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EXHIBIT 10.10
CONVERTIBLE SUBORDINATED PROMISSORY NOTES
AND WARRANT PURCHASE AGREEMENT
THIS CONVERTIBLE SUBORDINATED PROMISSORY NOTES AND WARRANT PURCHASE
AGREEMENT (the "Agreement") is made and entered into as of September 30, 1992,
by and among EXTENDED SYSTEMS, INC., a Delaware corporation (the "Company"), and
the persons listed on Exhibit 1.01A hereto (the "Purchasers").
1. PURCHASE, SALE AND TERMS OF NOTES AND WARRANTS
1.01 The Zero Promissory Notes. The Company has authorized the
issuance and sale of the Company's $7,625,000 Maturity Value of Zero Coupon
Convertible Subordinated Promissory Notes (the "Zero Coupon Notes") with the
Maturity Value payable on September 29, 1999, to the Purchasers for the Issue
Price and in the respective Maturity Values set forth in Exhibit 1.01A hereto.
The Zero Coupon Notes shall be substantially in the form set forth in Exhibit
1.01B hereto.
1.02 The 10% Promissory Notes. The Company has authorized the
issuance and sale of the Company's $500,000 principal amount 10% Convertible
Subordinated Promissory Notes (the "10% Notes") with interest payable annually
in arrears until the principal is paid in full and principal is payable on
September 29, 1999, to the Purchasers, in the respective amounts set forth in
Exhibit 1.01A hereto. The 10% Notes shall be substantially in the form set forth
in Exhibit 1.02 hereto. (Collectively the Zero Coupon Notes and 10% Notes are
herein referred to individually as a "Note" and collectively as the "Notes").
Any shares of Common Stock issuable upon conversion of the Notes, and such
shares when issued, are herein referred to as the "Conversion Shares."
1.03 The Warrants. The Company has authorized the issuance and
sale of three-year warrants to purchase 76,062 shares of the Company's Common
Stock, $.10 par value, at a price of $32.868 per share to the Purchasers, in the
respective amounts and for the price set forth in Exhibit 1.01A hereto. The
Warrants (the "Warrants") shall be delivered pursuant to Warrant Certificates
substantially in the form set forth in Exhibit 103 hereto. Any shares of Common
Stock issuable upon exercise of the Warrants and such shares when issued are
herein referred to as the "Warrant Shares."
1.04 The Securities. The Zero Coupon Notes, 10% Notes and
Warrants are sometimes referred to herein collectively as the "Securities."
1.05 Reservation of Shares. The Company shall authorize and
reserve, and covenants to continue to reserve, free of preemptive rights and
other preferential rights, a sufficient number of its previously authorized but
unissued shares of Common Stock to satisfy the rights of conversion of the
holders of the Notes and Warrants.
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1.06 The Closing of Purchase and Sale of Notes and Warrants. The
Company hereby issues and sells to the Purchasers, and the Purchasers, severally
but not jointly, hereby purchase, the Securities for the purchase price and in
the amounts set forth opposite their respective names in Exhibit 1.01A hereto.
Such purchase and sale shall take place at a closing (the "Closing") to be held
at the office of Stradling, Yocca, Xxxxxxx & Xxxxx, 000 Xxxxxxx Xxxxxx Xxxxx,
Xxxxx 0000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, on September 30, 1992 at 10:00
A.M., or on such other date and at such time as may be mutually agreed upon. The
Company hereby issues and delivers the Notes payable to the order of Purchasers
and Warrant Certificates representing the Warrants all in the amounts set forth
opposite their respective names in Exhibit 1.01A hereto. Purchasers hereby pay
the purchase price by wire transfers to the account of the Company or by
delivery of checks payable to the order of the Company.
1.07 Payments and Endorsements. Payment of principal and accrued
Original Issue Discount on the Zero Coupon Notes and payments of principal and
interest, on the 10% Notes, shall be made directly by check duly mailed or
delivered to each Purchaser at its address referred to in Exhibit 1.01A hereto,
without any presentment or notation of payment, except that prior to transfer of
any 10% Note, the holder of record shall endorse on such 10% Note a record of
the date to which interest has been paid and on all Notes a record of the date
all payments made on account of principal of such Note.
1.08 Redemption of Notes.
(a) Required Redemptions. Upon the earlier to occur of a
merger or other change of control described in Section 4.02(a) or on the 29th
day of September 1999, the Company shall pay, without premium, the Issue Price
plus the accrued Original Issue Discount of the Zero Coupon Notes then
outstanding and the full principal amount of and interest due on the 10% Notes,
or such lesser amount as may be then outstanding.
(b) Optional Redemption. In addition to the redemption of
Notes required under subsection 1.08(a), in the event the Company closes a
Qualified Public Offering the Company may, without premium, subject to the
notice requirement of subsection 1.08(c), redeem the outstanding Notes, in whole
but not in part, in an amount equal to the Issue Price of, and all accrued
Original Issue Discount on, the Zero Coupon Notes, to the extent such Notes
remain outstanding and together with all accrued and unpaid interest due on the
amount then remaining outstanding on the 10% Notes.
(c) Notice of Redemptions. Notice of optional redemptions
pursuant to subsection 1.08(b) shall be given to all registered holders of the
Notes at least thirty (30) days prior to the date of such redemption. The
Company shall give all registered holders of the Notes at least ten (10) days
prior written notice of the Company's intention to file a Registration Statement
with the Securities and Exchange Commission for Any Public Offering.
1.09 Registration, etc. The Company shall maintain at its
principal office a register of the Notes and shall record the names and
addresses of the holders of the Notes, which includes the address to which
notices are to be sent and payments are to be made, and the particulars of all
transfers, exchanges and replacements of Notes.
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1.10 Transfer and Exchange of Notes. The holder of any Note may
surrender such Note at the principal office of the Company for transfer or
exchange. The Company shall promptly make such exchange or transfer without
expense to the holder (other than transfer taxes, if any) and shall issue in
exchange therefor another Note for the same aggregate principal amount as the
unpaid principal amount of the Note so surrendered.
1.11 Replacement of Notes. Upon receipt of evidence satisfactory
to the Company of the loss, theft, destruction or mutilation of any Note and, if
requested in the case of any such loss, theft or destruction, the Company will
issue a new Note, of like tenor and amount and dated the date to which interest
has been paid, in lieu of such lost, stolen, destroyed or mutilated Note.
1.12 Subordination. The payment of the principal of, and with
respect to the 10% Notes, interest on, each and all of the Notes shall be
subordinated in right of payment, to the extent and in the manner hereinafter
set forth, to the prior payment in full of all Senior Debt (as hereinafter
defined) at any time outstanding.
(a) No Payment on Notes Under Certain Conditions. In the
event that:
(i) any default occurs in the payment of the
principal of or interest on any Senior Debt and during the continuance of such
default until such payment has been made or such default has been cured or
waived in writing by such holder of Senior Debt; or
(ii) the maturity of any Senior Debt is accelerated
by any holder thereof because of a default with respect thereto and until such
acceleration has been rescinded or said Senior Debt has been paid;
then and during the continuance of any of such events no payment of principal or
interest on the Notes shall be made nor shall any property or assets be applied
to the purchase or redemption of the Notes, whether voluntary or involuntary, by
the Company or demanded or accepted by any holder of the Notes who has received
notice from the Company or from a holder of Senior Debt of either of such
events.
(b) Scope of Section. The provisions of this Section 1.12
are intended solely for the purpose of defining the relative rights of the
holders of the Notes, on the one hand, and the holders of Senior Debt, on the
other hand. Nothing contained in this Section 1.12 or elsewhere in this
Agreement or the Notes is intended to or shall impair, as between the Company,
its creditors, other than the holders of Senior Debt, and the holders of the
Notes, the obligation of the Company, which is unconditional and absolute, to
pay to the holders of the Notes the principal of the Notes, Original Issue
Discount on the Zero Coupon Notes, and interest on the 10% Notes as and when the
same shall become due and payable in accordance with the terms thereof.
(c) Senior Debt Defined. The term "Senior Debt" shall mean
(i) all Indebtedness of the Company (which is not convertible into equity
securities of the Company and is not issued in conjunction with equity
securities of the Company or options or warrants to purchase equity securities
of the Company) for money borrowed from banks or other institutional lenders,
including any
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extension or renewals thereof, whether outstanding on the date hereof or
thereafter created or incurred, which is not by its terms subordinate and junior
to or on a parity with the Notes.
1.13 Representations by the Purchasers.
(a) Investment. Each Purchaser severally, and not jointly,
represents that:
(i) Such Purchaser has been advised that the
Securities have not been registered under the Securities Act nor qualified under
any state securities laws on the ground, among others, that no distribution or
public offering of the Securities, the Conversion Shares or the Warrant Shares,
is to be effected. It is Purchaser's intention to acquire the Securities for its
own account for the purpose of investment and not with a view to distribution or
resale thereof.
(ii) The Purchaser acknowledges that the Notes and
the certificates representing the Conversion Shares and the Warrant Shares, when
issued, shall contain the following legends:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933; THEY
HAVE BEEN ACQUIRED BY THE HOLDER FOR INVESTMENT AND MAY
NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT AS MAY BE AUTHORIZED UNDER
THE SECURITIES ACT OF 1933 AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER;
THIS STOCK IS RESTRICTED STOCK AND MAY NOT BE SOLD WITHOUT
FIRST OFFERING IT TO THE CORPORATION, WHICH SHALL HAVE THE
RIGHT TO PURCHASE IT WITHIN THIRTY (30) DAYS AT THE LATEST
APPRAISAL PRICE DETERMINED BY AN INDEPENDENT OUTSIDE
APPRAISER WITHIN ONE HUNDRED TWENTY (120) DAYS PRIOR TO
THE DATE OF SALE PURSUANT TO ARTICLE 4B OF THE AMENDED
ARTICLES OF INCORPORATION.
THIS RESTRICTION SHALL REMAIN IN EFFECT AT ALL TIMES AND
SHALL APPLY TO ANY FUTURE OWNER OR TRANSFEREE OF THIS
STOCK.
The legend arising from the Company's Certificate of Incorporation, shall expire
upon the closing of Any Public Offering.
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(b) Authorization. Each Purchaser, severally, but not
jointly, further represents that:
(i) It has duly authorized, executed and delivered
this Agreement and any other agreements and instruments executed in connection
herewith.
(ii) This Agreement and such other agreements and
instruments constitute the valid and binding obligations of such Purchaser,
enforceable against it in accordance with their respective terms.
1.14 Use of Proceeds. The Company shall use the proceeds from the
offer and sale of the Notes and the Warrants for the purpose of repurchasing
shares of the outstanding Common Stock of the Company from the Selling
Shareholders at a price per share not to exceed the most recently appraised
purchase price which is $29.88, and to the extent it is not used for the
repurchase of shares of the Common Stock the remainder shall be used for working
capital purposes.
2. CONDITIONS TO PURCHASERS' OBLIGATIONS
The obligation of each Purchaser to purchase and pay for the
Securities at the Closing is subject to the following conditions:
2.01 Documentation at Closing. The Purchasers shall have received
prior to or at the Closing all of the following:
(a) A favorable opinion of Xxxxxx & Xxxxxx, counsel for
the Company, as to matters set forth in Exhibit 2.01A and as to such other
matters as the Purchasers, or their special counsel, may reasonably request.
(b) A Stockholders' Agreement, in the form set forth in
Exhibit 2.01B, shall have been executed by the parties named therein.
2.02 Consents, Waivers, etc. Prior to the Closing, the Company
shall have obtained all consents or waivers, if any, necessary to execute and
deliver this Agreement, issue the Securities and to carry out the transactions
contemplated hereby and thereby, and all such consents and waivers shall be in
full force and effect.
3. REPRESENTATIONS AND WARRANTIES
The Company, which in every event shall include all Subsidiaries,
represents and warrants, that except as set forth in the Disclosure Schedule
attached hereto as Exhibit 3.00:
3.01 Organization, Standing of and Corporate Action by the
Company. The Company is a duly organized and validly existing corporation duly
licensed or qualified and in good standing as a foreign corporation authorized
to do business in all jurisdictions in which the failure to be so qualified
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would have a material adverse effect upon the business as now conducted. The
Company has taken all corporate action required to make all the provisions of
this Agreement, the Securities and any other agreements and instruments executed
in connection herewith and therewith, the valid and enforceable obligations of
the Company. The Company has complied with all applicable federal or state
securities laws in connection with the issuance and sale of the Securities.
3.02 Capitalization. The Company has a total authorized
capitalization consisting of 10,000,000 shares of Class A Common Stock, $.10 par
value, and 10,000,000 shares of Class B Preferred Stock, $.10 par value. A
complete list of the shares of Class A Common Stock and Class B Preferred Stock
currently issued and outstanding and the names in which such shares are
registered is set forth in Exhibit 3.02 hereto. All of the outstanding shares of
capital stock of the Company have been duly authorized, are validly issued and
are fully paid and nonassessable and all shares issuable upon exercise of
outstanding options and warrants have been duly authorized and, when issued in
accordance with the terms of such options and warrants, will be validly issued,
fully paid and nonassessable. The Conversion Shares, when issued and delivered
upon conversion of the Notes, and the Warrant Shares when issued and delivered
upon exercise of the Warrants, will be duly authorized, validly issued and fully
paid and nonassessable free and clear of all liens and encumbrances created by
the Company.
3.03 Financial Statements. The Financial Statements of the
Company for the years ended June 30, 1990, 1991 and 1992, as certified by
Coopers & Xxxxxxx, and of the Company for the two months ended August 31, 1992,
certified by the principal financial officer of the Company (collectively, the
"Financial Statements") copies of which Financial Statements, along with any
officers reports, have heretofore been delivered to Purchasers or their special
counsel, were prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved subject to
year-end adjustments which would not be materially adverse, and fairly present
the financial position and results of operations of the Company and Subsidiaries
for the periods covered. Since June 30, 1992 no event has occurred or failed to
occur that would be required to be disclosed in the footnotes of the Financial
Statements for such statements to be prepared in accordance with generally
accepted accounting principles, and to the best knowledge of the Company, there
has been no other event or condition of any character specifically relating to
the Company which specifically pertains to and materially adversely affects its
business, properties or condition, financial or otherwise.
3.04 Intellectual Property. To the best knowledge of the Company,
except as otherwise expressly disclosed to Purchasers, the Company has title to
and ownership of all necessary patents, licenses, trademarks, service marks,
tradenames, copyrights, trade secrets, inventions, franchises, computer software
and other proprietary rights ("intellectual property") necessary for its
business as now conducted, or proposed to be conducted, without any conflict
with or infringement of the rights of others. The Company has no reason to
believe that it has violated, or violates, any of the intellectual property
rights of any other person or entity.
3.05 Disclosure. To the best knowledge of the Company, all
responses to Purchasers and its counsel to all written and oral requests for
information have been true and accurate in every material respect and no
representation, warranty or statement by the Company in this Agreement or in any
written statement furnished to the Purchasers or their counsel pursuant to this
Agreement contains
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or will contain any untrue statement of material fact or omits to state a
material fact necessary to make such statements, in light of the circumstances
under which they were made, not misleading. To the best knowledge of the
Company, there is no material information regarding the Company that the Company
has failed to disclose that is likely to have a material adverse effect upon the
Company.
4. COVENANTS OF THE COMPANY AND PURCHASERS
4.01 Affirmative Covenants of the Company Other Than Reporting
Requirements. The Company covenants and agrees that, so long as any of the Notes
are outstanding or, until the closing of a Qualified Public Offering it will
perform and observe the following covenants and provisions and will cause each
Subsidiary to perform and observe such of the following covenants and
provisions:
(a) Punctual Payment. Redeem the Notes at the times and
place and in the manner provided in the terms of the Notes, respectively; and
pay the principal of, premium, if any, and interest on each of the Notes at the
times and place and in the manner provided in the Notes and herein.
(b) Compensation. The Compensation Committee of the Board
of Directors (which shall consist of not more than three members of the Board of
Directors and of which the director designated by the Purchasers pursuant to the
Stockholders' Agreement will be a member and a director who is not employed by
the Company nor affiliated with an employee is a member) shall annually prepare
and submit recommended compensation for the Company's officers to the Board of
Directors.
(c) Employment Agreements. The Company has caused all
officers and employees to enter an Employment Agreement and a Confidentiality
Agreement with the Company, and will continue to cause its new employees to
enter such agreements with the Company.
(d) Budgets and Board Approval. No later than the
fifteenth day following the commencement of each fiscal year, prepare and submit
to, and not more than forty-five (45) days into the current fiscal year obtain
the approval of a majority of, the Board of Directors a budget for the upcoming
fiscal year, including projections or forecasts of capital and operating
expenses, cash flow, and profits and losses, all itemized in reasonable detail.
(e) Board of Directors; Indemnification. The Board of
Directors shall not consist of more than seven (7) directors, and shall consist
of one member designated by the Purchasers pursuant to the Stockholders'
Agreement attached hereto as Exhibit 2.01B. The certificate of incorporation or
bylaws of the Company shall at all times provide for the indemnification of the
Board of Directors to the full extent provided by the law of the jurisdiction in
which the Company is organized. The Company shall pay for reasonable travel and
living expenses of the members of the Board of Directors designated by the
Purchasers in attending meetings of the Board of Directors and committees
thereof and in conducting other business on behalf of the Company in accordance
with the Company's customary travel policy.
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4.02 Negative Covenants of the Company. The Company covenants and
agrees that, until the earlier to occur of (i) all of the Notes have been paid
in full or converted and, (ii) until the closing of a Qualified Public Offering,
it will not take the actions contained in the following covenants and
provisions, and will not permit any Subsidiary to take the actions contained in
the following covenants and provisions:
(a) Mergers, Sale of Assets. Merge or consolidate with, or
sell, assign, lease or otherwise dispose of or voluntarily part with the control
of (whether in one transaction or in a series of transactions), all or
substantially all of its property and assets to any Person, except for sales or
other dispositions of assets in the ordinary course of business and except that
the Company may merge any Person into it or otherwise acquire such Person so
long as the holders of voting stock of the Company immediately prior to such
merger are the holders of more than 50% of the voting stock of the resulting
company immediately following such merger, such merger or acquisition does not
result in the violation of any of the provisions of this Agreement, no such
violation exists at the time of such merger or acquisition and the corporate
structure does not change in a manner to substantially change the rights of
Purchasers. If the Company elects to enter a transaction otherwise prohibited by
this Section 4.02(a) it shall first give Purchasers thirty days prior written
notice. In the event of a breach of the provisions of this subsection 4.02(a),
Purchasers may resort to the remedies provided in Article 7 of this Agreement.
(b) Dealings with Affiliates and Others. Other than stock
transactions, enter into any transaction with any officer, director or
stockholder of the Company, or any member of their respective immediate
families, or any corporation or other entity directly or indirectly controlled
by one or more of such Persons, except in amounts less than $60,000 in any year
in a single transaction or a series of similar transactions, unless such
transaction is approved in advance by a majority of disinterested members of the
Board of Directors.
(c) Dividends. (i) Purchase any class of the Company's or
any Subsidiary's capital stock above the appraised fair market value per share
of such stock, (ii) purchase any such stock in violation of any existing
shareholders or stockholders agreement, if applicable, (iii) pay any dividends
on any capital stock if there is a default on the payment of the principal or
interest on the Notes, or (iv) if the payment of the dividends or purchase of
such stock would impair the capital of the Company. Purchasers acknowledge that
the Company has a current policy to pay dividend annually in an amount equal to
ten percent of the Company's net income for the year most recently ended.
(d) Agreements with Employees for the Purchase of
Securities. The Company shall not issue securities to employees, officers,
directors or other parties at a price less than the fair market value of such
securities, nor shall it grant options to purchase its securities at a price
less than the then fair market value.
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4.03 Reporting Requirements. The Company will furnish the
following to each holder who owns of record or beneficially or has the right to
acquire from the Company any Conversion Shares or Warrant Shares, and to each
holder of the Notes:
(a) within five (5) days after the occurrence of each
Event of Default or each event that, with the giving of notice or lapse of time
or both, would or could reasonably constitute an Event of Default, the statement
of the chief executive officer of the Company setting forth details of such
Event of Default or event and the action the Company proposes to take with
respect thereto;
(b) as soon as available, and in any event within thirty
(30) days after the end of each fiscal month of the Company, Consolidated
balance sheets of the Company and its Subsidiaries as of the end of such month
and Consolidated statements of income and retained earnings for the period
ending with such month and within thirty (30) days after the end of each fiscal
quarter of the Company statements of cash flow of the Company for the period
ending with such fiscal quarter, setting forth in each case in comparative form
the corresponding figures for the corresponding period of the prior fiscal year,
all in reasonable detail and duly certified (subject to year-end audit
adjustments) by the chief executive officer or chief financial officer of the
Company as having been prepared consistent with the annual statements of the
Company except for year end adjustments;
(c) as soon as available, and in any event within ninety
(90) days after the end of each fiscal year of the Company, a copy of the annual
audit report for such year for the Company, including therein Consolidated,
balance sheets of the Company as of the end of such fiscal year and Consolidated
statements of income and retained earnings and of statements of cash flow of the
Company, all duly certified by a nationally recognized independent public
accounting firm chosen by the Board of Directors;
(d) no later than thirty (30) days after the commencement
of each fiscal year of the Company, a copy of the initial operating plan and
budget provided for in Section 4.01(d).
4.04 Confidentiality. Any confidential information obtained by
any holder of the Securities, Conversion or Warrant Shares pursuant to this
Agreement shall be treated as confidential and shall not be disclosed to a third
party without the consent of the Board of Directors, except that such
information shall not be deemed confidential for the purpose of enforcement of
this Agreement, provided, however Purchasers may disclose to the limited
partners of Purchasers the type and nature of financial information regarding
the Company as is set out in Exhibit 4.04 hereto.
5. REGISTRATION RIGHTS
5.01 "Piggy Back" Registration.
(a) If at any time the Company shall determine to register
under the Securities Act (including pursuant to a demand of any shareholder of
the Company exercising registration rights) any of its Common Stock, other than
a registration relating solely to employee stock option or purchase plans, or a
registration statement on Form S-4 (or any similar form promulgated by the
Securities and
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Exchange Commission) relating solely to a Securities and Exchange Commission
Rule 145 transaction, the Company shall send to each holder of Registrable
Shares written notice of such determination and, if within ten (10) days after
receipt of such notice, such holder shall so request in writing, the Company
shall use its best efforts to include in such registration statement all or any
part of the Registrable Shares that such holder requests to be registered.
(b) If the registration of which the Company gives notice
involves an underwriting, all holders proposing to have registered their
Registrable Shares, shall enter into an underwriting agreement in customary form
with the underwriter selected for such underwriting. If the underwriter
determines that marketing factors require a limitation of the number of
securities to be underwritten, the underwriter may limit the number of
Registrable Shares to be included in the registration and underwriting pro rata.
5.02 Registration on Form S-3. In addition to the rights provided
the holders of Registrable Shares in Section 5.01 above, if the registration of
Registrable Shares under the Securities Act can be effected on Form S-3 (or any
similar form promulgated by the Securities and Exchange Commission), the Company
will promptly so notify each holder of Registrable Shares, including each holder
who has a right to acquire Registrable Shares, and then will at any time, and
from time to time, thereafter, as expeditiously as possible, use its best
efforts to effect qualification and registration under the Securities Act on
said Form S-3 of all or such portion of the Registrable Shares as the holder
shall specify.
5.03 Effectiveness. The Company will use its best efforts to
maintain the effectiveness for up to nine (9) months of any registration
statement pursuant to which any of the Registrable Shares are being offered.
5.04 Indemnification. In the event that the Company registers any
of the Registrable Shares under the Securities Act, the Company will indemnify
and hold harmless each holder and each underwriter of the Registrable Shares so
registered and each person, if any, who controls such holder or any such
underwriter within the meaning of Section 15 of the Securities Act from and
against any and all losses, claims, damages, expenses or liabilities, joint or
several, to which they or any of them become subject under the Securities Act or
under any other statute or at common law or otherwise, and, except as
hereinafter provided, will reimburse each such holder, each such underwriter and
each such controlling person, if any, for any legal or other expenses reasonably
incurred by them or any of them in connection with investigating or defending
any actions whether or not resulting in any liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the registration statement, in any preliminary or amended preliminary prospectus
or in the prospectus, as amended, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein not misleading or
any violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with such registration; provided, however,
that the Company will not be liable in any such case to the extent that any such
claim, loss, damage or liability arises out of or is based on an untrue
statement or omission with respect to information furnished to the
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Company by or regarding such holder, underwriter or controlling person in
connection with such registration.
5.05 Exchange Act Registration. The Company will use its best
efforts to file on a timely basis with the Securities and Exchange Commission
all information that the Commission may require under either of Section 13 or
Section 15(d) of the Exchange Act and, so long as it is required to file such
information, shall use its best efforts to take all action that may be required
as a condition to the availability of Rule 144 under the Securities Act (or any
successor exemptive rule hereinafter in effect) with respect to the Company's
Common Stock.
5.06 Further Obligations of the Company. Whenever under the
preceding Sections of this Article V the Company is required hereunder to
register Registrable Shares, it agrees that it shall also do the following:
(a) Furnish to each selling holder such copies of each
preliminary and final prospectus and any other documents that such holder may
reasonably request to facilitate the public offering of its Registrable Shares;
(b) Use its best efforts to register or qualify the
Registrable Shares to be registered pursuant to this Article V under the
applicable securities or "blue sky" laws of such jurisdictions as any selling
holder may reasonably request; provided, however, that the Company shall not be
obligated to qualify to do business in any jurisdiction where it is not then so
qualified or to take any action that would subject it to the service of process
in suits other than those arising out of the offer or sale of the securities
covered by the registration statement in any jurisdiction where it is not then
so subject;
(c) Furnish to each selling holder a signed counterpart
of:
(i) an opinion of counsel for the Company, dated
the effective date of the registration statement, and
(ii) "comfort" letters signed by the Company's
independent public accountants who have examined and reported on the Company's
financial statements included in the registration statement;
(d) Permit each selling holder or his counsel or other
representatives to inspect and copy such corporate documents and records as may
reasonably be requested by them; and
(e) Furnish to each selling holder, upon request a copy of
all documents filed and all correspondence from or to the Securities and
Exchange Commission in connection with any such offering unless confidential
treatment of such information has been requested of the Securities and Exchange
Commission.
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5.07 Expenses. In the case of a registration under Sections 5.01
or 5.02, the Company shall bear all costs and expenses of each such
registration, including, but not limited to, printing, legal and accounting
expenses, Securities and Exchange Commission filing fees and "blue sky" fees and
expenses. In each such case, the selling holders shall bear, on a pro rata
basis, (i) all underwriting discounts, selling commissions and all applicable
stock transfer taxes, and (ii) all fees and disbursements of counsel for such
holders.
5.08 Transfer of Registration Rights. The registration rights of
the holders of Registrable Shares under this Article V may be transferred to any
transferee of Registrable Shares.
5.09 No Superior Rights. The Company will not grant registration
rights to any Person that are superior to the rights granted hereunder.
6. RIGHT TO PARTICIPATE IN FINANCINGS
6.01 Right of Participation. Prior to Any Public Offering, in the
event the Company chooses to issue, sell or exchange, agree to issue, sell or
exchange, or reserve or set aside for issuance, sale or exchange, for cash or
cash equivalents (i) any shares of Common Stock, (ii) any other equity security
of the Company, including, without limitation, shares of preferred stock, (iii)
any option, warrant or other right to subscribe for, purchase or otherwise
acquire any equity security of the Company, or (iv) any Debt Securities (the
"Offered Securities"), the Company shall offer to sell to the Purchasers, as a
group, that number of the Offered Securities so that the Purchasers shall retain
their then existing equity percentage of the Company on a fully diluted basis.
For purposes of making this calculation, Conversion Shares and Warrant Shares
shall be deemed to be issued and outstanding shares of Common Stock of the
Company.
The Company shall offer to sell to each Purchaser (a) that
portion of the Offered Securities as the aggregate number of Conversion Shares
and Warrant Shares then held by or issuable to such Purchaser bears to the total
number of outstanding shares of Common Stock of the Company (the "Basic
Amount"), at a price and on the other terms specified by the Company in writing
delivered to such Purchaser (the "Offer"), and the Offer by its terms shall
remain open and irrevocable for a period of thirty (30) days.
6.02 Notice of Acceptance. Notice of each Purchaser's intention
to accept, in whole or in part, an Offer made pursuant to Section 6.01 shall be
evidenced by a writing signed by such Purchaser and delivered to the Company
prior to the end of the thirty (30) day period of the Offer, setting forth the
portion of the Purchaser's Basic Amount that such Purchaser elects to purchase
(the 'Notice of Acceptance"). If the Basic Amounts subscribed for by all
Purchasers are less than the total Offered Securities, then any Purchaser shall
be entitled to purchase, in addition to the Basic Amount subscribed for, the
remaining-aggregate Basic Amount not subscribed for by the other Purchaser,
subject to rounding by the Board of Directors to the extent it reasonably deems
necessary.
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6.03 Conditions to Acceptance by Purchaser.
(a) Permitted Sales of Refused Securities. The Company
shall have sixty (60) days from the expiration of the period set forth in
Section 6.01 to sell all or any part of the Offered Securities as to which a
Notice of Acceptance has not been given by the Purchasers (the 'Refused
Securities") to the Person or Persons specified in the Offer, but only upon
terms and conditions, including, without limitation, unit price and interest
rates, which are not more favorable, in unit price and interest rates, in the
aggregate, to such other Person or Persons or less favorable to the Company than
those set forth in the Offer.
(b) Reduction in Amount of Offered Securities. In the
event the Company shall propose to sell less than all the Offered Securities
(any such sale to be in the manner and on the terms specified in Section 6.03(a)
above), then each Purchaser may maintain its then existing equity percentage of
the Company. In the event that any Purchaser so elects to reduce the number or
amount of Offered Securities specified in its respective Notice of Acceptance,
the Company may not sell or otherwise dispose of more than the reduced amount of
the Offered Securities until such securities have again been offered to the
Purchasers in accordance with Section 6.01.
(c) Closing. Upon the closing, which shall include full
payment to the Company, of the sale to such other Persons of Offered Securities,
the Purchasers shall purchase from the Company, and the Company shall sell to
the Purchasers, the number of Offered Securities specified in the Notices of
Acceptance, as reduced pursuant to Section 6.03(b), upon the terms and
conditions specified in the Offer. The purchase by the Purchasers of any Offered
Securities is subject in all cases to the preparation, execution and delivery by
the Company and the Purchasers of a purchase agreement relating to such Offered
Securities reasonably satisfactory in form and substance to the Purchasers and
their respective counsel.
6.04 Further Sale. In each case, any Offered Securities not
purchased by the Purchasers or other Persons in accordance with Section 6.03
such Offered Securities may not be sold or otherwise disposed of until they are
again offered to the Purchasers under the procedures specified in Section 6.01,
6.02 and 6.03.
6.05 Exceptions. The rights of the Purchasers under this Article
VI shall not apply to: (a) Common Stock issued as a stock dividend to holders of
Common Stock or upon any subdivision or combination of shares of Common Stock;
(b) the issuance of any shares of Common Stock upon conversion of the Notes or
exercise of the Warrants; or (c) issuance of shares of Common Stock, or options
exercisable therefor, issuable to officers, employees or consultants of the
Company and any Subsidiary pursuant to any stock option agreement or plan or
stock purchase agreement or plan approved by a vote of not less than a majority
of the disinterested members of the Board of Directors of the Company.
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6.06 Assignment of Rights. A Purchaser may assign its rights
hereunder in connection with any transfer of the Conversion Shares, Warrants,
Warrant Shares and Notes; provided, however, Purchasers shall not transfer the
Securities to any competitor of the Company without prior approval of the Board
of Directors.
7. EVENTS OF DEFAULT
Events of Default. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) The Company shall fail to pay any installment of principal of
any of the Notes when due; or
(b) The Company shall fail to pay any installment of interest on
any of the 10% Notes when due or default in the performance of any covenant
contained in Section 4.02 and such default shall continue for seven (7) days; or
(c) Any representation or warranty made by the Company or any
Subsidiary in this Agreement or by the Company or any Subsidiary (or any
officers of the Company or any Subsidiary) in any certificate, instrument or
written statement contemplated by or made or delivered pursuant to or in
connection with this Agreement, shall prove to have been materially incorrect;
or
(d) The Company shall fail to perform or observe any material
term, covenant or agreement, other than as set out in (b) above, contained in
this Agreement or the Securities on its part to be performed or observed, and
any such failure remains unremedied for thirty (30) days after written notice
thereof has been given to the Company by any holder of the Notes, Conversion
Shares, Warrants, or Warrant Shares; or
(e) The Company shall fail to pay any Indebtedness for borrowed
money (other than as evidenced by the Notes) owing by the Company aggregating
$100,000 or more, or any interest or premium thereon, when due (or, if permitted
by the terms of the relevant document, within any applicable grace period); or
(f) The Company shall be involved in financial difficulties as
evidenced (i) by its admitting in writing its inability to pay its debts
generally as they become due; (ii) by its commencement of a voluntary or
involuntary case being filed against it under Title 11 of the United States Code
as from time to time in effect, or under any applicable insolvency laws, or by
its authorizing, by appropriate proceedings of its Board of Directors or other
governing body, the commencement of such a voluntary case; or (iii) by its
making an assignment for the benefit of its creditors, or appointing or
consenting to the appointment of a receiver; or
(g) Any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied against the property of the Company
and such judgment, writ, or similar process shall not be released, vacated or
fully bonded within sixty (60) days after its issue or levy; or
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(h) The Company shall merge or consolidate with, or sell,
assign, lease or otherwise dispose of or voluntarily part with the control of
(whether in one transaction or in a series of transactions), all or
substantially all of its property and assets (whether now owned or hereinafter
acquired) to any Person, or permit any Subsidiary to do any of the foregoing;
then, and in any such event, the Purchasers may, by notice to the Company,
declare the entire unpaid Issue Price, plus all accrued Original Issue Discount,
all unpaid principal and accrued and unpaid interest on the 10% Notes, and all
other amounts payable under this Agreement, to be forthwith due and payable,
whereupon the Notes, all such accrued Original Issue Discount and interest and
all such amounts shall become and be forthwith due and payable and if such event
occurs prior to September 30, 1995, the original purchase price of the Warrants
shall also be due and payable in full to Purchasers (unless there shall have
occurred an Event of Default under subsection (f), in which case all such
amounts shall automatically become due and payable), without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Company.
8. DEFINITIONS AND ACCOUNTING TERMS
8.01 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Any Public Offering" means and includes the closing of an
underwritten public offering pursuant to an effective registration statement
under the Securities Act covering the offer and sale of Common Stock for the
account of the Company.
"Board of Directors" shall mean the then present members
of the Board of Directors of the Company.
"Common Stock" includes (a) the Company's Class A Common
Stock, $.10 par value, and the Company's Class B Preferred Stock, $.10 par
value, as authorized on the date of this Agreement, (b) any other capital stock
of any class or classes (however designated) of the Company, authorized on or
after the date hereof, the holders of which shall have the right, without
limitation as to amount, either to all or to a share of the balance of current
dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of directors of the Company, and (c) any other securities into which or
for which any of the securities described in (a) or (b) may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or otherwise.
"Consolidated" when used with reference to any term
defined herein shall mean that term as applied to the accounts of the Company
and its Subsidiaries consolidated in accordance with generally accepted
accounting principles after eliminating intercompany items and minority
interests.
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"Debt Securities" means and includes (i) any debt security
of the Company that by its terms is convertible into or exchangeable for any
equity security of the Company that is a combination of debt and equity, or (ii)
any option, warrant or other right to subscribe for, purchase or otherwise
acquire any such debt security of the Company.
"Exchange Act" means the Securities Exchange Act of 1934,
or any similar federal statute, and the rules and regulations of the Securities
and Exchange Commission (or of any other Federal Agency then administering the
Exchange Act) thereunder, all as the same shall be in effect at the time.
"Indebtedness" means all obligations, contingent and
otherwise, which should, in accordance with generally accepted accounting
principles consistently applied, be classified upon the obligor's balance sheet
as liabilities, excluding any liabilities in respect of deferred federal or
state income taxes.
"Issue Price" means the original purchase price of the
Zero Coupon Notes as set forth on Exhibit 1.01A hereto.
"Maturity Value" means the amount payable on the Zero
Coupon Notes on the stated date due, as set forth on Exhibit 1.01A hereto.
"Original Issue Discount" shall mean herein and for
federal income tax purposes the difference between the Issue Price and the
Maturity Value.
"Person" means an individual, corporation, partnership,
joint venture, trust, or unincorporated organization, or. a government or any
agency or political subdivision thereof.
"Qualified Public Offering" means and includes the closing
of an underwritten public offering pursuant to an effective registration
statement under the Securities Act, covering the offer and sale of Common Stock
for the account of the Company from which the aggregate net proceeds to the
Company exceed $10,000,000 and in which the price per share is at least $59.76
per share (such amount to be equitably adjusted whenever there shall occur a
stock split, combination, reclassification or other similar event affecting the
Common Stock).
"Registrable Shares" means and includes (i) the Conversion
and Warrant Shares; (ii) any other shares of Common Stock held by the
Purchasers; and (iii) any shares of Common Stock issued or issuable upon
conversion of other securities of the Company held by the Purchasers.
"Securities Act" means the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and regulations of the
Securities and Exchange Commission (or of any other Federal agency then
administering The Securities Act) thereunder, all as the same shall be in effect
at the time.
"Selling Shareholders" means those stockholders of the
Company whose shares of Common Stock are being repurchased by the Company as a
use of the proceeds under this transaction
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which specifically includes the following individuals: Xxxx X. Xxxxxx, Xxxxxxx
X. Xxxxxx, Xxx X. Xxxxx, Xxxxxxx X. Xxxxxxxxxx and Xxxxxx Xxxxx.
"Subsidiary" or "Subsidiaries" any corporation, 50% or
more of the outstanding voting stock of which shall at the time be owned by the
Company or by one or more Subsidiaries, or any other entity or enterprise, 50%
or more of the equity of which shall at the time be owned by the Company or by
one or more Subsidiaries.
"Wholly-Owned Subsidiary" or "Wholly-Owned Subsidiaries"
means any corporation, 100% of the outstanding voting stock of which shall at
the time be owned by the Company or by one or more Wholly-Owned Subsidiaries, or
any other entity or enterprise, 100% of the equity of which shall at the time be
owned by the Company or by one or more Wholly-Owned Subsidiaries.
"Zero Coupon Notes" shall have the meaning assigned to
that term in Section 1.01.
"10% Notes" shall have the meaning assigned to that term
in Section 1.02.
8.02 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles, and all other financial data submitted pursuant to this
Agreement shall be prepared and calculated in accordance with such principles.
9. MISCELLANEOUS
9.01 No Waiver; Cumulative Remedies. No failure or delay on the
part of any Purchaser, or any other holder of the Notes, in exercising any
right, power or remedy hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. The remedies herein provided are cumulative.
9.02 Amendments, Waivers and Consents. Except as expressly
provided herein, no changes in or additions to this Agreement or the Securities
may be made, nor compliance with any covenant or provision herein or therein set
forth may be omitted or waived, unless the Company shall obtain consent thereto
in writing from the party against whom enforcement of any such amendment, waiver
or discharge is sought. Any waiver or consent may be given subject to
satisfaction of conditions stated therein and any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
9.03 Addresses for Notices, etc. All notices, requests, demands
and other communications provided for hereunder shall be in writing (including
telegraphic or facsimile communication) and mailed, by certified or registered
mail, or telegraphed, sent by facsimile or delivered to the Company at the
addresses indicated on the signature page hereto.
If to the Purchaser: at the address or facsimile number set forth
under their respective names on Exhibit 1.01A hereto, with a copy to Stradling,
Yocca, Xxxxxxx & Xxxxx, 000 Xxxxxxx Xxxxxx
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Drive, Suite 1600, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx Xxxxxxxx,
Facsimile: (000) 000-0000.
If to any other holder of the Securities: at such holder's
address for notice as set forth in the register maintained by the Company, or,
as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall, when mailed or telegraphed, respectively, be effective
when deposited in the mails or delivered to the telegraph company, respectively,
addressed as aforesaid.
9.04 Costs, Expenses and Taxes. The parties shall pay their own
expenses, fees and costs incurred in connection with the investigation,
preparation, execution and delivery of this Agreement, the Securities and the
transactions contemplated hereby. In the event of any controversy, claim or
dispute among the parties hereto arising out of or relating to this Agreement,
or breach hereof, the prevailing party shall be entitled to recover from the
losing party reasonable attorneys' fees, expenses and costs.
9.05 Binding Effect: Assignment. This Agreement shall be binding
upon and inure to the benefit of the Company and the Purchasers and their
respective successors and assigns.
9.06 Survival of Representations and Warranties. All
representations and warranties made herein shall survive the execution and
delivery hereof.
9.07 Prior Agreements. This Agreement constitutes the entire
agreement between the parties and supersedes any prior understandings or
agreements concerning the subject matter hereof.
9.08 Severability. The invalidity or unenforceability of any
provision hereto shall in no way affect the validity or enforceability of any
other provision.
9.09 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Idaho.
9.10 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument.
9.11 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchasers, the Company and each Subsidiary
shall execute and deliver such instruments, documents and other writings as may
be necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement and the Securities.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
Extended Systems, Inc. EXTENDED SYSTEMS, INC.
0000 Xxxxx Xxxxxx Xxxxxx
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00
Xxxxx, Xxxxx 00000
Facsimile: (000) 000-0000 By: /s/ Xxxx Xxxxxx
-------------------------------
Xxxx Xxxxxx, President
with a copy to:
Xxxxxx Xxxxxx By: /s/ Xxxx Xxxxxxxxxx
Xxxxxx & Xxxxxx -------------------------------
000 Xxxx Xxxxxxx, Xxxxx 000 Xxxx Xxxxxxxxxx, Secretary
Xxxxx, Xxxxx 00000
SUMMIT VENTURES II, L.P.,
General Partner
By: Stamps, Xxxxxxx & Co. II,
General Partner
By: /s/ Xxxxxxx X. Xxxx
-------------------------------
General Partner
SUMMIT INVESTORS II, L.P.
By: /s/ Xxxxxxx X. Xxxx
-------------------------------
General Partner
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