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GENUS, INC.,
as the Company
and
PURCHASERS,
as defined herein
SECURITIES PURCHASE AGREEMENT
Dated as of , 2002
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TABLE OF CONTENTS
PAGE
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SECTION 1. Purchase and Sale of Notes and Warrants . . . . . . . . . 2
SECTION 2. Purchaser's Representations and Warranties . . . . . . . . . 2
SECTION 3. Representations and Warranties of the Company . . . . . . . 6
SECTION 4. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5. Conditions to the Company's Obligation to Close. . . . . 15
SECTION 6. Conditions to Each Purchaser's Obligation to Purchase . . 15
SECTION 7. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 17
SCHEDULES
Schedule A . . . . . . . . . . . . . Wire Instructions
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Schedule B . . . . . . . . . . . . . Parties to Assignment of Rights Agreement
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Schedule 3(a). . . . . . . . . . . . Subsidiaries
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Schedule 3(k). . . . . . . . . . . . Absence of Certain Changes
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Schedule 3(o). . . . . . . . . . . . Indebtedness and Other Contracts
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Schedule 3(v). . . . . . . . . . . . Transactions with Affiliates
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EXHIBITS
Exhibit A . . . . . . . . . . . . . Schedule of Purchasers
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Exhibit B . . . . . . . . . . . . . Form of Note
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Exhibit C . . . . . . . . . . . . . Form of Warrant
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Exhibit D . . . . . . . . . . . . . Form of Registration Rights Agreement
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Exhibit E . . . . . . . . . . . . . Form of Legal Opinion
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Exhibit F . . . . . . . . . . . . . Form of Secretary's Certificate
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of , 2002,
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by and among Genus, Inc., a California corporation (the "Company"), and the
Purchasers listed on the Schedule of Purchasers attached hereto as Exhibit A
(individually, a "Purchaser" and, collectively, the "Purchasers"). THE PARTIES
TO THIS AGREEMENT enter into this Agreement on the basis of the following facts,
intentions and understandings:
A. In accordance with the terms and conditions of this Agreement, the
Company has agreed to issue and sell, and the Purchasers severally have agreed
to purchase (i) the Company's Convertible Subordinated Notes due 2005 in an
aggregate amount equal to $ (the "Initial Amount") less the Displacement
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Amount (as defined in Section 7(s) hereto), if any (such difference being the
"Aggregate Principal Amount"), (such notes, in the form attached hereto as
Exhibit B, as the same may be amended, modified or supplemented from time to
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time in accordance with the terms thereof, the "Notes") that shall be
convertible into shares of the common stock, no par value (the "Common Stock"),
of the Company on the terms set forth in the Notes and (ii) Warrants (such
Warrants, in the form attached hereto as Exhibit C, as the same may be amended,
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modified or supplemented from time to time in accordance with the terms thereof,
the "Warrants"). The shares of Common Stock issuable upon exercise of the Notes
are referred to herein collectively as the "Conversion Shares." The shares of
Common Stock issuable upon exercise of the Warrants are referred to herein as
the "Warrant Shares," and the Conversion Shares and the Warrant Shares are
referred to herein as the "Underlying Shares." The Notes, the Warrants, and the
Underlying Shares are referred to herein as the "Securities."
B. 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 D (as the same may be
amended, modified or supplemented from time to time in accordance with the terms
thereof, the "Registration Rights Agreement") pursuant to which the Company has
agreed to provide the Purchasers with the benefit of certain registration rights
with respect to the Underlying Shares under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the "Securities
Act") and applicable state securities laws, on the terms and subject to the
conditions set forth therein. This Agreement, the Notes, the Warrants, the
Registration Rights Agreement, and the Assignment of Rights Agreements by and
among the parties hereto and each of the persons listed on Schedule B hereto
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(each an "ASSIGNMENT OF RIGHTS AGREEMENT")(which Schedule B shall be
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supplemented from time to time by the Company in accordance with Section 4(j))
and each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement (the
"Transaction") are referred to herein as the "Transaction Documents."
NOW THEREFORE, in consideration of the promises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the
Purchasers severally and not jointly hereby agree as follows:
PURCHASE AND SALE OF NOTES AND WARRANTS
Closing of Notes and Warrants
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Upon the satisfaction (or waiver) of the conditions set forth in Sections 5 and
6 of this Agreement, the Company shall issue and sell to each Purchaser, and
each Purchaser severally and not jointly agrees to purchase from the Company,
the respective principal amount of Notes, together with the related Warrants,
equal to the product of (A) the percentage set forth opposite such Purchaser's
name on the Schedule of Purchasers attached hereto as Exhibit A multiplied by
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(B) the Aggregate Principal Amount (the "Closing"). The Company shall issue to
each Purchaser $1,000 principal amount (or such other amount as specified by any
such Purchaser) of the Notes and Warrants to purchase Warrant Shares for
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each $1,000 tendered by such Purchaser (subject to adjustment for stock splits,
stock dividends and similar transactions). The conversion price for the Notes
and the exercise price (the "Conversion/Exercise Price") for the Warrants shall
be 105.19% of the Closing Price determined in the manner set forth in Section
1(a)(3) below. The date and time of the Closing (the "Closing Date") shall be
12:00 p.m., California time, on August 14, 2002 (or such other date as the
parties may specify), subject to the satisfaction (or waiver) of the conditions
set forth in Sections 5 and 6 of this Agreement. The Closing shall occur on the
Closing Date at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx
Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000.
For the purposes of this Agreement, the "Closing Price" shall be the lesser of
(i) the closing bid price of the Company's Common Stock as quoted on Bloomberg
Financial Markets for the one (1) Trading Day immediately preceding the date
hereof or (ii) the average of the closing bid price of the Company's Common
Stock as quoted on Bloomberg Financial Markets for each of the five (5)
consecutive Trading Days immediately preceding the date hereof. A "Trading Day"
means a day during which trading in securities generally occurs on the Nasdaq
National Market or, if the Common Stock is not quoted on the Nasdaq National
Market, on the principal other national or regional securities exchange on which
the Common Stock then is listed or, if the Common Stock is not listed on a
national or regional securities exchange, on the National Association of
Securities Dealers Automated Quotation System, on the principal other market on
which the Common Stock is then traded; provided, however, that "Trading Day
shall not include any day (an "excluded day") during which trading in the Common
Stock is suspended for more than three hours between 9:30 a.m. (New York time)
and 4:00 p.m. (New York time).
Form of Payment. On the Closing Date, (i) each Purchaser shall pay the
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Company for the Notes and the Warrants to be issued and sold to such Purchaser
on such Closing Date, by wire transfer of immediately available funds in
accordance with the Company's written wire instructions attached hereto on
Schedule A, less reasonable expenses to the extent required by Section 4(g) of
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this Agreement and (ii) the Company shall deliver to each Purchaser properly
authenticated Notes representing the principal amount of Notes and the
corresponding number of Warrants, duly executed on behalf of the Company and
registered in the name of such Purchaser, that the Purchaser is purchasing from
the Company pursuant to this Agreement.
PURCHASER'S REPRESENTATIONS AND WARRANTIES. Each Purchaser represents and
warrants to the Company with respect to only itself that as of the date hereof
and the Closing Date:
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Investment Purpose. Such Purchaser (i) is acquiring the Notes and the Warrants,
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(ii) upon conversion of the Notes owned by it, will acquire the Conversion
Shares then issuable upon conversion thereof, and (iii) upon exercise of the
Warrants held by it, will acquire the Warrant Shares then issuable upon exercise
thereof for its own account for investment only and not with a view towards, or
for resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the Securities Act; provided,
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however, that by making the representations herein, such Purchaser does not
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agree to hold any of the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time; provided, further,
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that such disposition shall be in accordance with or pursuant to a registration
statement or an exemption under the Securities Act.
Accredited Investor Status. Such Purchaser is an "accredited investor" as that
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term is defined in Rule 501(a) of Regulation D under the Securities Act as of
the date of this Agreement and was not organized for the specific purpose of
acquiring the Securities.
Reliance on Exemptions. Such Purchaser understands that the Securities are
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being offered and sold to it in reliance on specific exemptions from the
registration requirements of the United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of, and such
Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein and in the
applicable Note or Warrant in order to determine the availability of such
exemptions and the eligibility of such Purchaser to acquire the Securities.
Information. Such Purchaser believes it (i) has been furnished with or believes
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it has had full access to all of the information that it considers necessary or
appropriate for deciding whether to purchase the Securities, (ii) has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Securities, (iii) can bear the
economic risk of a total loss of its investment in the Securities and (iv) has
such knowledge and experience in business and financial matters so as to enable
it to understand the risks of and form an investment decision with respect to
its investment in the Securities. Neither such inquiries nor any other due
diligence investigations conducted by such Purchaser or its advisors, if any, or
its representatives shall limit, modify, amend or affect the Company's
representations and warranties contained in this Agreement and the Purchaser's
right to rely thereon.
No Governmental Review. Such Purchaser understands that no United States federal
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or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of an investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
Transfer or Resale. Such Purchaser understands that, except as provided in the
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Registration Rights Agreement, none of the Securities have been or will be
registered under the Securities Act or any state securities laws, and the
Securities may not be offered for sale, sold, assigned or transferred without
registration under the Securities Act or an exemption therefrom and that, in the
absence of an effective registration statement under the Securities Act, such
Securities may only be sold under certain circumstances as set forth in the
Securities Act.
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Legends.
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Such Purchaser understands that, until the end of the holding period under Rule
144(k) of the Securities Act (or any successor provision), such Notes and
Warrants (and all securities issued in exchange therefor or in substitution
thereof, other than Underlying Securities, which shall bear the legend set forth
in Section 2(g)(2) of this Agreement, if applicable) shall bear a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED 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 EXEMPTION THEREFROM.
The legend set forth above shall be removed and the Company shall issue a new
Note or Warrant, as appropriate, of like tenor and aggregate principal amount or
number of shares, as appropriate, and which shall not bear the restrictive
legends required by this Section 2(g)(1), (i) if, in connection with a sale
transaction, such holder provides the Company with an opinion of counsel
reasonably acceptable to the Company to the effect that a public sale,
assignment, pledge or transfer of the Notes or Warrants, as appropriate, may be
made without registration under the Securities Act, or (ii) upon expiration of
the two-year holding period under Rule 144(k) of the Securities Act (or any
successor rule). The Company shall not require such opinion of counsel for the
sale of Securities in accordance with Rule 144 of the Securities Act in the
event that the Seller provides such representations that the Company shall
reasonably request confirming compliance with the requirements of Rule 144.
Such Purchaser understands that, until the end of the holding period under Rule
144(k) of the Securities Act (or any successor provision) with respect to the
Underlying Shares issued upon conversion of the Notes or exercise of the
Warrants, as the case may be, any stock certificate representing Underlying
Shares issued upon conversion of the Notes or exercise of the Warrants shall
bear a legend in substantially the following form unless the Notes submitted for
conversion or the Warrants submitted for Cashless Exercises (as defined in the
Warrants), as the case may be, do not bear the legend specified in Section
2(g)(1):
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 MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR AN EXEMPTION THEREFROM.
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The legend set forth above shall be removed and the Company shall issue the
Underlying Securities without such legend to the holder of the Underlying
Securities upon which it is stamped, (i) if such Underlying Securities have been
resold or transferred pursuant to the registration statement contemplated by the
Registration Rights Agreement and the registration statement was effective at
the time of such transfer, (ii) if, in connection with a sale transaction, such
holder provides the Company with an opinion of counsel reasonably acceptable to
the Company to the effect that a public sale, assignment, pledge or transfer of
the Securities may be made without registration under the Securities Act, or
(iii) upon expiration of the two-year period under Rule 144(k) of the Securities
Act (or any successor rule). The Company shall not require such opinion of
counsel for the sale of Securities in accordance with Rule 144 of the Securities
Act, provided that the Seller provides such representations that the Company
shall reasonably request confirming compliance with the requirements of Rule
144.
Such Purchaser understands that, in the event Rule 144(k) as promulgated under
the Securities Act (or any successor rule) is amended to change the two-year
period under Rule 144(k) (or the corresponding period under any successor rule),
(i) each reference in Sections 2(g)(1) and 2(g)(2) of this Agreement to "two (2)
years" or the "two-year period" shall be deemed for all purposes of this
Agreement to be references to such changed period, and (ii) all corresponding
references in the Securities shall be deemed for all purposes to be references
to the changed period, provided that such changes shall not become effective if
they are otherwise prohibited by, or would otherwise cause a violation of, the
then-applicable federal securities laws.
Authorization; Enforcement; Validity. The Transaction Documents have been
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duly and validly authorized, executed and delivered on behalf of such Purchaser
and are valid and binding agreements of such Purchaser enforceable against such
Purchaser in accordance with their terms, subject as to enforceability to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) 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 and except as the indemnification agreements of such
Purchasers may be legally unenforceable.
Residency. Such Purchaser is a resident of that country or state specified in
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its address on the Schedule of Purchasers attached hereto as Exhibit A.
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Additional Acknowledgement. Each Purchaser acknowledges that it has
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independently evaluated the merits of the transactions contemplated by this
Agreement, the Notes, the Registration Rights Agreement and the Warrants, that
it has independently determined to enter into the transactions contemplated
hereby and thereby, that it is not relying on any advice from or evaluation by
any other Purchaser, and that it is not acting in concert with any other
Purchaser in making its purchase of securities hereunder. The Purchasers and, to
its knowledge, the Company agree that the Purchasers have not taken any actions
that would deem such Purchasers to be members of a "group" for purposes of
Section 13(d) of the Exchange Act. With the exception of Subsection 2(h), the
Purchasers' representations and warranties made in this Section 2 are made
solely for the purpose of permitting the Company to make a determination that
the offer and sale of the Notes and Warrants pursuant to this Agreement complies
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with applicable United States federal and state securities laws and not for any
other purpose. Accordingly, other than Subsection 2(h), the Company should not
rely on such representations and warranties for any other purpose.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to each of the Purchasers that as of the date hereof subject to such
exceptions as set forth in a Disclosure Schedule:
Organization and Qualification. The Company and its "Subsidiaries" (which, for
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purposes of this Agreement, means any entity of which the Company, directly or
indirectly, owns a majority of the capital stock or other equity or similar
interests) are corporations, partnerships or limited liability companies duly
organized and validly existing in good standing under the laws of the
jurisdiction in which they are incorporated or organized, and have the requisite
corporate or other power and authority to own their properties and to carry on
their business as now being conducted. Copies of the Company's articles of
incorporation and bylaws, and all amendments thereto, have been filed as
exhibits to the Company's SEC Documents (as defined below), are in full effect
and have not been modified. Each of the Company and its Subsidiaries is duly
qualified as a foreign corporation or partnership to do business and is in good
standing in every jurisdiction in which its ownership of property or the nature
of the business conducted and proposed to be 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, and
no proceeding has been instituted in any such jurisdiction revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such qualification. As used
in this Agreement, "Material Adverse Effect" means any material adverse effect
on the business, properties, assets, operations, prospects, results of
operations or financial condition of the Company and its Subsidiaries, taken as
a whole, or on the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith, or on the authority or
ability of the Company to perform its obligations under the Transaction
Documents. A complete list of Subsidiaries is set forth on Schedule 3(a).
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Authorization; Enforcement; Validity. The Company has all requisite corporate
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power and authority to enter into and perform its obligations under each of the
Transaction Documents, and to issue the Securities in accordance with the terms
hereof and thereof. The execution and delivery of the Transaction Documents by
the Company and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by the Company's Board of Directors, and
no further consent or authorization is required of the Company's Board of
Directors or shareholders. The Transaction Documents have been duly executed and
delivered by the Company and 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
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies. Each of the Assignment of Rights
Agreements constitutes the valid and binding obligations of the person listed on
Schedule B that is a party thereto, enforceable against such person in
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accordance with its terms, except as such enforceability may be limited by
general principles of equity (regardless of whether such
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enforceability is considered in a proceeding in equity or at law) or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies.
Capitalization. As of the date hereof, the authorized capital stock of the
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Company consists of (x) 50,000,000 shares of Common Stock, of which 27,642,939
shares are issued and outstanding, and (y) as of July 25, 2002, 6,505,006 shares
are reserved for issuance pursuant to the Company's stock option and purchase
plans and 580,696 shares are reserved for issuance pursuant to securities (other
than the Notes, the Warrants, and shares reserved for issuance pursuant to the
Company's stock option and purchase plans) exercisable or exchangeable for, or
convertible into, shares of Common Stock, and (z) 2,000,000 shares of preferred
stock, of which as of the date hereof, no shares are issued and outstanding, and
2,000,000 shares are reserved for issuance. All of such outstanding shares of
capital stock of the Company have been duly and validly issued and are fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and were not issued in violation of any preemptive rights
or similar rights to subscribe for or purchase securities. Except as set forth
or contemplated in the Company's SEC Documents, there are no outstanding rights
(including, without limitation, preemptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any unissued
shares of capital stock or other equity interest in the Company, or any
contract, commitment, agreement, understanding or arrangement of any kind to
which the Company is a party and relating to the issuance or sale of any capital
stock of the Company, any such convertible or exchangeable securities or any
such rights, warrants or options. Except as disclosed in the Company's SEC
Documents, there are no stockholders agreements, voting agreements or other
similar agreements with respect to the Common Stock to which the Company is a
party.
Conversion Shares. The Conversion Shares have been duly and validly authorized
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and reserved and, when issued upon conversion of the Notes in accordance with
the terms of the Notes, will be duly and validly authorized and issued, fully
paid and non-assessable and free and clear of all liens, and the issuance of
such Common Stock is not, and will not be, subject to any preemptive rights or
similar rights.
Warrant Shares. The Warrant Shares have been duly and validly authorized and
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reserved and, when issued upon exercise of the Warrants in accordance with the
terms of the Warrants, will be duly and validly authorized and issued, fully
paid and non-assessable and free and clear of all liens, and the issuance of
such Common Stock is not, and will not be, subject to any preemptive rights or
similar rights.
No Conflicts. The execution, delivery and performance of the Transaction
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Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the reservation
for issuance and issuance of the Conversion Shares and the Warrant Shares) will
not (i) result in a violation of the articles of incorporation or the bylaws of
the Company; (ii) conflict with, or constitute a material 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 agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party; or (iii) result in a violation of any law,
rule,
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regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the Principal Market (as
defined below)) 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. Neither the Company nor its Subsidiaries is in violation of
any material term of or in default under its (i) articles of incorporation,
Bylaws or other organizational documents or (ii) any agreement, indenture or
instrument, judgment, decree or order or any statute, rule or regulation
applicable to the Company or its Subsidiaries, except where such violations and
defaults in the case of (ii) above would not result, either individually or in
the aggregate, in a Material Adverse Effect. The business of the Company and its
Subsidiaries is not being conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
Except as specifically contemplated by this Agreement, as required under the
Securities Act or as required by Blue Sky filings, 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 regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents. All consents,
authorizations, orders, filings and registrations that the Company is required
to obtain have been obtained or effected on or prior to the date hereof and
copies of such consents, authorizations, orders, filings and registrations have
been delivered to the Purchasers. The Company is not in violation of the listing
requirements of the Principal Market. The issuance by the Company of the
Securities is exempt from registration under the 1933 Act.
(g) Dilutive Effect. The Company understands and acknowledges
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that the number of Conversion Shares issuable upon conversion of the Notes and
the Warrant Shares issuable upon exercise of the Warrants will increase in
certain circumstances. The Company further acknowledges that its obligation to
issue Conversion Shares upon conversion of the Notes in accordance with this
Agreement and the Notes and its obligation to issue the Warrant Shares upon
exercise of the Warrants in accordance with this Agreement and the Warrants, is,
in each case, absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company.
(h) Application of Takeover Protections; Rights Agreement. The
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Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Articles of Incorporation or
the laws of the state of its incorporation which is or could become applicable
to the Purchaser as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the Securities and the
Purchaser's ownership of the Securities.
(i) Acknowledgment Regarding Purchaser's Purchase of Securities.
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The Company acknowledges and agrees that each Purchaser is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby and thereby, and that no Purchaser is (i)
an officer or director of the Company, (ii) to the Company's knowledge an
"affiliate" of the Company (as defined in Rule 144) or (iii) to the Company's
knowledge a "beneficial owner" of more than 10% of the Common Stock (as defined
for purposes of Rule 13d-3 of the 1934 Act). The Company further acknowledges
that no Purchaser is acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and any advice
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given by a Purchaser or any of its representatives or agents in connection with
the Transaction Documents and the transactions contemplated hereby and thereby
is merely incidental to such Purchaser's purchase of the Securities. The Company
further represents to each Purchaser that the Company's decision to enter into
this transaction is based on its independent evaluation.
(j) SEC Documents; Financial Statements. The Company has filed in
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a timely manner all reports, schedules, forms, statements and other documents
required to be filed by it with the Securities and Exchange Commission (the
"Commission") pursuant to the reporting requirements of the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder
(the "Exchange Act") (all of the foregoing filed prior to or on the date hereof
and all exhibits included therein and financial statements and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as
the "SEC Documents"). As of the date of filing of such SEC Documents, each such
SEC Document, as it may have been subsequently amended by filings made by the
Company with the Commission prior to the date hereof, complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the Commission promulgated thereunder applicable to such SEC Document. None
of the SEC Documents, as of the date filed and as they may have been
subsequently amended by filings made by the Company with the Commission prior to
the date hereof, 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 the 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 published
rules and regulations of the Commission with respect thereto. Such financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States, 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),
correspond to the books and records of the Company and fairly present in all
material respects the financial position of the Company and its Subsidiaries as
of the dates thereof and the results of their operations and cash flows for the
periods then ended. No other written information provided by or on behalf of the
Company to the Purchasers that is not included in the SEC Documents contains any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are or were made, not
misleading.
(k) Absence of Certain Changes. Since December 31, 2001, there
--------------------------
has been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, prospects, or results of
operations of the Company and its subsidiaries, taken as a whole, except as
disclosed in the SEC Documents filed prior to the date hereof. The Company has
not taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company or any of its
Subsidiaries have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings. Except as disclosed in Schedule
3(k) hereto, since December 31, 2001 the Company has not (i) declared or paid
any dividends, (ii) sold any assets, individually or in the aggregate, in excess
of $3,000,000
-9-
outside of the ordinary course of business or (iii) had capital expenditures,
individually or in the aggregate, in excess of $3,000,000.
(l) S-3 Eligibility. The Company satisfies the requirements
---------------
for use of Form S-3 for registration of the resale of the Underlying Shares and
does not have any knowledge or reason to believe that it does not satisfy such
requirements or any knowledge of any fact that would reasonably result in it not
satisfying such requirements. The Company has no reason to believe that its
independent auditors will withhold their consent to the inclusion of their audit
opinion concerning the Company's financial statements which shall be included in
the Registration Statement (as defined in the Registration Rights Agreement).
(m) Absence of Litigation. Except as disclosed in the SEC
---------------------
Documents, 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 or any of its Subsidiaries,
threatened against the Company or any of the Subsidiaries or any of the
Company's or the Subsidiaries' officers or directors in their capacities as
such.
(n) No Integrated Offering. Neither the Company, nor any of its
----------------------
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the Securities Act, any applicable state securities laws or any applicable
shareholder approval provisions, including, without limitation, under the rules
and regulations of any national securities exchange or automated quotation
system on which any of the securities of the Company are listed or designated,
nor will the Company or any of its Subsidiaries take any action or steps that
would cause the offering of the Securities to be integrated with other
offerings.
(o) Indebtedness and Other Contracts. Except as disclosed in
--------------------------------
Schedule 3(o), neither the Company nor any of its Subsidiaries (i) has any
outstanding Indebtedness (as defined below), (ii) is a party to any contract,
agreement or instrument, the violation of which, or default under which, by the
other party(ies) to such contract, agreement or instrument would result in a
Material Adverse Effect, (iii) is in violation of any term of or in default
under any contract, agreement, instrument or Indebtedness, except where such
violations and defaults would not result, either individually or in the
aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement or instrument, the performance of which, in the judgement of the
Company's officers, has or is expected to have a Material Adverse Effect. For
purposes of this Agreement: (x) "INDEBTEDNESS" of any Person means, without
duplication (A) all indebtedness for borrowed money, (B) all obligations issued,
undertaken or assumed as the deferred purchase price of property or services
(other than trade payables entered into in the ordinary course of business), (C)
all reimbursement or payment obligations with respect to letters of credit,
surety bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses, (E) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
-10-
such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, change,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through (G) above; (y) "CONTINGENT OBLIGATION" means, as to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability
will be protected (in whole or in part) against loss with respect thereto; and
(z) "PERSON" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization or a
government or any department or agency thereof.
(p) Intellectual Property Rights. The Company and its
----------------------------
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, trade dress, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, technology licenses,
approvals, governmental authorizations, trade secrets, and other intellectual
property rights (collectively, "Intellectual Property") necessary to conduct
their respective businesses as now conducted and as currently contemplated to be
conducted by them as described in the SEC Documents, except where the failure to
currently own or possess such Intellectual Property would not have a Material
Adverse Effect. The Company and its Subsidiaries do not have any knowledge of
any infringement by the Company or its Subsidiaries of Intellectual Property
rights of others, or of any development of similar or identical trade secrets or
technical information by others. Except as disclosed in the SEC Documents,
there is no claim, action or proceeding being made by the Company or its
Subsidiaries regarding the Intellectual Property rights of the Company or its
Subsidiaries or, to the Company's knowledge, being brought or currently
threatened against the Company or its Subsidiaries regarding the Intellectual
Property rights of or the use of any Intellectual Property of any third party by
the Company or its Subsidiaries that, if the subject of an unfavorable decision,
ruling or finding would have a Material Adverse Effect.
(q) Insurance. The Company and each of its Subsidiaries are and
---------
will continue to be insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are commensurate with
similarly situated companies engaged in businesses similar to those of the
Company and its Subsidiaries.
(r) Regulatory Permits. The Company and its Subsidiaries possess
------------------
all material certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as currently conducted
-11-
(the "Permits"), and neither the Company nor any such Subsidiary has received
any written notice of proceedings relating to the revocation or modification of
any such Permit.
(s) Tax Status. The Company and each of its Subsidiaries (i) has
----------
made or filed all federal and state income and all other tax returns, reports
and declarations required by any taxing authority of any jurisdiction to which
it is subject, (ii) has paid all taxes and other governmental assessments and
charges due with respect to the periods covered by such returns, reports and
declarations, except those being contested in good faith and for which the
Company has made appropriate reserves on its books, (iii) has paid or set aside
on its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
(referred to in clause (i) above) apply and (iv) has paid all stock transfer or
other taxes that are required to be paid in connection with sale and issuance of
the Securities. There are no unpaid taxes that are individually or in the
aggregate material in amount and that are claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
(t) Foreign Corrupt Practices. Neither the Company nor any of its
-------------------------
Subsidiaries, nor, to the Company's knowledge, any director, officer, agent,
employee or other person acting on behalf of the Company or any Subsidiary has,
in the course of his actions for, or on behalf of, the Company or any
Subsidiary, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the United States Foreign Corrupt Practices Act of 1977, as
amended; or made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
(u) No Manipulation of Stock. The Company has not taken and will
------------------------
not, in violation of applicable law, take, any action outside the ordinary
course of its business designed to or that might reasonably be expected to cause
or result in unlawful manipulation of the price of the Common Stock to
facilitate the sale or resale of the Securities.
(v) Transactions With Affiliates. Other than the grant of stock
----------------------------
options pursuant to the Company's employee benefit plans, none of the officers,
directors or employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than in connection with the
provision of services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any such officer, director or
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any such officer, director, or employee has a
substantial interest or is an officer, director, trustee or partner, such that
the transaction would be required to be disclosed pursuant to Item 404 of
Regulation S-K promulgated under the Securities Act.
(w) Brokers and Finders. 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
-12-
or sale of the Securities. Except for fees payable to XX Xxxxx as placement
agent for the Securities, no broker's, finder's or financial advisory fees or
commissions will be payable by the Company with respect to the transactions
contemplated by this Agreement.
(x) Accountants. PricewaterhouseCoopers LLP, which has expressed
-----------
its opinion with respect to the financial statements set forth in the Company's
annual report on Form 10-K for the year ended December 31, 2001, are independent
accountants as required by the Securities Act and the rules and regulations
promulgated thereunder.
(y) Not Investment Company. The Company is not an "investment
----------------------
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for an investment company, within the meaning of the Investment Company Act of
1940, as amended.
(z) Title. The Company and each of its Subsidiaries has good and
-----
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them, in each case free and clear of all
liens, encumbrances and defects, except such as are described in the SEC
Documents or such as do not materially affect the value of such property and do
not materially interfere with the use made or proposed to be made of such
property by the Company and its subsidiaries; and all assets held under lease by
the Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases, with such exceptions as are not material and do not
interfere with the use made or proposed to be made of such property and
buildings by the Company and its Subsidiaries.
(aa) No Labor Dispute. No labor disturbance by the employees of
----------------
the Company exists or, to the knowledge of the Company, is imminent, which would
be reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to
a collective bargaining agreement or employs any member of a union. The Company
and its Subsidiaries believe that their relations with their employees are good.
(bb) Option Rights. Schedule B accurately sets forth the
------------- ----------
percentage of all outstanding Option Rights (as defined in the Assignment of
Rights Agreements) assigned by each of the Persons listed on Schedule B to the
----------
Purchasers pursuant to the Assignment of Rights Agreements entered into by such
Person.
COVENANTS.
Obligations. Each party shall use its best efforts to timely satisfy each of
-----------
the conditions to be satisfied by it as provided in Sections 5 and 6 of this
Agreement.
Form D and Blue Sky. The Company agrees to file timely a Form D with the
-------------------
Commission with respect to the Securities as required under Regulation D and to
provide a copy thereof to each Purchaser promptly after such filing. The
Company shall, on or before the Closing Date, take such action as the Company
shall reasonably determine is necessary in order to obtain an exemption for, or
to qualify the Securities for, sale to the Purchasers at the Closing pursuant to
this Agreement under applicable securities or "Blue Sky" laws of the states of
the United States (or to obtain an
-13-
exemption from such qualification), and shall provide evidence of any such
action so taken to the Purchasers on or prior to the Closing Date. The Company
shall timely make all filings and reports relating to the offer and sale of the
Securities required under applicable securities or "Blue Sky" laws of the states
of the United States following the Closing Date.
Use of Proceeds. The Company intends to use the net proceeds from the sale of
---------------
the Notes and the Warrants for working capital and general corporate purposes.
Reporting Status. Until the date on which the Holders (as defined in the
----------------
Registration Rights Agreement) shall have sold all the Conversion Shares and the
Warrant Shares and none of the Notes or Warrants is outstanding, the Company
shall 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 otherwise permit such termination.
Reservation of Shares. The Company shall take all action necessary to at all
---------------------
times have authorized and reserved for the purpose of issuance the number of
shares of Common Stock (the "Reservation Amount") needed to provide for the
issuance of the Underlying Shares.
Listing. The Company shall promptly use its best efforts to secure the listing
-------
of all of the Conversion Shares and the Warrant Shares upon each national
securities exchange and 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 of the Purchasers hold any of the Securities, such
listing of all the Conversion Shares and the Warrant Shares from time to time
issuable under the terms of the Transaction Documents. So long as any Securities
are outstanding, the Company shall maintain the Common Stock's authorization for
quotation or listing on The New York Stock Exchange, Inc. (the "NYSE"), the
American Stock Exchange, Inc. ("AMEX") or The Nasdaq National Market ("NASDAQ")
(as applicable, the "Principal Market"). The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(e).
Expenses. At the Closing, the Company shall reimburse the Purchasers for the
--------
Purchasers' reasonable out-of-pocket expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement, which amount
shall be deducted from the purchase price at the Closing. Any such
reimbursement by the Company, however, shall not exceed $30,000 in the aggregate
and, in the event the consummation of the transactions contemplated by this
Agreement does not occur, any such reimbursement by the Company shall not exceed
$10,000 in the aggregate.
Violation of Laws. The business of the Company and its Subsidiaries shall not
-----------------
be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.
Limits on Additional Issuances. The Company shall not, until the later of (i)
------------------------------
180 days after the Closing or (ii) the date on which the Shelf Registration
Statement required to be filed pursuant to Section 2(a) of the Registration
Rights Agreement is declared effective by the Commission, issue or sell any
rights, warrants or options to subscribe for or purchase Common Stock or any
security
-14-
directly or indirectly convertible into or exchangeable or exercisable for
Common Stock at a price per share less than the Conversion Price as defined in
the Notes (the "Equity Limitation"). The Equity Limitation shall not apply (i)
to the issuance of Conversion Shares or Warrant Shares, as the case may be,
pursuant to the Notes or the Warrants, (ii) to the issuance of securities
pursuant to the conversion or exchange of convertible or exchangeable securities
or the exercise of warrants or options, in each case outstanding on the date
hereof and without giving effect to any amendments thereto after the date
hereof, (iii) if holders representing a majority of the outstanding principal
amount of the Notes give their prior written consent to such issuance or sale,
(iv) if the issuance is pursuant to employee benefits plans approved by the
Company's Board of Directors, (v) to the filing of a Registration Statement on
Form S-8, (vi) if the securities are issued for consideration other than cash in
connection with a bona fide business acquisition by the Company whether by
merger, consolidation, purchase of assets, sale or exchange of stock or
otherwise; or (vii) if the issuance is in connection with a commercial banking
arrangement, equipment financing, or corporate strategic partner transactions
involving issuances to, or commercially reasonable financing from, a significant
supplier, customer, or consultant; provided, however, that with respect to
strategic partnerships, the primary purpose of such transaction is not to raise
equity capital.
(j) Additional Assignment of Rights Agreements. In the event that any
------------------------------------------
additional Assignment of Rights Agreements are entered into after the date
hereof, but prior to the Closing Date, the Company shall, prior to the Closing
Date, supplement Schedule B to reflect all such additional Assignment of Rights
Agreements.
CONDITIONS TO THE COMPANY'S OBLIGATION TO CLOSE. The obligation of the Company
to issue and sell the Notes and the Warrants to each respective Purchaser at the
Closing is subject to the satisfaction, at or before each respective 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 by providing such Purchaser with prior written notice
thereof:
Transaction Documents. Such Purchaser shall have executed each of the
---------------------
Transaction Documents to which it is a party and delivered the same to the
Company.
Payment of Purchase Price. Such Purchaser shall have delivered to the Company
-------------------------
the purchase price for the Notes and the Warrants being purchased by such
Purchaser at the Closing by the Closing Date by wire transfer of immediately
available funds pursuant to the wire instructions attached hereto as Schedule A.
----------
Representations and Warranties; Covenants. The representations and warranties
-----------------------------------------
of such Purchaser shall be true, correct and complete in all 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 (which shall
be true, correct and complete as of such date)), and such Purchaser shall have
performed, satisfied and complied with in all material respects the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by such Purchaser at or prior to the Closing Date.
CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE. The obligation of each
Purchaser hereunder to purchase the Notes and the Warrants from the Company at
the Closing is subject to the
-15-
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Purchaser's sole benefit
and may be waived by such Purchaser at any time in its sole discretion by
providing the Company with prior written notice thereof:
Transaction Documents. The Company shall have executed each of the Transaction
---------------------
Documents and delivered the same to such Purchaser.
No Delisting of Common Stock. The Common Stock (i) shall be designated for
----------------------------
quotation or listed on the Principal Market and (ii) shall not have been
suspended by the Commission or the Principal Market from trading on the
Principal Market nor shall suspension by the Commission or the Principal Market
have been threatened either (A) in writing by the Commission or the Principal
Market or (B) by the Company falling below the minimum listing maintenance
requirements of the Principal Market; and the Conversion Shares issuable upon
conversion of the Notes (without regard to any limitations on conversions) and
the Warrant Shares issuable upon exercise of the Warrants (without regard to any
limitations on exercises) shall be designated for quotation or listed upon the
Principal Market.
Representations and Warranties; Covenants. The representations and warranties
-----------------------------------------
of the Company shall be true, correct and complete in all 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 (which shall
be true, correct and complete as of such date)) and the Company shall have
performed, satisfied and complied with in all respects the covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. Such Purchaser
shall have received a certificate, executed by the principal executive officer
and principal financial officer of the Company, dated as of the Closing Date, to
the foregoing effect.
Minimum Subscription and Delivery of Notes and Warrants. On the Closing Date
-------------------------------------------------------
the Purchasers shall have tendered to the Company for the purchase of the Notes
and Warrants at least $_______in cash by the Closing Date, and the Company shall
have executed and delivered to such Purchaser an aggregate of $_______ of the
Notes and the Warrants for the Notes and the Warrants being purchased by such
Purchaser at the Closing and shall have executed the requisite Transaction
Documents required for the Closing.
Reservation of Common Stock. As of the Closing Date, the Company shall have
---------------------------
reserved out of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of the Notes and the exercise of the Warrants,
13,000,000 shares of its Common Stock.
Good Standing Certificates. The Company shall have delivered to such Purchaser
--------------------------
a certificate evidencing the incorporation and good standing of the Company in
California issued by the Secretary of State of California as of a recent date.
Secretary's Certificate. The Company shall have delivered to such Purchaser a
-----------------------
secretary's certificate, in the form attached hereto as Exhibit F and dated as
---------
of the Closing Date, certifying as to (i) adoption without subsequent
modification or amendment of the form of resolutions of the Board
-16-
of Directors of the Company consistent with Section 3(b) of this Agreement, (ii)
the articles of incorporation of the Company as in effect at the Closing and
(iii) the bylaws of the Company as in effect at the Closing.
Articles. The Company shall have delivered to such Purchaser a certified copy
--------
of the Articles of Incorporation as certified by the Secretary of State of the
State of California within 15 days of the date hereof.
Filings; Authorizations. The Company shall have made all filings under all
-----------------------
applicable federal and state securities laws necessary to consummate the
issuance of the Securities pursuant to this Agreement in compliance with such
laws, and shall have obtained all authorizations, approvals and permits
necessary to consummate the transactions contemplated by the Transaction
Documents.
Transfer Agent Certificate. The Company shall have delivered to such Purchaser a
--------------------------
letter from the Company's transfer agent certifying the number of shares of
Common Stock outstanding as of a date within 10 Business Days of the Closing
Date.
No Injunctions. No temporary restraining order, preliminary or permanent
--------------
injunction or other order or decree, and no other legal restraint or prohibition
shall exist which prevents or arguably prevents the consummation of the
transactions contemplated by the Transaction Documents, nor shall any proceeding
have been commenced or threatened with respect to the foregoing.
No Material Adverse Effect. Between the time of execution of this Agreement and
--------------------------
the Closing Date, (i) no Material Adverse Effect shall occur or become known
(whether or not arising in the ordinary course of business) and (ii) no
transaction which is material and unfavorable to the Company shall have been
entered into by the Company.
Legal Opinion. The Company shall have delivered a legal opinion from legal
-------------
counsel to the Company, in the form attached hereto as Exhibit E.
---------
Miscellaneous.
Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement shall be
-------------------------------------------------
deemed to be a contract made under the laws of the Sate of New York, and for all
purposes shall be, governed by, and considered in accordance with, the law of
the State of New York. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any
-17-
manner permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
Counterparts. This Agreement may be executed in identical counterparts, each of
------------
which shall be deemed an original but all of which together shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
Headings. The headings of this Agreement are for convenience of reference only
---------
and shall not limit or otherwise affect the meaning hereof.
Entire Agreement. This Agreement, the Registration Rights Agreement, the Notes
----------------
and the Warrants and the documents referenced herein and therein constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein.
This Agreement, the Registration Rights Agreement, the Notes and the Warrants
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
Amendments. This Agreement may not be modified or amended except pursuant to an
----------
instrument in writing signed by the Company and the holders of Notes
representing at least sixty percent (60%) of the aggregate principal amount of
the Notes then outstanding.
Waivers. No provision of this Agreement may be amended or waived other than by
-------
an instrument in writing signed by the Company and the holders of at least sixty
percent (60%) of the outstanding Underlying Shares, such determination to
include Underlying Shares issuable upon conversion or exercise of the Notes or
Warrants, as the case may be. No consideration shall be offered or paid to any
person to amend or consent to a waiver or modification of any provision of this
Agreement unless the same consideration also is offered to all of the parties to
this Agreement.
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 facsimile, provided that such notice
is also delivered via regular mail; or (iii) 1 Business 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:
-18-
If to the Company:
Genus, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Shum Mukherjee, CFO
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxxxx, Esq.
If to a Purchaser, to its address and facsimile number set forth on the
signature page hereto executed by it, with copies to such Purchaser's
representatives as set forth thereon, or at such other address and/or facsimile
number and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party 5 days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission, or (C) provided by a courier or overnight courier
service shall be rebuttal evidence of personal service, receipt by facsimile,
receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
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 in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
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.
Severability. If any provision of this Agreement shall be invalid or
------------
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
Successors and Assigns. This Agreement shall be binding upon and inure to the
----------------------
benefit of the parties and their respective successors and permitted assigns.
The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of all the Purchasers. Any
Purchaser may assign its rights under this Agreement to any person to whom the
Purchaser assigns or transfers any Securities, provided that such transferee
agrees in writing to be
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bound, with respect to the transferred Securities, by the provisions hereof that
apply to the Purchasers.
Survival. Unless this Agreement is terminated under Section 7(n) of this
--------
Agreement, the representations and warranties of the Company and the Purchasers
contained in Sections 2 and 3 of this Agreement and the agreements and covenants
set forth in Sections 4 and 7 of this Agreement shall survive until such time as
no Securities remain outstanding. Each Purchaser shall be responsible only for
its own representations, warranties, agreements and covenants hereunder.
Publicity. On or before the first business day following the Closing Date, the
---------
Company shall file a Form 8-K describing the terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934 Act,
and attaching the material Transaction Documents (including, without limitation,
this Agreement, the form of Note, the form of Warrant and the Registration
Rights Agreement, provided that the signature pages and all references to the
names of the Purchasers shall be redacted) as exhibits to such filing (including
all attachments, the "8-K Filing"). From and after the filing of the 8-K Filing
with the SEC, no Purchaser shall be in possession of any material nonpublic
information received from the Company, any of its subsidiaries or any of its
respective officers, directors, employees or agents, that is not disclosed in
the 8-K Filing. The Company shall not, and shall cause each of its Subsidiaries
and its and each of their respective officers, directors, employees and agents,
not to, provide any Purchaser with any material nonpublic information regarding
the Company or any of its Subsidiaries from and after the filing of the 8-K
Filing with the SEC without the express written consent of such Purchaser.
Subject to the foregoing, neither the Company nor any Purchaser shall issue any
press releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of any Purchaser, to make any press release or other
public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) each Purchaser shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release). No press
release by the Company shall disclose the identity of any Purchaser without such
Purchaser's prior written consent. The Company shall have the right to approve
before issuance any press releases or any other public statements with respect
to the transactions contemplated by the Transaction Documents.
Termination. In the event that the Closing shall not have occurred with respect
-----------
to a Purchaser on or before 15 Business Days from the date hereof due to the
Company's or such Purchaser's failure to satisfy the conditions set forth in
Sections 5 and 6 of this Agreement (and the nonbreaching party's failure to
waive such unsatisfied conditions), the nonbreaching party shall have the option
to terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party, and the
Company shall return any and all funds paid hereunder to the applicable
Purchaser no later than the close of business on the Business Day following such
termination; provided, however, that if this Agreement is terminated pursuant to
this Section 7(n), the Company shall remain obligated to reimburse any
nonbreaching Buyer for the expenses described in Section 4(f) of this Agreement.
-20-
Placement Agent. The Company acknowledges that it has engaged XX Xxxxx as
---------------
placement agent in connection with the sale of the Notes and the Warrants. The
Company shall be responsible for the payment of all placement agent's fees,
financial advisory fees, or brokers' commissions (other than for persons engaged
by any Purchaser or its investment advisor) relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold each
Purchaser harmless against, any liability, loss or expense (including, without
limitation, attorney's fees and out-of-pocket expenses) arising in connection
with any such claim.
Remedies. Each Purchaser and each holder of the Securities shall have all
--------
rights and remedies set forth in the Transaction Documents and all rights and
remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any person having any rights under any provision of this Agreement shall
be entitled to enforce such rights to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by law.
Furthermore, the Company recognizes that in the event that it fails to perform,
observe, or discharge any or all of its obligations under this Agreement, any
remedy at law may prove to be inadequate relief to the Purchasers. The Company
therefore agrees that the Purchasers shall be entitled to seek temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages and without posting a bond or other security.
Indemnification. In consideration of each Purchaser's execution and delivery of
---------------
the Transaction Documents and in addition to all of the Company's other
obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Purchaser and each other holder of the
Securities and all of their stockholders, officers, directors, employees and
direct or indirect investors and any of the foregoing persons' agents or other
representatives (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 any Indemnitee 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 the Transaction Documents 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 the Transaction Documents 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
(other than a cause of action, suit or claim which (x) is brought or made by the
Company and (y) is not a shareholder derivative suit) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or (ii) the status of such Purchaser or holder
of the Securities 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.
Except as otherwise set forth herein, the mechanics and
-21-
procedures with respect to the rights and obligations under this Section 7(q)
shall be the same as those set forth in the Registration Rights Agreement,
including, without limitation, those procedures with respect to the settlement
of claims and the Company's rights to assume the defense of claims.
Payment Set Aside. To the extent that the Company makes a payment or payments
-----------------
to the Purchasers hereunder or pursuant to any of the other Transaction
Documents or the Purchasers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
(s) Displacement. In the event that any of the investors signatory to the
------------
Securities Purchase Agreement dated January 17, 2002 (the "JANUARY PURCHASE
AGREEMENT"), by and among the Company and such investors (the "JANUARY
INVESTORS"), exercise their option provided in Section 5(g) of the January
Purchase Agreement (the "OPTION RIGHTS") such that, after given effect to the
exercise by the Purchasers of the Option Rights assigned to them pursuant to the
Assignment of Rights Agreements (the "ASSIGNED OPTIONS"), such January Purchaser
have the right to purchase a portion of the Initial Amount of the Notes (such
portion of the Initial Amount that the January Purchasers have the right to
purchase being referred to as the "DISPLACEMENT AMOUNT"), then in lieu of
purchasing such Displacement Amount each Purchaser shall be issued Warrants in
the form attached as Exhibit C hereto (in addition to those already contemplated
---------
by this Agreement) exercisable for that number of shares of Company Common Stock
equal to the quotient of (i) 25% of the product of (A) the Displacement Amount
multiplied by (B) the percentage set forth opposite such Purchaser's name on
Exhibit A hereto, divided by (ii) the Conversion/Exercise Price; provided,
--------- --------
however, that in no event shall the Company be required to issue (X) in excess
-------
of 665,000 Warrant Shares pursuant to this Section 7(s) and (Y) to any
Purchasers any Warrants pursuant to this Section 7(s) exercisable for an
aggregate amount in excess of the product of (1) 665,000 Warrant Shares,
multiplied by (2) the percentage set forth opposite such Purchaser's name on
Exhibit A hereto (in the case of either (X) or (Y), subject to adjustment for
stock splits, stock dividends and other similar transactions). The Company
shall provide the Purchasers notice (pursuant to Section 7(g) hereof) of any
exercise by the January Investors of their Option Rights, including, the amount
of the Notes for which any such Option Rights have been exercised, no later than
the Business Day immediately preceding the Closing Date, and the Purchasers
shall exercise their Assigned Rights so that they can purchase as great a
percentage as possible of the Initial Amount (and so that the Displacement
Amount will be as small as possible).
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IN WITNESS WHEREOF, the parties have caused this Securities Purchase Agreement
to be duly executed as of the date first written above.
"COMPANY"
GENUS, INC.
By:
---------------------------------------
Shum Mukherjee, Chief Financial Officer
[Signatures of Purchasers on Following Page]
"PURCHASER"
--------------------------------------------
(print full legal name of Purchaser)
By:
-----------------------------------------
(signature of authorized representative)
Name:
---------------------------------------
Its:
----------------------------------------
Address:
------------------------------------
Telephone:
----------------------------------
Fax:
----------------------------------------
Tax I.D. or SSN:
----------------------------
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
EXHIBIT A
---------
SCHEDULE OF PURCHASERS
NAME OF PURCHASERS PRINCIPAL AMOUNT OF NOTES NUMBER OF WARRANTS % OF INITIAL AMOUNT
------------------ ------------------------- ------------------ -------------------
XXX $200,000 70,422 3%
XXX $150,000 52,816 2%
XXX $100,000 35,211 1%
XXX $5,000,000 1,760,563 67%
XXX $1,000,000 352,112 13%
XXX $1,050,000 369,718 14%
EXHIBIT B
---------
FORM OF NOTE
EXHIBIT C
---------
FORM OF WARRANT
EXHIBIT D
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT E
---------
LEGAL OPINION
EXHIBIT F
---------
SECRETARY'S CERTIFICATE
SCHEDULE A
----------
WIRE INSTRUCTIONS
Bank Name: Silicon Valley Bank
Beneficiary: Genus, Inc.
Account Number: XXX
ABA Number: XXX
Bank Address: 0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Contact: XXX
SCHEDULE B
----------
PARTIES TO ASSIGNMENT OF RIGHTS AGREEMENT
Assignors % of Outstanding Option Rights Assigned
------------------------- ---------------------------------------
XXX 4.52%
XXX .88%
XXX .9%
XXX 5.74%
XXX 26.41%
XXX 13.2%
