shall reasonably determine is necessary to qualify the Series D Preferred Shares
and the Conversion Shares for, or obtain exemption for the Series D Preferred
Shares and the Conversion Shares, for sale to the Buyers at the Closing pursuant
to this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the Buyers on or prior to the Closing Date.
b. REPORTING STATUS. Until the earlier of (i) the date as of which
the Holders (as that term is defined in the Registration Rights Agreement) may
sell all of the Conversion Shares without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto), or (ii) the date on which
the registration rights expire pursuant to the Registration Rights Agreement
(the "Registration Period"), the Company shall, on a timely basis, file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination.
c. USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Series D Preferred Shares for the Company's internal working capital
purposes and to make outstanding payments to certain vendors expected, on a
commercially reasonable basis, to be approximately $4,000,000 at Closing and
approximately $2,750,000 per month thereafter.
d. RESERVATION OF SHARES. The Company shall have taken all actions
necessary to authorize and reserve 63,295,773 shares of Common Stock available
at the time of the Closing for issuance upon conversion of the Series D
Preferred Shares held by Amber.
9.
10
e. LISTING. The Company shall promptly secure the listing of the
Conversion Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Conversion Shares from time
to time issuable under the terms of this Agreement and the Registration Rights
Agreement. The Company shall maintain the Common Stock's authorization for
quotation on AMEX, the Nasdaq National Market, or The New York Stock Exchange,
Inc. The Company shall promptly provide to each Buyer copies of any notices it
receives from AMEX regarding the continued eligibility of the Common Stock for
listing on AMEX. The Company has not received any notice that the Common Stock
is not eligible for continued listing on AMEX.
f. ANNUAL MEETING; INCREASE IN AUTHORIZED COMMON STOCK. The Company
agrees that it will hold the 1998 Annual Meeting of Stockholders (the "1998
Meeting") of the Company no later than July 9, 1998. At the 1998 Meeting or at
any special meeting called on or before the 1998 Meeting, pursuant to Section
6(h) or otherwise, the Company shall propose an amendment to the Company's
Certificate of Incorporation increasing the Company's authorized number of
shares of Common Stock to cover at least the number of shares of Common Stock
issuable upon conversion of the Series D Preferred Shares and to permit holders
of not less than 25% of the outstanding voting power of the Company to call a
special meeting of stockholders (the "Amendment"). In the event the Amendment is
not approved in the 1998 Meeting, the Company agrees that it will continue to
propose the Amendment at subsequent annual meetings of stockholders or special
meetings of stockholders until the Amendment is approved. The Company agrees
that it will not submit any other proposals for stockholder approval until the
Amendment is approved, unless upon the advice of counsel, the Company determines
that it is obligated to do so under the Company's charter documents, by law or
judicial order or in order to discharge its fiduciary obligations.
g. FURTHER EQUITY ISSUANCES; RIGHT OF FIRST REFUSAL. The Company
agrees that it shall not issue any additional equity securities or securities
exercisable to purchase, or convertible into, or exchangeable for, equity
securities until the Amendment is approved, other than securities reserved for
issuance as of the Closing. The Company further agrees that any additional
equity securities issued after approval of the Amendment which have a
liquidation preference senior to the Series D Preferred Shares (the "Additional
Equity Securities") shall be subject to a right of first refusal in favor of the
Buyers (the "Right"). Pursuant to the Right, each Buyer shall have the right to
agree to purchase up to its pro rata share based on its proportionate investment
in the Series D Preferred Shares, of the Additional Equity Securities within
five (5) days of receipt of written notice from the Company of its intent to
issue the Additional Equity Securities. If any Buyer fails to give notice of its
intent to purchase its pro rata share of the Additional Equity Securities within
such five (5) day period, the Company shall thereafter sell the Additional
Equity Securities in respect of which the Right was not exercised, at a price
and upon general terms and conditions materially no more favorable to the
purchasers thereof than specified in the Company's notice to the Buyers pursuant
to this section.
10.
11
h. RIGHT OF ACCESS TO BOOKS AND RECORDS. The Company agrees to
provide each Buyer with access to the books and records of the Company;
provided, however, that such Buyer shall exercise such right upon reasonable
notice to the Company, at a reasonable time, and with reasonable frequency and
shall execute a confidentiality agreement reasonably acceptable in form to the
Company prior to the exercise of such right. The right shall not be assignable
and shall not apply in instances of contested takeovers in which the requesting
Buyer is a participant or has announced in a Schedule 13D that it is
contemplating participating; provided, however, that the Company agrees that in
no event will the Company provide less information to the Buyers than is
available to other contestants.
i. BOARD OF DIRECTORS. The Company agrees that the authorized size
of the Board of Directors of the Company shall be seven directors. The Board
shall initially be comprised of Xxx Xxxxxxxx, Xxxxx Xxxxxxx, Xxxx Xxxxxxx, Jugi
Tandon, Xxxx Xxxxxxx, and Lip-Bu Tan and a seventh member to be designated by a
majority in interest of the Buyers.
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to deposit with the Escrow
Agent the Series D Preferred Shares at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:
a. Such Buyer shall have executed each of the Transaction Documents
and delivered the same to the Company.
b. Such Buyer shall have deposited with the Escrow Agent (i) the
Purchase Price for the Series D Preferred Shares to be purchased by such Buyer
by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Escrow Agent and (ii) an executed Lock-Up
Agreement.
c. The representations and warranties of such Buyer shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the Closing Date.
6. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to deposit with the Escrow
Agent the purchase price for the Series D Preferred Shares at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion:
11.
12
a. The Company shall have executed each of the Transaction
Documents, and delivered the same to such Buyer.
b. The Certificate of Designations, shall have been filed with the
Secretary of State of the State of Delaware, and a copy thereof certified by
such Secretary of State shall have been delivered to such Buyer.
c. The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. Such Buyer
shall have received a certificate, executed by the Chief Executive Officer of
the Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer including,
without limitation, an update as of the Closing Date regarding the
representation contained in Section 3(c) above.
d. Such Buyer shall have received the opinion of the Company's
counsel dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to such Buyer and in substantially the form of Exhibit F attached
hereto.
e. The Company shall have executed and delivered to the Escrow Agent
the Stock Certificates (in such denominations as such Buyer shall request) for
the Series D Preferred Shares being purchased by such Buyer.
f. The Board of Directors of the Company shall have adopted the
resolutions in substantially the form of Exhibit G attached hereto.
g. The Company shall have taken all actions necessary to authorize
and reserve the 63,295,773 shares of Common Stock available as of the date
hereof for the issuance upon conversion of the Series D Preferred Shares held by
Amber Arbitrage.
h. As of the Closing Date, such Buyer shall have received a copy of
letter agreements (the "Stockholders Agreement") executed by the ten (10)
largest stockholders of the Company as of the Closing Date that are affiliated
with the Company's officers or directors (collectively, the "Approving
Stockholders") to the effect that each of the Approving Stockholders, as common
stockholders of the Company, covenants to vote such Approving Stockholder's
shares of Common Stock in favor of amending the Company's Certificate of
12.
13
Incorporation to increase the number of authorized shares of Common Stock to
cover the number of shares of Common Stock issuable upon conversion of the
Series D Preferred Shares at the Company's next special or annual meeting of
stockholders, which meeting the Company agrees to hold by November 30, 1997
(unless the proxy statement relating to such meeting is reviewed by the SEC, in
which case the length of time of such review shall be added to the above date),
and at any subsequent meeting until the Amendment is approved.
i. A total of $5,000,000 shall have been deposited with the Escrow
Agent by Buyers other than Amber.
7. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of this Agreement and acquiring the Series D Preferred Shares and
Conversion Shares hereunder and in addition to all of the Company's other
obligations under this Agreement, the Company shall defend, protect, indemnify
and hold harmless each Buyer and each other holder of Series D Preferred Shares
and Conversion Shares and all of their officers, directors, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities'), incurred by
the Indemnitees or any of them as a result of, or arising out of, or relating to
(a) any misrepresentation or breach of any representation or warranty made by
the Company in this Agreement, the Certificate of Designations or the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, the Certificate of
Designations or the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of
action, suit or claim brought or made against such Indemnitee and arising out of
or resulting from the execution, delivery, performance or enforcement of this
Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Indemnitees, any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the issuance of
the Series D Preferred Shares or the status of such Buyer or holder of the
Series D Preferred Shares or the Conversion Shares as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
8. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California without
regard to the principles of conflict of laws.
13.
14
b. COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof; provided, however, that the failure to so deliver shall not
invalidate the Agreement.
c. HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provision of this Agreement in any other jurisdiction so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. If any provision of this Agreement is so broad as
to be unenforceable, the provision shall be interpreted to be only so broad as
is enforceable.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all other
prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the Company if the Company is to be charged with enforcement and/or, as the
case may be, a majority in interest of the Buyers to be charged with
enforcement.
f. NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by confirmed facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested;
(iii) five (5) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
14.
15
000 Xxxxxxxxx Xxxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President
With a copy to:
Cooley Godward LLP
3000 El Camino Real
Five Xxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
If to a Buyer, to its address and facsimile number on the Schedule of
Investors, with copies to such Buyer's counsel as set forth on the Schedule of
Investors. Each party shall provide ten (10) days' prior written notice to the
other party of any change in address or facsimile number.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
Neither party shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other party, except as specifically set
forth in the documents delivered herewith. A Buyer may assign its rights
hereunder without the consent of the Company, provided, however, that any such
assignment shall not release such Buyer from its obligations hereunder unless
such obligations are assumed by such assignee and the Company has consented to
such assignment and assumption.
h. NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. SURVIVAL. The representations and warranties of the Company and
the Buyers contained in Sections 2 and 3, the agreements and covenants set forth
in Sections 4, 7 and this Section 8(i), shall survive the Closing. Each Buyer
shall be responsible only for its own representations, warranties, agreements
and covenants hereunder.
j. FURTHER ASSURANCES. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request
15.
16
in order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.
k. PLACEMENT AGENT. The Company and the Buyers shall each indemnify
the other for any broker's or finder's fees for which such indemnifying party is
responsible.
L. NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
16.
17
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY BUYERS
JTS CORPORATION AMBER ARBITRAGE LDC
By: /s/ XXXXX X. XXXXXXXX By: /s/ XXXX XXXXXX
---------------------------------- ----------------------------------------
Name: Xxxxx X. Xxxxxxxx Name: Xxxx Xxxxxx
Its: President and Chief Its: Trading Manager
Executive Officer
/s/ XXXX XXXXXXX
-------------------------------------------
Xxxx Xxxxxxx
/s/ XXXXXXX XXX TANDON
-------------------------------------------
Xxxxxxx Xxx Tandon
/s/ XXXXX X. XXXXXXXX
-------------------------------------------
Xxxxx X. Xxxxxxxx
17.
18
EXHIBIT A
SCHEDULE OF INVESTORS
NUMBER OF
SERIES D
PREFERRED
INVESTOR NAME & ADDRESS INVESTMENT SHARES
----------------------- ------------ -----------
Amber Arbitrage $20,000,750 22,858
c/o Custom House Fund
Management Limited
00 Xxxxxxx Xxxxxx
Xxxxxx 0, Xxxxxxx
cc: Xxxxxx Xxxxxxxxxx LLP
Attn: Xxxxxx Xxxxxxx, Esq.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Xxxx Xxxxxxx $ 3,000,375 3,429
00000 Xxxxxxxxx Xxxxx
Xxxxx Xxxxxx, XX 00000
Xxxxx X. Xxxxxxxx $ 200,375 229
JTS Corporation
000 Xxxxxxxxx Xxxxxxx
Xxx Xxxx, XX 00000
Xxxxxxx X. Xxxxxx $ 2,000,250 2,286
Tandon Associates
0000-X Xxxxxx Xxxx
Xxxx Xxxxxx, XX 00000
----------- ------
TOTAL $25,201,750 28,802
=========== ======
