SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of December 16, 1998, is by and
between TERA COMPUTER COMPANY, a Washington corporation, with headquarters
located at 0000 Xxxxxxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxx 00000 (the "Company"),
and GENESEE FUND LIMITED - PORTFOLIO B, a British Virgin Islands corporation
("Genesee"), and XXXX INDUSTRIES, INC., a Kansas corporation ("Xxxx" and,
collectively with Genesee, the "Buyers").
W I T N E S S E T H:
WHEREAS, the Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D as promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, upon the terms and subject to the conditions of this Agreement,
the Buyers wish to purchase shares of the common stock, $.01 par value, of the
Company (the "Common Stock"), to acquire the right to receive additional shares
of Common Stock, and to acquire warrants exercisable for shares of Common Stock;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
Unless otherwise defined herein, capitalized terms used in this Agreement
shall have the following meanings:
(a) "Adjustment Date" means the last day of each Adjustment Period
during the Term.
(b) "Adjustment Period" means a period commencing on the day after the
May Adjustment Date and ending on the same day (as the May Adjustment Date) of
each third month thereafter through the end of the Term.
(c) "Adjustment Price" means the arithmetic average of the Closing
Price of the Common Stock during the Measurement Period ending on the Trading
Day immediately preceding the Initial Adjustment Date, the May Adjustment or an
Adjustment Date, as the case may be, provided that each subsequent Adjustment
Price shall be permanently reduced on each Reset Date by an amount equal to
three percent (pro rated for each period of less than 30 days
after a Reset Date shall occur in which the event giving rise thereto shall
continue) of the Adjustment Price that otherwise would have applied without such
increase.
(d) "Adjustment Shares" means the shares of Common Stock issuable by
the Company to the Buyers upon exercise of Adjustment Warrants issued pursuant
to Section 3 hereof and any other securities into which or for which the Common
Stock may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(e) "Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law to remain closed.
(f) "Closing Date" means December 16, 1998, or such other date as to
which the parties hereto may agree.
(g) "Closing Price" of the Common Stock on any date means the closing
bid price for one share of Common Stock on such date on the first applicable
among the following: (i) the national securities exchange on which the shares of
Common Stock are listed which constitutes the principal securities market for
the Common Stock, (ii) the Nasdaq, if the Nasdaq constitutes the principal
market for the Common Stock on such date, or (iii) the Nasdaq SmallCap Market,
if the Nasdaq SmallCap Market constitutes the principal securities market for
the Common Stock on such date, in any such case as reported by Bloomberg, L.P.;
provided, however, that if during any Measurement Period or other period during
which the Closing Price is being determined:
(i) The Company shall declare or pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of Common
Stock or fix any record date for any such action, then the Closing Price for
each day in such Measurement Period or such other period which day is prior to
the earlier of (1) the date fixed for the determination of shareholders entitled
to receive such dividend or other distribution and (2) the date on which
ex-dividend trading in the Common Stock with respect to such dividend or
distribution begins shall be reduced by multiplying the Closing Price
(determined without regard to this proviso) for each such day in such
Measurement Period or such other period by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding at the close of
business on the earlier of (1) the record date fixed for such determination and
(2) the date on which ex-dividend trading in the Common Stock with respect to
such dividend or distribution begins and the denominator of which shall be the
sum of such number of shares and the total number of shares constituting such
dividend or other distribution;
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(ii) The Company shall issue rights or warrants to all holders of
its outstanding shares of Common Stock, or fix a record date for such issuance,
which rights or warrants entitle such holders (for a period expiring within 45
days after the date fixed for the determination of shareholders entitled to
receive such rights or warrants) to subscribe for or purchase shares of Common
Stock at a price per share less than the Closing Price (determined without
regard to this proviso) for any day in such Measurement Period or such other
period which day is prior to the end of such 45-day period, then the Closing
Price for each such day shall be reduced so that the same shall equal the price
determined by multiplying the Closing Price (determined without regard to this
proviso) by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding at the close of business on the record date fixed for
the determination of shareholders entitled to receive such rights or warrants
plus the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at such Closing Price, and the denominator
of which shall be the number of shares of Common Stock outstanding on the close
of business on such record date plus the total number of additional shares of
Common Stock so offered for subscription or purchase. In determining whether any
rights or warrants entitle the holders to subscribe for or purchase shares of
Common Stock at less than the Closing Price (determined without regard to this
proviso), and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration received for
such rights or warrants, the value of such consideration, if other than cash, to
be determined in good faith by a resolution of the Board of Directors of the
Company;
(iii) The outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock or a record date for any such
subdivision shall be fixed, then the Closing Price of the Common Stock for each
day in such Measurement Period or such other period which day is prior to the
earlier of (1) the day upon which such subdivision becomes effective and (2) the
date on which ex-dividend trading in the Common Stock with respect to such
subdivision begins shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Closing Price for each day in such Measurement
Period or such other period which day is prior to the earlier of (1) the date on
which such combination becomes effective and (2) the date on which trading in
the Common Stock on a basis which gives effect to such combination begins, shall
be proportionately increased;
(iv) The Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock shares of any class of capital stock of the
Company (other than any dividends or distributions to which clause (i) of this
proviso applies) or evidences of its indebtedness, cash or other assets
(including securities, but excluding any rights or warrants referred to in
clause (ii) of this proviso and dividends and distributions paid exclusively in
cash and excluding any capital stock, evidences of indebtedness, cash or assets
distributed upon a merger or consolidation) (the foregoing hereinafter in this
clause (iv) of this proviso called the "Securities"), or fix a record date for
any such distribution, then, in each such case, the Closing Price for each day
in such Measurement Period or such other period which day is
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prior to the earlier of (1) the record date for such distribution and (2) the
date on which ex-dividend trading in the Common Stock with respect to such
distribution begins shall be reduced so that the same shall be equal to the
price determined by multiplying the Closing Price (determined without regard to
this proviso) by a fraction, the numerator of which shall be the Closing Price
(determined without regard to this proviso) for such trade less the fair market
value (as determined in good faith by resolution of the Board of Directors of
the Company) on such date of the portion of the Securities so distributed or to
be distributed applicable to one share of Common Stock, and the denominator of
which shall be the Closing Price (determined without regard to this proviso). If
the Board of Directors of the Company determines the fair market value of any
distribution for purposes of this clause (iv) by reference to the actual or when
issued trading market for any securities comprising all or part of such
distribution, it must in doing so consider the prices in such market on the same
day for which an adjustment in the Closing Price is being determined.
For purposes of this clause (iv) and clauses (i) and (ii) of this proviso,
any dividend or distribution to which this clause (iv) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock to which clause (i) or (ii) of this proviso
applies (or both), shall be deemed instead to be (1) a dividend or distribution
of the evidences of indebtedness, assets, shares of capital stock, rights or
warrants other than such shares of Common Stock or rights or warrants to which
clause (i) or (ii) of this proviso applies (and any Closing Price reduction
required by this clause (iv) with respect to such dividend or distribution shall
then be made) immediately followed by (2) a dividend or distribution of such
shares of Common Stock or such rights or warrants (and any further Closing Price
reduction required by clauses (i) and (ii) of this proviso with respect to such
dividend or distribution shall then be made), except that any shares of Common
Stock included in such dividend or distribution shall not be deemed "outstanding
at the close of business on the date fixed for such determination" within the
meaning of clause (i) of this proviso;
(v) The Company or any subsidiary of the Company shall (x) by
dividend or otherwise, distribute to all holders of its Common Stock cash in (or
fix any record date for any such distribution), or (y) repurchase or reacquire
shares of its Common Stock (other than an Option Share Surrender) for, in either
case, an aggregate amount that, combined with (1) the aggregate amount of any
other such distributions to all holders of its Common Stock made exclusively in
cash after the Closing Date and within the twelve (12) months preceding the date
of payment of such distribution, and in respect of which no adjustment pursuant
to this clause (v) has been made, (2) the aggregate amount of any cash plus the
fair market value (as determined in good faith by a resolution of the Board of
Directors of the Company) of consideration paid in respect of any repurchase or
other reacquisition by the Company or any subsidiary of the Company of any
shares of Common Stock (other than an Option Share Surrender) made after the
Closing Date and within the twelve (12) months preceding the date of payment of
such distribution or making of such repurchase or reacquisition, as the case may
be, and in respect of which no adjustment pursuant to this clause (v) has been
made, and (3) the aggregate of any cash plus the fair market value (as
determined
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in good faith by a resolution of the Board of Directors of the Company) of
consideration payable in respect of any Tender Offer by the Company or any of
its subsidiaries for all or any portion of the Common Stock concluded within the
twelve (12) months preceding the date of payment of such distribution or
completion of such repurchase or reacquisition, as the case may be, and in
respect of which no adjustment pursuant to clause (vi) of this proviso has been
made (such aggregate amount combined with the amounts in clauses (1), (2) and
(3) above being the "Combined Amount"), exceeds 10% of the product of the
Closing Price (determined without regard to this proviso) for any day in such
Measurement Period or such other period which day is prior to the earlier of (A)
the record date with respect to such distribution and (B) the date on which
ex-dividend trading in the Common Stock with respect to such distribution begins
or the date of such repurchase or reacquisition, as the case may be, times the
number of shares of Common Stock outstanding on such date, then, and in each
such case, the Closing Price for each such day shall be reduced so that the same
shall equal the price determined by multiplying the Closing Price (determined
without regard to this proviso) for such day by a fraction (i) the numerator of
which shall be equal to the Closing Price (determined without regard to this
proviso) for such day less an amount equal to the quotient of (x) the excess of
such Combined Amount over such 10% and (y) the number of shares of Common Stock
outstanding on such day and (ii) the denominator of which shall be equal to the
Closing Price (determined without regard to this proviso) for such day; or
(vi) A Tender Offer made by the Company or any of its
subsidiaries for all or any portion of the Common Stock shall expire and such
Tender Offer (as amended upon the expiration thereof) shall require the payment
to shareholders (based on the acceptance (up to any maximum specified in the
terms of the Tender Offer) of Purchased Shares (as defined below)) of an
aggregate consideration having a fair market value (as determined in good faith
by resolution of the Board of Directors of the Company) that combined together
with (1) the aggregate of the cash plus the fair market value (as determined in
good faith by a resolution of the Board of Directors of the Company), as of the
expiration of such Tender Offer, of consideration payable in respect of any
other Tender Offers, by the Company or any of its subsidiaries for all or any
portion of the Common Stock expiring within the 12 months preceding the
expiration of such Tender Offer and in respect of which no adjustment pursuant
to this clause (vi) has been made, (2) the aggregate amount of any cash plus the
fair market value (as determined in good faith by a resolution of the Board of
Directors of the Company) of consideration paid in respect of any repurchase or
other reacquisition by the Company or any subsidiary of the Company of any
shares of Common Stock (other than an Option Share Surrender) made after the
Closing Date and within the 12 months preceding the expiration of such Tender
Offer and in respect of which no adjustment pursuant to clause (v) of this
proviso has been made, and (3) the aggregate amount of any distributions to all
holders of Common Stock made exclusively in cash within 12 months preceding the
expiration of such Tender Offer and in respect of which no adjustment pursuant
to clause (v) of this proviso has been made, exceeds 10% of the product of the
Closing Price (determined without regard to this proviso) for any day in such
period times the number of shares of Common Stock outstanding on such day, then,
and in each such case, the Closing Price for such day shall be reduced so
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that the same shall equal the price determined by multiplying the Closing Price
(determined without regard to this proviso) for such day by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding on
such day multiplied by the Closing Price (determined without regard to this
proviso) for such day and the denominator of which shall be the sum of (x) the
fair market value (determined as aforesaid) of the aggregate consideration
payable to shareholders based on the acceptance (up to any maximum specified in
the terms of the Tender Offer) of all shares validly tendered and not withdrawn
as of the last time tenders could have been made pursuant to such Tender Offer
(the "Expiration Time") (the shares deemed so accepted, up to any such maximum,
being referred to as the "Purchased Shares") and (y) the product of the number
of shares of Common Stock outstanding (less any Purchased Shares) on such day
times the Closing Price (determined without regard to this proviso) of the
Common Stock on the Trading Day next succeeding the Expiration Time. If the
application of this clause (vi) to any Tender Offer would result in an increase
in the Closing Price (determined without regard to this proviso) for any trade,
no adjustment shall be made for such Tender Offer under this clause (vi) for
such day.
(h) "Common Shares" means the Initial Shares, the Adjustment Shares,
and the Warrant Shares.
(i) "Disclosure Documents" means (i) Amendments No. 1 and No. 2 to the
Company's Annual Report on Form 10-K/A for the fiscal year ended December 31,
1997; (ii) the Company's Quarterly Reports on Form 10-Q/A for the fiscal
quarters ended March 31, 1998, June 30, 1998, and its Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1998; (iii) the Company's
Current Reports on Form 8-K dated October 8, 1998, November 19, 1998, and
December 23, 1998; and (iv) the proxy statement for the Company's 1998 Annual
Meeting as filed with the SEC on April 1, 1998.
(j) "Floor Price" means $12.00 (subject to equitable adjustments from
time to time on terms reasonably acceptable to the Buyers for stock splits,
stock dividends, combinations, recapitalizations, reclassifications and similar
events occurring or with respect to which "ex-" trading commences on or after
the date of this Agreement), provided that the Floor Price shall be permanently
increased on each Reset Date by an amount equal to three percent (pro rated for
each period of less than 30 days after a Reset Date shall occur in which the
event giving rise thereto shall continue) of the Floor Price that otherwise
would have applied without such increase.
(k) "Initial Adjustment Date" means February 22, 1999.
(l) "Initial Shares" means an aggregate of 200,000 shares of Common
Stock issued and sold by the Company to the Buyers on the Closing Date in
accordance with the terms and conditions hereof.
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(m) "Market Price" of any security on any date shall mean the last
sale price (regular way) per share of such security on such date on the
principal securities exchange or other market on which such security is listed
for trading which constitutes the principal securities market for such security,
as reported by such exchange or market.
(n) "Measurement Period" means, with respect to any date, the period
of 15 consecutive Trading Days ending on the Trading Day prior to such date.
(o) "Nasdaq" means the Nasdaq National Market.
(p) "Option Share Surrender" means the surrender of shares of Common
Stock to the Company in payment of the exercise price or tax obligations
incurred in connection with the exercise of a stock option granted by the
Company to any of its employees, directors or consultants.
(q) "Registration Rights Agreements" means the Registration Rights
Agreements, dated the date hereof, between the Company and each of the Buyers,
the form of which is attached hereto as Annex I.
(r) "Registration Statement" has the meaning given such term in the
Registration Rights Agreements.
(s) "Reset Date" means (i) the date that is 91 days after the Closing
Date, unless the Registration Statement has been declared effective prior
thereto; (ii) each date that is 30 days after a Reset Date, if the Registration
Statement has not been declared effective by the SEC prior to such 30th day;
(iii) if the Registration Statement has not been declared effective by the SEC
within 90 days after the Closing Date, the date on which the Registration
Statement is declared effective by the SEC; (iv) the date on which the
Registration Statement has ceased to be available for use by any holder of the
Common Shares which is named therein as a selling shareholder if, at any time
during which the Registration Statement is required by the Registration Rights
Agreements to remain available for such use, the Registration Statement ceases
to be so available for any reason (including, without limitation, by reason of
an SEC stop order, a material misstatement or omission therein or the
information contained in the Registration Statement having become outdated) and
shall remain so unavailable, and each date that is the 30th day (whether or not
consecutive) after such date on which the Registration Statement shall have
remained so unavailable, excluding any Excluded Period (as defined in the
Registration Rights Agreements); (v) the date on which the Registration
Statement becomes available for use by holders of Common Shares if the
Registration Statement shall have become unavailable for such use as described
in the preceding clause (iv); provided, however, that if more than one event
that could give rise to a Reset Date during any period shall have occurred, only
one of such events shall be deemed to result in a Reset Date so that the
adjustments provided herein by reason of the occurrence of a Reset Date shall be
made only once in respect of any period of time and then in the maximum amount
based on all such Reset Dates.
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(t) "SEC" means the United States Securities and Exchange Commission.
(u) "Securities" means the Common Shares, the Warrants and the
Adjustment Warrants.
(v) "Tender Offer" means a tender offer as defined for the purposes of
Regulation 14D and Rule 13e-4 under the Securities Exchange Act of 1934, as
amended (the "1934 Act").
(w) "Term" means the period commencing on the Closing Date and ending
September 30, 2001.
(x) "Trading Day" means a day on whichever of the national securities
exchange, the Nasdaq or the Nasdaq SmallCap Market which at the time constitutes
the principal securities market for the Common Stock, is open for general
trading.
(y) "Warrants" means warrants to purchase shares of Common Stock, such
warrants having the terms and conditions set forth in the form of warrant
attached hereto as Annex II.
(z) "Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
(aa) "Adjustment Warrants" means warrants to purchase shares of Common
Stock issuable pursuant to Section 3 hereof, such warrants having the terms and
conditions set forth in the form of Adjustment Warrant attached to the Amendment
Agreement as Annex I.
(bb) "Amendment Agreement" means the Amendment Agreement, dated as of
March __, 1999, by and between the Company and the Buyers which, among other
things, amends this Agreement.
(cc) "May Adjustment Date" means May 22, 1999.
(dd) "Pool A Adjustment Shares" means Adjustment Shares issuable upon
exercise of Adjustment Warrants issued pursuant to Section 3(a).
(ee) "Pool A Initial Shares" means one-half of the Initial Shares
issued to each Buyer, as represented by stock certificates nos. ____ and ____ or
any replacement certificates, and any other securities in to which or for which
such shares may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
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SEA1-170766.5 73543-0016
(ff) "Pool B Initial Shares" means one-half of the Initial shares
issued to each Buyer, as represented by stock certificates nos. ____ and ____ or
any replacement certificates, an any other securities into which or for which
such shares may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
2. AGREEMENT TO SUBSCRIBE; PAYMENT OF PURCHASE PRICE
(a) Subscription for Initial Shares. Each Buyer hereby agrees to
purchase from the Company, and the Company hereby agrees to issue and sell to
each Buyer, the number of Initial Shares set forth on the signature page hereof
at a purchase price of $10.00 per share, for an aggregate purchase price of
$2,000,000 from both Buyers.
(b) Warrants. In connection with the purchase of the Initial Shares by
each Buyer, the Company agrees to issue warrants to purchase the number of
Warrant Shares set forth on the signature page hereof to each Buyer.
(c) Form and Method of Payment. Each Buyer shall pay the purchase
price for the number of Initial Shares purchased thereby directly to the Company
in United States Dollars by certified bank check or wire transfer to an account
designated in writing by the Company against issuance to such Buyer of its
portion of the Initial Shares and the Warrants. The Company shall deliver (i)
the certificates for the Initial Shares directly to each Buyer, and (ii) the
Warrants directly to each Buyer against payment of the purchase price for the
Initial Shares to the Company on the Closing Date.
3. BUYERS' RIGHT TO RECEIVE ADJUSTMENT WARRANTS
(a) Initial Issuance of Adjustment Warrants (Pool A). On the date of
execution and delivery of the Amendment Agreement, the Company shall issue to
the Buyers Adjustment Warrants with respect to the Initial Adjustment Date for
the Pool A Initial Shares as follows:
Genesee 67,073
Xxxx 67,073
(b) May 1999 Issuance of Adjustment Warrants.
(1) Pool B. If the Adjustment Price for the May Adjustment Date
is less than the Floor Price, then the Company shall issue to each Buyer
Adjustment Warrants to purchase the number of Adjustment Shares calculated in
accordance with the following formula:
[ (A / B) x C ] - C
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where:
A = Floor Price;
B = Adjustment Price for the May Adjustment Date, and
C = Number of Pool B Initial Shares beneficially owned by Buyer on the
May Adjustment Date.
(2) Pool A. If the Adjustment Price for the may Adjustment Date
is less than $6.50, then, in addition to the Adjustment Warrants issued to each
Buyer in accordance with Section 3(b)(1), the Company shall issue to each Buyer
Adjustment Warrants to purchase the number of Adjustment Shares calculated in
accordance with the following formula:
[($6.50 / A) x B ] - B
where:
A = Adjustment Price for the May Adjustment Date;
B = Number of Pool A Initial Shares and Pool A Adjustment Shares beneficially
owned by Buyer on the May Adjustment Date, including all Pool A Adjustment
shares issuable upon exercise of outstanding Adjustment Warrants
determined without regard to any limitation on beneficial ownership
contained in Section 1.1(d) of the Adjustment Warrants.
References to $6.50 in this Section 3(b)(2) are subject to equitable
adjustments from time to time on terms reasonably acceptable to the Buyers for
stock splits, stock dividends, combinations, recapitalizations,
reclassifications and similar events occurring or with respect to which
"ex-"trading commences on or after the date of the Amendment Agreement.
(c) Subsequent Issuances of Adjustment Warrants. On each Adjustment
Date, if the Adjustment Price for that Adjustment Date is less than the lowest
Adjustment Price for the May Adjustment Date or any prior Adjustment Date, then
the Company shall issue to each Buyer Adjustment Warrants to purchase the number
of Adjustment Shares calculated in accordance with the following formula:
[(1.0125 x A x B) / C ] - A
where:
A = Number of Initial Shares and Adjustment Shares beneficially owned by
Buyer on the Adjustment Date, including all Adjustment Shares issuable
upon exercise of outstanding Adjustment Warrants determined without
regard to any limitation on beneficial ownership contained in Section
1.1(d) of the Adjustment Warrants.
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B = Lowest Adjustment Price for the May Adjustment Date or any prior
Adjustment Date, and
C = Adjustment Price applicable to the Adjustment Date.
(d) Buyer's Assignment of Rights under Section 3. If a Buyer intends
to assign all or any portion of its rights to acquire any Adjustment Warrants in
accordance with Section 10(h) hereof, then such Buyer shall so notify the
Company not less than ten days before the May Adjustment Date or any Adjustment
Date. Each such notice of assignment by a Buyer shall specify the name(s) of the
assignee(s) and the rights to be assigned thereto. Each such notice shall be
executed by the assignee(s). From and after the giving of such notice by such
Buyer, the Buyer shall be deemed for all purposes to have assigned to such
assignee(s) the rights under this Agreement with respect to the acquisition of
the number of Adjustment Warrants covered by such notice, and such assignee(s)
shall be deemed a party to this Agreement with respect to the acquisition of
such number of Adjustment Warrants upon the terms and subject to the conditions
of this Agreement, and all applicable references hereinafter to the "Buyers"
shall include such assignee(s).
(e) No Fractional Shares. No fractional shares of Common Stock shall
be issued as Adjustment Shares upon exercise of the Adjustment Warrants but, in
lieu of any fraction of a share of Common Stock that would otherwise be issuable
upon exercise of an Adjustment Warrant, the Company shall pay in cash an amount
equal to the product of (i) the Adjustment Price and (ii) such fraction of a
share.
(f) Delivery of Adjustment Warrants. The Company shall issue and
deliver to each Buyer the Adjustment Warrants not later than 4:00 p.m., Pacific
Time, on or before the third Business Day following the May Adjustment Date and
each Adjustment Date, or as otherwise agreed to by the parties hereto. Delivery
of the Adjustment Warrants shall be made at a location mutually agreed to by the
parties hereto. The Company's obligation to issue and deliver the Adjustment
Warrants shall be absolute and unconditional, irrespective of any action or
inaction by the Buyer to enforce the same, any waiver or consent with respect to
any provision hereof, the recovery of any judgment against any person or any
action to enforce the same, any failure or delay in the enforcement of any other
obligation of the Company to the Buyer, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Buyer or any
other person of any obligation to the Company or any violation or alleged
violation of law by the Buyer or any other person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Buyer in connection with such obligation. If the Company fails to issue and
deliver the Adjustment Warrants pursuant to this Section 3(f) as and when
required to do so following the May Adjustment Date and each Adjustment Date, in
addition to any other liabilities the Company may have hereunder and under
applicable law (i) the Company shall pay or reimburse the Buyer on demand for
all reasonable out-of-pocket expenses including, without limitation, fees and
expenses of legal counsel incurred by the Buyer as a result of such failure, and
(ii) the Adjustment Price used to determine the number of Adjustment Shares
issuable upon exercise of
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such Adjustment Warrants with respect to such Adjustment Date shall be reduced
by two percent from the Adjustment Price otherwise used to calculate such number
of Adjustment Shares for each Trading Day the Company fails to issue and deliver
such Adjustment Warrants and, accordingly, the Buyer shall be entitled to
receive the additional Adjustment Warrants resulting from such reduced
Adjustment Price.
(g) Condition Precedent to Issuance of Adjustment Warrants. Each Buyer
understands that the Company's obligation to issue the Adjustment Warrants to
such Buyer in accordance with this Agreement is conditioned upon the accuracy in
all material respects on the May Adjustment Date or the particular Adjustment
Date, as applicable, of the representations and warranties of the Buyer
contained in (i) Sections 4(a), (b), (c), (d), (f) and (g) of this Agreement and
(ii) Sections 3(a), (b), (c), (d) and (f) of the Amendment Agreement, in each
case as if made on such date.
4. BUYER REPRESENTATIONS AND WARRANTIES
Each Buyer represents and warrants to, and covenants and agrees with, the
Company as follows (except for the representations set forth in Section 4(h),
with respect to which each Buyer represents only to its security holdings in the
Company):
(a) Purchase for Investment. The Buyer is purchasing the Initial
Shares and acquiring the Warrants and, upon issuance of any Adjustment Shares,
will acquire the Adjustment Shares, for its own account for investment only and
not with a view towards the public sale or distribution thereof. The Buyer
understands that its investment in the Securities involves a high degree of
risk.
(b) Accredited Investor; No Broker-Dealer. The Buyer is an "accredited
investor" as that term is defined in Rule 501 of Regulation D under the 1933 Act
by reason of Rule 501(a)(3). The Buyer is not a person required to be registered
as a broker or dealer under Section 15(a) of the 1934 Act or a member of the
National Association of Securities Dealers, Inc.
(c) Reoffers and Resales. All subsequent offers and sales of the
Securities by the Buyer shall be made pursuant to registration of the Securities
being offered and sold under the 1933 Act or pursuant to an exemption from
registration.
(d) Company Reliance. The Buyer understands that the Initial Shares
are being offered and sold, the Warrants are being issued, and the Adjustment
Shares are being offered, to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
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availability of such exemptions and the eligibility of the Buyer to acquire the
Initial Shares and the Warrants and to receive an offer of the Adjustment
Shares.
(e) Information Provided. The Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances, and
operations of the Company and materials relating to the offer and sale of the
Initial Shares and the Warrants and the offer of the Adjustment Shares, that
have been requested by the Buyer. The Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the management of the Company and
have received complete and satisfactory answers to any such inquiries. Without
limiting the generality of the foregoing, the Buyer has had the opportunity to
obtain and to review the Disclosure Documents.
(f) Absence of Approvals. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities.
(g) Subscription Agreement. This Agreement has been duly and validly
authorized, executed, and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable in accordance with its terms, subject
to general principles of equity and to bankruptcy, insolvency, moratorium and
other similar laws affecting the enforcement of creditors' rights generally.
(h) Current Holdings. As of December 14, 1998, Genesee owns 270 shares
of Series A Convertible Preferred Stock, $0.01 par value of the Company (the
"Series A Stock"), 3,000 shares of Series B Convertible Preferred Stock, $0.01
par value, of the Company (the "Series B Stock"), no shares of Common Stock, and
warrants to purchase 87,500 shares of Common Stock. As of the date hereof, Xxxx
owns no shares of Series A Stock, no shares of Series B Stock, 300,000 shares of
Common Stock, and warrants to purchase 60,504 shares of Common Stock.
5. COMPANY REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to, and covenants and agrees with,
Buyers that:
(a) Organization and Authority. The Company is a corporation duly
organized and validly existing under the laws of the State of Washington, and
has all requisite corporate power and authority (i) to own, lease, and operate
its properties and to carry on its business as now being conducted, and (ii) to
execute, deliver, and perform its obligations under this Agreement, the
Warrants, and the Registration Rights Agreements, and the other agreements to be
executed and delivered by the Company in connection herewith, and to consummate
the transactions contemplated hereby and thereby. The Company is duly qualified
to do business as a foreign corporation and is in good standing in all
jurisdictions wherein such qualification is necessary and where failure so to
qualify could have a material adverse effect
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on the business, properties, operations, condition (financial or other), results
of operations or prospects of the Company. The Company has no subsidiaries.
(b) Capitalization. As of December 14, 1998, the authorized capital
stock of the Company consisted of (i) 25,000,000 shares of Common Stock, of
which 13,543,875 shares were outstanding and all of which are fully paid and
nonassessable; and (ii) 5,000,000 shares of Preferred Stock, $.01 par value, of
which (i) 10,000 shares were designated as Series A Stock, of which 1,785 shares
are outstanding; (ii) 12,000 shares were designated as Series B Stock, of which
6,000 shares are outstanding; and (iii) 5,000 shares were designated as Series C
Convertible Preferred Stock, none of which are outstanding. As of December 14,
1998, the Company had outstanding options entitling the holders thereof to
purchase 2,597,961 shares of Common Stock and outstanding warrants entitling the
holders thereof to purchase 1,032,600 shares of Common Stock. As of the Closing
Date, there will have been no material increase from December 14, 1998, in the
number of shares of Common Stock outstanding other than pursuant to the exercise
of outstanding options or warrants or the conversion of outstanding shares of
Series A Stock of Series B Stock, or both. The Company does not have outstanding
any material amount of securities (or obligations to issue any such securities)
convertible into, exchangeable for or otherwise entitling the holders thereof to
acquire shares of Common Stock, except as disclosed above or in the Disclosure
Documents or as set forth in Schedule 5(b) hereof. The outstanding shares of
Common Stock and outstanding options, warrants, and other securities to purchase
Common Stock have been duly authorized and validly issued. None of such
outstanding shares of Common Stock, options, warrants, and other securities has
been issued in violation of the preemptive rights of any security holder of the
Company. The offers and sales of the outstanding shares of Common Stock and
options, warrants and other rights to acquire Common Stock were at all relevant
times either registered under the 1933 Act and applicable state securities laws
or exempt from such requirements. No holder of any of the Company's securities
has any rights, "demand," "piggy-back" or otherwise, to have such securities
registered by reason of the intention to file, filing or effectiveness of the
Registration Statement (as defined in the Registration Rights Agreements).
(c) Concerning the Securities. The Securities have been duly
authorized and the Initial Shares, when issued and paid for in accordance with
this Agreement, the Adjustment Shares, when issued, and the Warrant Shares, when
issued upon exercise of the Warrants, as the case may be, will be duly and
validly issued, fully paid and non-assessable, and will not subject the holder
thereof to personal liability by reason of being such holder. There are no
preemptive or similar rights of any security holder of the Company or any other
person to acquire any of the Common Shares. The Common Stock is listed for
trading on the Nasdaq and, except as set forth in Schedule 5(c), (i) the Company
and the Common Stock meet the currently applicable criteria for continued
listing and trading on Nasdaq; (ii) the Company has not been notified since
September 25, 1995 by Nasdaq of any failure or potential failure to meet the
criteria for continued listing and trading on Nasdaq; (iii) no suspension of
trading in the Common Stock is in effect; and (iv) the Company knows of no
reason that the Common Shares will not be eligible for listing on Nasdaq.
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(d) Subscription Agreement; Warrants; Registration Rights Agreements.
This Agreement, the Warrants, and the Registration Rights Agreements have been
duly and validly authorized by the Company, this Agreement has been duly
executed and delivered on behalf of the Company and this Agreement is, and the
Warrants and the Registration Rights Agreements, when executed and delivered by
the Company, will be, valid and binding obligations of the Company enforceable
in accordance with their respective terms, subject to general principles of
equity and to bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally and limits upon rights
to indemnity.
(e) Non-contravention. The execution and delivery of this Agreement by
the Company and the issuance by the Company of the Initial Shares, the
Adjustment Shares, the Warrants, and the Warrant Shares, as contemplated by this
Agreement, and completion of the other transactions contemplated in this
Agreement, the Registration Rights Agreements and the Warrants, do not and will
not conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under, the Restated and Amended Articles
of Incorporation or Bylaws of the Company, or any indenture, mortgage, deed of
trust or other material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound which would have a
material adverse effect on the Company, or any applicable law, rule or
regulation or any applicable decree, judgment or order of any court, United
States federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any of its properties
or assets which would have a material adverse effect on the Company.
(f) Approvals. Except as set forth in Schedule 5(f), no authorization,
approval or consent of any court, governmental body, regulatory agency,
self-regulatory organization, or stock exchange or market or the shareholders of
the Company is required to be obtained by the Company for (i) the issuance and
sale of the Initial Shares and the issuance of the Warrants and the Adjustment
Shares, as contemplated by this Agreement, and (ii) the issuance of Warrant
Shares upon exercise of the Warrants, except for the filing of one or more Forms
D with respect to the Securities as required under Regulation D under the 1933
Act.
(g) Information Provided. The information provided by or on behalf of
the Company to the Buyers in connection with the transactions contemplated by
the Agreement, including, without limitation, the information referred to in
Section 4(e) of this Agreement, does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances in which they were made,
not misleading.
(h) Absence of Certain Changes. Except as disclosed in the Disclosure
Documents, since December 31, 1997, there has been no material adverse change
and no material adverse development in the business, properties, operations,
condition (financial or other), results of operations or prospects of the
Company, and, except as and to the extent
-15-
disclosed, reflected or reserved against in the financial statements of the
Company and the notes thereto included in the Disclosure Documents, the Company
has no material (individually or in the aggregate) liabilities, debts or
obligations whether accrued, absolute, contingent or otherwise, and whether due
or to become due. Subsequent to December 31, 1997, the Company has not incurred
any liabilities, debts or obligations of any nature whatsoever which are
individually or in the aggregate material to the Company, other than those
incurred in the ordinary course of its business or disclosed in the Disclosure
Documents.
(i) Absence of Certain Proceedings. There is no action, suit or
proceeding, before or by any court, public board or body or governmental agency
(an "Action") pending or, to the knowledge of the Company, threatened against
the Company and, to the knowledge of the Company, there is no inquiry or
investigation before or by any court, public board or body or governmental
agency pending or threatened against the Company, in any such case wherein an
unfavorable decision, ruling or finding would have a material adverse effect on
the properties, business, condition (financial or other), results of operations
or prospects of the Company or the transactions contemplated by this Agreement
or any of the documents contemplated hereby or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of such other documents.
Neither the Company nor any director or officer thereof is or has been the
subject of any Action involving (i) a claim of violation of or liability under
federal or state securities laws or (ii) a claim of breach of fiduciary duty.
The Company does not have pending before the SEC any request for confidential
treatment of information and to the knowledge of the Company, no such request
will be made by the Company prior to the time the Registration Statement
relating to the Initial Shares which is contemplated by the Registration Rights
Agreements is first ordered effective by the SEC; and, to the knowledge of the
Company, there is not pending or contemplated and has not been any investigation
by the SEC of the Company or any director or officer of the Company.
(j) Properties. The Company has good title to all property, real and
personal (tangible and intangible), and other assets owned by it, free and clear
of all security interests, charges, mortgages, liens or other encumbrances,
except such as are described in the Disclosure Documents or such as do not
materially interfere with the use of such property made by the Company. The
leases, licenses or other contracts or instruments under which the Company
leases, holds or is entitled to use any property, real or personal, are valid,
subsisting, and enforceable with only such exceptions as do not materially
interfere with the use of such property made by the Company. The Company has
received no notice of any material violation of any applicable law, ordinance,
regulation, order or requirement relating to its owned or leased properties. The
Company does not have any knowledge of, and the Company has not given or
received any notice of, any pending conflicts with or infringement of the rights
of others with respect to any Company Proprietary Rights (as defined herein) or
with respect to any license of Company Proprietary Rights. No action, suit,
arbitration, or legal, administrative or other proceeding or investigation is
pending, or, to the best knowledge of the Company, threatened, which involves
any Company Proprietary Rights. The Company
-16-
is not subject to any judgment, order, writ, injunction or decree of any court
or any federal, state, local, foreign or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
any arbitrator, or has entered into or is a party to any contract which
restricts or impairs the use of any such Company Proprietary Rights in a manner
which would have a material adverse effect on the use by the Company of any of
the Company Proprietary Rights. To the best knowledge of the Company, no Company
Proprietary Rights and no services or products sold by the Company, conflict
with or infringe upon any proprietary rights available to any third party. The
Company has not received written notice of any pending conflict with or
infringement upon such third-party proprietary rights. The Company has not
entered into any consent, indemnification, forbearance to xxx or settlement
agreement with respect to Company Proprietary Rights other than in the ordinary
course of business. No claims have been asserted by any person with respect to
the validity of the Company's ownership or right to use the Company Proprietary
Rights and, to the best knowledge of the Company, there is no reasonable basis
for any such claim to be successful. To the best knowledge of the Company, the
Company Proprietary Rights are valid and enforceable. No registration relating
to the Company Proprietary Rights has lapsed, expired or been abandoned or
canceled or is the subject of cancellation or other adversarial proceedings, and
all applications therefor are pending and are in good standing, except for such
lapses, expirations, abandonments, cancellations, adversarial proceedings or
failures to be in good standing which would not, singly or in the aggregate,
have a material adverse effect on the business, properties, operations,
condition (financial or otherwise), results of operations or prospects of the
Company. The Company has complied, in all material respects, with its
contractual obligations relating to the protection of the Company Proprietary
Rights used pursuant to licenses. To the best knowledge of the Company, no
person is infringing on or violating the Company Proprietary Rights. As used
herein, the term "Company Proprietary Rights" means all patents, patent
applications, inventions, trademarks, trade names, applications for registration
of trademarks, service marks, service xxxx applications, copyrights, know-how,
manufacturing processes, formulae, trade secrets, licenses and rights in any
thereof and any other intangible property and assets which are material to the
business of the Company as now conducted, as proposed to be conducted or as
described in this Agreement.
(k) Labor Relations. No material labor problem exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(l) SEC Filings. The Company has timely filed all required forms,
reports and other documents with the SEC. All of such forms, reports and other
documents complied, when filed, in all material respects, with all applicable
requirements of the 1933 Act and the 0000 Xxx. The Company has not filed any
reports with the SEC under the 1934 Act since January 22, 1998, other than the
Disclosure Documents.
(m) Absence of Brokers, Finders, Etc. No broker, finder or similar
person is entitled to any commission, fee or other compensation by reason of the
transactions
-17-
contemplated by this Agreement and the Company shall pay, and indemnify and hold
each Buyer harmless from, any claim made against such Buyer by any person for
any such commission, fee or other compensation.
(n) Absence of Rights Agreement. The Company has not adopted a
shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change in control of the Company.
(o) No Solicitation. No form of general solicitation or general
advertising was used by the Company or, to the best of its knowledge, any other
person acting on behalf of the Company, in respect of or in connection with the
offer and sale of the Securities. Neither the Company nor, to its knowledge, any
person acting on behalf of the Company has, either directly or indirectly, sold
or offered for sale to any person any of the Common Shares or the Warrants or,
within the six months prior to the date hereof, any other similar security of
the Company except as contemplated by this Agreement; and neither the Company
nor any person authorized to act on its behalf will sell or offer for sale any
shares of Common Stock or Warrants, or solicit any offers to buy any shares of
Common Stock or Warrants, so as thereby to cause the issuance or sale of any of
the Common Shares or the issuance of the Warrants to be in violation of Section
5 of the 1933 Act.
(p) Certain Issuances of Securities. The Company has not issued any
shares of Common Stock or shares of any series of preferred stock or other
securities convertible into, exchangeable for or otherwise entitling the holder
to acquire shares of Common Stock that are subject to Rule 4460(i) of Nasdaq (or
any successor, replacement or similar provision thereof or of any other market
on which the Common Stock is listed for trading) (collectively, "Rule 4460(i)")
and that would be integrated with the sale of the Initial Shares to the Buyers
or the issuance of Adjustment Shares or Warrant Shares for purposes of Rule
4460(i), other than the Company's Series B Convertible Preferred Stock.
6. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
(a) Transfer Restrictions. Each Buyer acknowledges that (i) the
Warrants and the Adjustment Warrants have not been and are not being registered
under the 1933 Act, and, except as provided in the Registration Rights
Agreements, the Common Shares have not been and are not being registered under
the 1933 Act, and may not be transferred unless (x) subsequently registered
thereunder or (y) such Buyer shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope, and substance to the Company,
to the effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; (ii) any sale of
the Securities made in reliance on Rule 144 promulgated under the 1933 Act may
be made only in accordance with the terms of said Rule and further, if said Rule
is not applicable, any such resale of Securities under circumstances in which
the seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other
-18-
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to
register the Securities (other than pursuant to the Registration Rights
Agreements) under the 1933 Act or to comply with the terms and conditions of any
exemption thereunder (other than pursuant to Section 6(d) hereof and pursuant to
the Registration Rights Agreements).
(b) Restrictive Legend. Each Buyer acknowledges and agrees that the
certificates for the Initial Shares, the Adjustment Warrants, the Adjustment
Shares, the Warrants, and the Warrant Shares and, until such time as the Common
Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreements, the certificates for the Common Shares shall
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such
Securities):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
Once the Registration Statement required to be filed by the Company pursuant to
Section 2 of the Registration Rights Agreements has been declared effective,
thereafter (i) upon request of a Buyer the Company will substitute certificates
without the above-referenced legend for certificates for any Common Shares
issued prior to the date such Registration Statement is declared effective by
the SEC which bear such legend and promptly remove any stop-transfer restriction
relating to such Common Shares, but in no event later than three Business Days
after surrender of such certificates by such Buyer, and (ii) the Company shall
not place any restrictive legend on certificates for any Common Shares issued or
impose any stop-transfer restriction thereon.
(c) Registration Rights Agreements. The Company and each Buyer agree
to enter into a Registration Rights Agreement on or before the Closing Date.
(d) Form D. The Company agrees to file a Form D with the SEC with
respect to the Securities as required under Regulation D promulgated under the
1933 Act and to provide a copy thereof to the Buyers promptly after such filing.
Each Buyer agrees to cooperate with the Company in connection with such filing
and, upon request of the Company, to provide all information relating to such
Buyer reasonably required for such filing.
-19-
(e) Authorization for Trading; Reporting Status. On or before the date
that is 30 days after the Closing Date, but in any event before the effective
date of the Registration Statement (as defined in the Registration Rights
Agreements), the Company shall file a listing application for the Common Shares
with the Nasdaq and shall provide evidence of such filing to each Buyer. From
the Closing Date until such time as the Registration Statement is no longer
required to be in effect, the Company shall file all reports required to be
filed with the SEC pursuant to Section 13 or 15(d) of the 1934 Act and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination.
(f) Use of Proceeds. The Company does not own or have any present
intention of acquiring any "margin stock" as defined in Regulation G (12 C.F.R.
Part 207) of the Board of Governors of the Federal Reserve System ("margin
stock"). The proceeds of sale of the Common Shares will be used for general
working capital purposes and in the operation of the Company's business. None of
such proceeds will be used, directly or indirectly (i) to make any loan to or
investment in any other person or (ii) for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any margin stock or for the
purpose of maintaining, reducing or retiring any indebtedness which was
originally incurred to purchase or carry any stock that is currently a margin
stock or for any other purpose that might constitute the transactions
contemplated by this Agreement as a "purpose credit" within the meaning of such
Regulation G. Neither the Company nor any agent acting on its behalf has taken
or will take any action which might cause this Agreement or the transactions
contemplated hereby to violate Regulation G, Regulation T or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
the 1934 Act, in each case as in effect now or as the same may hereafter be in
effect.
(g) Blue Sky Laws. On or before the Closing Date, the Company shall
take such action as shall be necessary to qualify, or to obtain an exemption
from qualification for, the Initial Shares for sale to the Buyers pursuant to
this Agreement and the Warrants, and the Adjustment Shares and the Warrant
Shares for issuance to the Buyers, under such of the securities or "blue sky"
laws of jurisdictions as shall be applicable to the offer and sale of the
Initial Shares, the issuance of the Warrants, and the offer of the Adjustment
Shares pursuant to this Agreement. As promptly as practicable, the Company shall
take such action as shall be necessary to qualify, or to obtain an exemption
from qualification for the Adjustment Warrants and the Adjustment Shares for
issuance to the Buyers under such of the securities or "blue sky" laws of
jurisdictions as shall be applicable to the offer of the Adjustment Warrants and
the Adjustment Shares pursuant to the Amendment Agreement. The Company shall
furnish copies of all filings, applications, orders, and grants or confirmations
of exemptions relating to such securities or "blue sky" laws to the Buyers
withing five days of filing or receipt thereof, as the case may be.
(h) Certain Expenses and Fees. Whether or not the closing of the
transactions contemplated hereby occurs, the Company shall pay or reimburse the
Buyers for
-20-
all reasonable expenses (including, without limitation, legal fees and expenses
of counsel to the Buyers of up to $20,000) incurred by the Buyers in connection
with this Agreement and the transactions contemplated hereby. Notwithstanding
the foregoing, the Company shall pay on demand all expenses (including
reasonable attorneys' fees and expenses) incurred by the Buyers, and the Buyers
shall pay on demand all expenses (including reasonable attorneys' fees and
expenses) incurred by the Company, as a consequence of, or in connection with,
(i) any default or breach of any of the other party's obligations under this
Agreement, the Warrants, and the Registration Rights Agreements (which payment
shall be made by the defaulting or breaching party), and (ii) the enforcement or
restructuring of any right of, including the collection of any payments due, the
Buyers or the Company, as the case may be, under any of such agreements or
instruments, including any action or proceeding relating to such enforcement or
any order, injunction or other process seeking to restrain the Company or the
Buyers, as the case may be, from paying any amount due the Buyers or the
Company, as the case may be, in which the party seeking such enforcement or
restructuring prevails.
(i) Certain Issuances of Securities.
(i) Unless the Company obtains the Shareholder Approval (as
defined in Section 6(i)(2) below) or a waiver thereof from Nasdaq, the Company
will not (x) issue any Adjustment Shares or Warrant Shares in excess of the
number of shares permitted by Rule 4460(i) or (y) issue any shares of Common
Stock or shares of any series of preferred stock or other securities convertible
into, exchangeable for or otherwise entitling the holder to acquire shares of
Common Stock which issuance would be subject to Rule 4460(i) and which would be
integrated with the sale of the Initial Shares to the Buyers, or the issuance of
Adjustment Shares, Adjustment Warrants or Warrant Shares to the Buyers, or the
sale and issuance of the Series B Stock and the common stock purchase warrants
issued in connection therewith (including the issuance of shares of Common Stock
upon conversion of the Series B Stock or in payment of dividends thereof, and
upon exercise of the aforesaid common stock purchase warrants), for purposes of
Rule 4460(i).
(ii) For purposes of this Agreement, "Shareholder Approval" means
the approval by a majority of the votes cast by the holders of shares of Common
Stock (in person or by proxy) at a meeting of the shareholders of the Company
(duly convened at which a quorum was present), or a written consent of holders
of shares of Common Stock entitled to such number of votes given without a
meeting, of the issuance by the Company of 20% or more of the outstanding Common
Stock of the Company for less than the greater of the book or market value of
such Common Stock, taking into account all issuances of Common Stock to the
Buyers on the Closing Date, on all Adjustment Dates, and upon the exercise of
the Warrants and the Adjustment Warrants, as and to the extent required under
Rule 4460(i).
(iii) During the period from the Closing Date to the later of the
date on which the Registration Statement shall have been effective with the SEC
for 60 consecutive days or the Initial Adjustment Date, the Company shall not
offer, sell, contract to sell or issue
-21-
(or engage any person to assist the Company in taking any such action) any
equity securities or securities convertible into, exchangeable for or otherwise
entitling the holder to acquire, any Common Stock at a price below the Market
Price of the Common Stock; provided, however, that nothing in this Section
6(i)(3) shall prohibit the Company from issuing securities (x) pursuant to
compensation plans for employees, directors, officers, advisers or consultants
of the Company and in accordance with the terms of such plans as in effect as of
the date of this Agreement or (y) upon exercise of conversion, exchange,
purchase or similar rights issued, granted or given by the Company and
outstanding as of the date of this Agreement or pursuant to the exercise of the
Warrants.
(j) Best Efforts. Each of the parties shall use its best efforts
timely to satisfy each of the conditions to the other party's obligations to
sell and purchase the Initial Shares set forth in Section 8 or 9, as the case
may be, of this Agreement on the Closing Date.
(k) Certain Trading Restrictions. So long as the Company is in
compliance in all material respects with its obligations to the Buyer pursuant
to this Agreement, the Registration Rights Agreements, the Adjustment Warrants
and the Warrants, each Buyer agrees that it and its affiliates shall not engage
in short sales or other hedging transactions relating to the Common Stock (i)
during the 18 Trading Days prior to the Initial Adjustment Date unless and only
while the then highest current bid price of the Common Stock, as reported on
Nasdaq, is higher than 125% of the Floor Price, and (ii) during the 18 Trading
Days prior to any other Adjustment Date unless and only while the then highest
current bid price of the Common Stock, as reported on Nasdaq, is higher than
125% of the then applicable lowest Adjustment Price for any prior Adjustment
Date. To the extent that any prior agreement between the Company and the Buyers
otherwise permits short sales or other hedging transactions, any such sale and
transaction shall conform to the provisions of the foregoing sentence, except as
otherwise provided below with respect to the Preferred Stock Subscription
Agreements. To the extent that the first sentence of this Section 6(k) permits
short sales or other hedging transactions, then such transactions may only be
effected at or above the last reported sale price of the Common Stock in
accordance with Rule 10a-1 under the 1934 Act (assuming that the exclusions in
subparagraph (e) of Rule 10a-1 are inapplicable), and in any case such
transactions will not create any daily low sales prices for the Common Stock.
The foregoing notwithstanding, nothing herein shall prohibit Genesee from
entering into a short sale or other hedging transaction involving a number of
shares of Common Stock not in excess of the number of shares for which it has
submitted a conversion notice to the Company and its transfer agent pursuant to
its respective Subscription Agreements, dated as of December 23, 1997 and June
30, 1998, with the Company (the "Preferred Stock Subscription Agreements").
(l) Reservation of Common Stock. The Company (and any successor
corporation) shall take all action necessary so that a number of shares of the
authorized but unissued Common Stock (or common stock in the case of any
successor corporation) sufficient to provide for the issuance of all Adjustment
Shares and Warrant Shares issuable hereunder
-22-
are at all times reserved by the Company (or any successor corporation), free
from preemptive rights. If the Company shall issue any securities or make any
change in its capital structure which would change the number of shares of
Common Stock issuable as Adjustment Shares or Warrant Shares as herein provided,
the Company shall at the same time also make proper provision so that thereafter
there shall be a sufficient number of shares of Common Stock authorized and
reserved, free from preemptive rights, for issuance of the Common Shares on the
new basis. If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to permit the issuance of all Adjustment Shares
and Warrant Shares issuable hereunder, the Company promptly shall seek, and use
its best efforts to obtain and complete, such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
(m) Consolidation, Merger, etc. In case of any consolidation or merger
of the Company with any other corporation (other than a wholly-owned subsidiary
of the Company) in which the Company is not the surviving corporation, or in
case of any sale or transfer of all or substantially all of the assets of the
Company, or in the case of any share exchange pursuant to which all of the
outstanding shares of Common Stock are converted into other securities or
property, the Company shall make appropriate provision or cause appropriate
provision to be made so that each holder of Adjustment Warrants or Common Shares
then outstanding shall have the right thereafter to receive Adjustment Warrants
or Adjustment Shares in the form of the kind of warrants or shares of stock and
other securities and property receivable upon such consolidation, merger, sale,
transfer, or share exchange by a holder of warrants or shares of Common Stock
immediately prior to the effective date of such consolidation, merger, sale,
transfer, or share exchange and on a basis which preserves the economic benefits
of the rights of the holders of Common Shares and Adjustment Warrants to receive
Adjustment Warrants and Adjustment Shares on a basis as nearly as practical as
such rights exist hereunder prior thereto. The Company shall not effect any such
transaction unless the provisions of this Section 6(m) have been complied with.
The above provisions shall similarly apply to successive consolidations,
mergers, sales, transfers, or share exchanges.
(n) Overdue Amounts. Whenever any amount which is due by the Company
to any holder of Common Shares or Adjustment Warrants pursuant to the terms of
this Agreement, the Registration Rights Agreements or the Warrants is not paid
to such holder when due, such amount shall bear interest at the rate of 14% per
annum (or such other rate as shall be the maximum rate allowable by applicable
law) until paid in full.
7. BUYERS' RIGHT TO REQUIRE REPURCHASE OF THE COMMON
SHARES AND ADJUSTMENT WARRANTS
(a) Repurchase at Option of Buyers. Each Buyer shall be entitled, at
its option by notice to the Company given within 90 days after the occurrence of
a Repurchase
-23-
Event (as defined in Section 7(b)), to require the Company to repurchase all or
a portion of its Common Shares and Adjustment Warrants following the occurrence
of a Repurchase Event.
(b) Repurchase Events. A "Repurchase Event" means any one of the
following events:
(i) For any period of five consecutive Trading Days there shall
be no reported closing bid price of the Common Stock on any national securities
exchange, the Nasdaq or on the Nasdaq SmallCap Market;
(ii) The Common Stock ceases to be listed for trading on the
Nasdaq, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American
Stock Exchange;
(iii) The inability for 30 or more days (whether or not
consecutive) of any holder of Common Shares or Adjustment Shares who is entitled
to exercise its repurchase right under this Section 7 to sell Common Shares
pursuant to the Registration Statement for any reason on each of such 30 days,
other than for an Excluded Period as defined in the Registration Rights
Agreements;
(iv) The Company shall fail or default in the timely performance
of any material obligation to the Buyer under the terms of this Agreement, the
Warrants, the Registration Rights Agreements or any other agreement or document
entered into in connection with the transactions contemplated hereby, as such
instruments may be amended from time to time, provided such failure or default
is not cured prior to the delivery of an Repurchase Notice (as defined in
Section 7(c)); or
(v) Any consolidation or merger of the Company with or into
another entity (other than a merger or consolidation of a subsidiary of the
Company into the Company or a wholly-owned subsidiary of the Company) where the
shareholders of the Company immediately prior to such transaction do not
collectively own at least 51% of the outstanding voting securities of the
surviving corporation of such consolidation or merger immediately following such
transaction or the common stock of such surviving corporation is not listed for
trading on the Nasdaq, the Nasdaq SmallCap Market, the New York Stock Exchange,
or the American Stock Exchange.
Notwithstanding Sections 7(a), 7(c) and any other provision of this
Agreement, if a Repurchase Event occurs by reason of the occurrence of an event
described in clause (i), (ii) or (v) of this Section 7(b), and such occurrence
is by reason of events which are not solely within the control of the Company,
then the Company, in its sole discretion, may elect not to repurchase any or all
of the Common Shares and Adjustment Warrants and, if the Company so elects, each
Buyer hereby waives any and all rights to require the Company to so repurchase
such Common Shares and Adjustment Warrants under such clauses. In order to make
such
-24-
election, the Company shall so notify each Buyer that has submitted a Repurchase
Notice with respect to such event and shall deliver to each such Buyer an
Auditor's Determination (as defined below) within ten Business Days after the
Company's receipt of the Repurchase Notice. If the Company so elects and
notifies each such Buyer, then for each 30 days that such Repurchase Event
continues to exist, which period shall commence as of the first Business Day of
the event that gave rise to such Repurchase Event, the Company shall issue to
each such Buyer shares of Common Stock (the "Repurchase Shares") equal to six
percent of the number of Common Shares acquired hereunder or issuable upon
exercise of Adjustment Warrants and beneficially held on the Determination Date
(as defined below) by the Buyer (pro rated for any period of, or in case the
Repurchase Event ceases to exist in, less than thirty (30) days). For purposes
of this Section 7(b), a "Determination Date" means the last day of each calendar
month in which the Repurchase Events continues. Such Repurchase Shares shall be
issued by the Company within three Business Days after each Determination Date.
When issued and delivered to such Buyer, the Repurchase Shares shall be duly
authorized, validly issued, fully paid and nonassessable.
For purposes of this Section 7, (A) a Repurchase Event described in clause
(i), (ii) or (v) of the definition of the term "Repurchase Event" in Section
7(b) or (B) a requirement of the Company to make a payment pursuant to Section
7(f), shall be deemed to have occurred by reason of events which are not solely
within the control of the Company if a requirement of the Company to repurchase,
or a right of any holder of Common Shares or Adjustment Shares to require
repurchase of, Common Shares or Adjustment Shares pursuant to such clauses of
Section 7(b), or the requirement of the Company to make a payment pursuant to
Section 7(f), would result in the Company being required to classify the Common
Shares as redeemable common stock on a balance sheet of the Company prepared in
accordance with generally accepted accounting principles and Regulation S-X of
the Securities and Exchange Commission.
For purposes of this Section 7, the term "Auditor's Determination" shall
mean a written determination signed by the Auditors concurring with the
Company's conclusion that (A) the Repurchase Event described in the applicable
clause (i), (ii) or (v) of the definition of Repurchase Event in Section 7(b) or
(B) the requirement of the Company to make a payment pursuant to Section 7(f),
was due to the occurrence of events which were met solely within the control of
the Company, as such phrase is defined in the immediately preceding paragraph.
The Auditors' Determination shall (i) set forth in reasonable detail all
relevant facts considered by the Auditors in connection therewith, (ii) set
forth all applicable accounting principles and assumptions used, and (iii) set
forth in reasonable detail or attach copies of all legal, expert and other
advice or information used by the Auditors in reaching their conclusion. To the
extent any facts are assumed for purposes of the Auditor's Determination, the
validity of such conclusion or determination shall depend upon such assumed
facts being true and complete in all material respects.
-25-
For purposes of this Section 7, the term "Auditors" shall mean the
nationally recognized independent accounting firm then serving as the Company's
auditors or such other "big five" nationally recognized independent accounting
firm (including successors thereto) as the Company may designate. The fees and
expenses of the Auditors shall be paid by the Company.
(c) Repurchase Notice. To exercise the right of repurchase under
Section 7(a), a Buyer shall deliver to the Company a notice of repurchase (a
"Repurchase Notice"), accompanied by the certificate(s) for the Common Shares
and Adjustment Warrants to be repurchased. Any Repurchase Notice shall state (i)
that such Buyer is thereby requiring the Company to repurchase Common Shares and
Adjustment Warrants pursuant to this Section 7, (ii) the Repurchase Event giving
rise to such repurchase, and (iii) the number of Common Shares and Adjustment
Warrants which are to be repurchased. Promptly and in no event later than three
Business Days after the Company's receipt of the Repurchase Notice, the Company
shall make payment in immediately available funds of the Repurchase Price (as
defined in Section 7(d)) applicable on the date of such repurchase with respect
to the Common Shares and Adjustment Warrants to be repurchased to or upon the
order of the Buyer as specified in the Repurchase Notice. Upon repurchase of
less than all of the Common Shares evidenced by a particular certificate,
promptly, but in no event later than three Business Days after surrender of such
certificate to the Company, the Company shall issue a replacement certificate
for the Common Shares and Adjustment Warrants that have not been repurchased.
Only whole Common Shares and Adjustment Warrants to purchase whole Common Shares
may be repurchased.
(d) Repurchase Price. As used herein, "Repurchase Price" means (1)
during the period from the Closing Date through and including the Initial
Adjustment Date, the product of (i) the number of Common Shares to be
repurchased and (ii) the Floor Price, and (2) after the Initial Adjustment Date,
the product of (i) the sum of the number of Common Shares to be repurchased and
the number of Adjustment shares issuable upon the exercise of the Adjustment
Warrants to be repurchased and (ii) the greater of (x) the arithmetic average of
the Market Price of the Common Stock for the five consecutive Trading Days
ending on the Trading Day immediately preceding the date of repurchase and (y)
the most recent Adjustment Price.
(e) Third Party Repurchase Rights. Each Buyer acknowledges that
holders of outstanding securities of the Company issued pursuant to the
Preferred Stock Subscription Agreements (including Genesee and its affiliates)
are entitled to have their securities repurchased or redeemed by the Company
upon the occurrence of certain events, including but not limited to events
substantially similar to the Repurchase Events, and that such obligations of the
Company to repurchase securities held by third parties may affect the Company's
ability to pay any Repurchase Price due under this Agreement.
-26-
(f) Inability to Issue Adjustment Shares. In the event the Company is
unable to issue all Adjustment Shares required to be issued with respect to any
date of exercise of any Adjustment Warrants by reason of the restrictions set
forth in Rule 4460(i), each Buyer shall be entitled, at its option, by notice to
the Company given within 90 days after such exercise date, to require the
Company to make a payment to such Buyer in an amount equal to the product of (i)
the number of Adjustment Shares otherwise required to be issued to each Buyer on
such exercise date which the Company is unable to issue by reason of Rule
4460(i) and (ii) the Repurchase Price. Promptly and in no event later than three
Business Days after the Company's receipt of such notice, the Company shall make
a cash payment in immediately available funds of such Repurchase Price to or
upon the order of such Buyer unless prior thereto the Company notifies such
Buyer that it is seeking Shareholder Approval to permit the issuance of all
required Adjustment Shares in accordance with Rule 4460(i). If the Company so
elects to seek such Shareholder Approval and for any reason such approval is not
obtained within 60 days of the applicable exercise date, the Company shall be
obligated to pay such Buyer the amount due pursuant to this Section 7(f) within
three Business Days after such 60th day. The Company's obligations to make
payments pursuant to this Section 7(f) shall not limit or otherwise affect its
obligations to repurchase Common Shares and Adjustment Shares pursuant to the
other provisions of this Section 7.
(g) Limitations on Repurchases by the Company. Notwithstanding the
foregoing, the Company's obligation to repurchase a Buyer's Common Shares and
Adjustment Warrants upon the occurrence of a Repurchase Event shall be subject
to (i) the restrictions on the Company's ability to purchase, redeem or
otherwise acquire any shares of its Common Stock as may be set forth in the
Company's Amended and Restated Articles of Incorporation, including the
Statement of Rights and Preferences for the Series A Stock and for the Series B
Stock, and (ii) the limitations on distributions to shareholders set forth in
the Washington Business Corporation Act. The Company agrees that it will not
amend its Restated Articles of Incorporation to limit or prohibit the Buyers'
rights to have their Common Shares and Adjustment Warrants repurchased pursuant
to this Agreement.
(h) Share Limitation Event. Notwithstanding any other provision of
this Agreement, if a Share Limitation Event (as defined below) occurs by reason
of events which are not solely within the control of the Company, the Company
shall have the right to give a notice (a "Share Limitation Notice"), accompanied
by an Auditor's Determination, to the Buyer at any time after such Share
Limitation Event occurs and prior to the earlier of (1) the date on which the
Buyer's right (other than as limited by this Section 7(h)) to receive a cash
payment pursuant to Section 7(f) by reason of the occurrence of such Share
Limitation Event expires and (2) the date on which the Company is obligated to
make a payment to the Buyer pursuant to Section 7(f). If the Company timely
gives a Share Limitation Notice and an Auditor's Determination to the Buyer,
then, in lieu of making the payment required by Section 7(f) or issuing
Repurchase Shares pursuant to Section 7(b), pursuant to a notice given by the
Buyer by reason of such Share Limitation Event, on the next Adjustment Date to
occur the Adjustment Price shall be reduced to 80% of the amount such Adjustment
Price would
-27-
otherwise be. On or after the date the Company gives such Share Limitation
Notice, upon notice from the Buyer, the Company promptly shall call a special
meeting of its shareholders, to be held not later than 60 days after such notice
is given, to seek the Shareholder Approval for the issuance of all shares of
Common Stock issuable in accordance with this Agreement and Adjustment Warrants
without regard to Rule 4460(i) and shall use its best efforts to obtain the
Shareholder Approval. The Company shall prepare and file with the SEC within 20
days after such notice is given preliminary proxy materials which set forth a
proposal to seek such Shareholder Approval. The Company shall provide the Buyer
an opportunity to consult with the Company regarding the content of such proxy
materials insofar as it relates to the Shareholder Approval by providing copies
of such preliminary proxy materials and any revised preliminary proxy materials
to the Buyer a reasonable period of time prior to their filing with the SEC. The
Company shall furnish to the Buyer a copy of its definitive proxy materials for
such special meeting and any amendments or supplements thereto promptly after
the same are mailed to shareholders or filed with the SEC. Upon the earlier of
(i) the failure to obtain Shareholder approval in accordance with Section 7(f),
(ii) the failure to obtain the Shareholder Approval at the special meeting
provided in this paragraph or (iii) the failure to hold such special meeting
within such 60-day period provided in this paragraph, the Company shall so
notify the Buyer and such of the following as shall be specified by notice to
the Company from the Buyer shall occur: (1) on the next Adjustment Date to occur
the Adjustment Price shall be reduced to 70% of the amount such Adjustment Price
would otherwise be and (2) the Company shall promptly file applications and take
all other actions necessary to (i) list the Common Stock for trading and
quotation on the OTC Bulletin Board or such other securities market or exchange
that will not restrict the number of shares of Common Stock issuable under this
Agreement and Adjustment Warrants and (ii) upon filing such applications,
request the immediate removal of the Common Stock from listing on the securities
market on which it is then listed that restricts the issuance of shares of
Common Stock under this Agreement and Adjustment Warrants without the
Shareholder Approval. Upon obtaining such Shareholder Approval or listing, as
the case may be, the Company shall promptly issue all Adjustment Shares and
Repurchase Shares due through the date of such issuance.
For purposes of this Section 7, the term "Share Limitation Event" means a
time at which the Company is unable to issue all Adjustment Shares or Repurchase
Shares otherwise required to be issued by this Agreement by reason of the
restrictions set forth in Rule 4460(i) and the Company has not obtained a waiver
thereof.
7.1 COMPANY'S RIGHT TO REPURCHASE THE COMMON SHARES.
(a) Right to Repurchase. So long as (i) the Company shall be in
compliance in all material respects with its obligations to the Buyers
(including, without limitation, its obligations under this Agreement and the
Registration Rights Agreement), (ii) on the date the Company Repurchase Notice
(as defined below) is given and at all times until the date of repurchase, the
Registration Statement is effective and available for use by the buyers for the
resale of their Common Shares and (iii) on Repurchase Event shall have occurred
with
-28-
respect to which, on the date a Company Repurchase Notice is to be given or on
the redemption date, a Buyer (A) shall be entitled to exercise optional
repurchase rights under Section 7 by reason of such Repurchase Event or (B)
shall have exercised optional repurchase rights under Section 7 by reason of
such Repurchase Event and the Company shall not have paid the Repurchase Price
to such Buyer, then the Company shall have the right, exercisable by giving a
Company Repurchase Notice not less than 20 Trading Days or more than 30 Trading
Days prior to the repurchase date to the Buyer, at any time on or after the
Closing Date to repurchase all or a portion of the Common Shares and Adjustment
Warrants then held by the Buyers. Prior to any repurchase date, whether or not a
Company Repurchase Notice has been given, the Buyers may sell or transfer any of
their Common Shares and Adjustment Warrants.
(b) Repurchase Notice. To exercise the right of repurchase under
Section 7.1(a), the Company shall deliver a notice of repurchase (a "Company
Repurchase Notice") to each Buyer from which the Company desires to repurchase
Common Shares, Adjustment Warrants, or both. The Company Repurchase Notice shall
(i) state that the Company is exercising its right to repurchase the Buyer's
Common shares, Adjustment Warrants, or both pursuant to this Section 7.1, (ii)
indicate the number of Common Shares and Adjustment warrants which are to be
repurchased, (iii) state the Company Repurchase Price (as defined below) and the
formula for determining the same, and (iv) provide the Buyer with instructions
with respect to the delivery to the Company of the buyer's certificate(s) for
the Common Shares and the Adjustment Warrants to be repurchased. Promptly and in
no event later than three Business Days after the company's receipt of the
Buyer's certificate(s) for the Common shares and the Adjustment Warrants to be
repurchased, the Company shall make payment in immediately available funds of
the Company Repurchase Price applicable on the date of such repurchase with
respect to the Common Shares and Adjustment Warrants to be repurchased to or
upon the order of the Buyer as specified in the Company Repurchase Notice. Upon
repurchase of less than all of the Common Shares evidenced by a particular
certificate or the Adjustment Shares evidenced by a particular Adjustment
Warrant, promptly, but in no event later than three Business Days after
surrender of such certificate or Adjustment Warrant to the Company, the Company
shall issue a replacement certificate for the Common shares and a replacement
warrant for the portion of the Adjustment Warrants that have not been
repurchased. Only whole Common Shares and portions of Adjustment Warrants to
purchase whole Common Shares may be repurchased.
(c) Company Repurchase Price. As used in this Section 7.1, "Company
Repurchase Price" means the product of (i) the sum of the number of Common
shares to be repurchased and the number of Adjustment shares issuable upon the
exercise of the Adjustment Warrants to be repurchased and (ii) the greater of
(x) the arithmetic average of the Market Price of the Common Stock for the five
consecutive Trading Days ending on the Trading day immediately preceding the
date of repurchase and (y) the most recent Adjustment Price as of the date of
repurchase.
-29-
8. CONDITIONS TO THE COMPANY'S OBLIGATIONS
Each Buyer understands that the Company's obligation to sell and issue the
Initial Shares and to issue the Warrants to such Buyer on the Closing Date
pursuant to this Agreement is conditioned upon:
(a) The receipt and acceptance by the Company of this Agreement as
evidenced by execution of this Agreement by the Company and delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel;
(b) Delivery by the Buyer to the Company of good funds as payment in
full of an amount equal to the purchase price for the Initial Shares in
accordance with Section 2 hereof; and
(c) The accuracy on the Closing Date of the representations and
warranties of the Buyers contained in this Agreement as if made on the Closing
Date and the performance by the Buyers on or before the Closing Date of all
covenants and agreements of the Buyers required to be performed on or before the
Closing Date.
9. CONDITIONS TO THE BUYERS' OBLIGATIONS
The Company understands that each Buyer's obligations to purchase the
Initial Shares and to acquire the Warrants on the Closing Date pursuant to this
Agreement is conditioned upon:
(a) Delivery by the Company to the Buyers of the certificates for the
Initial Shares and the Warrants in accordance with this Agreement;
(b) The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date and the performance by the Company on or before the Closing Date of all
covenants and agreements of the Company required to be performed on or before
the Closing Date and receipt by the Buyers of a certificate, dated the Closing
Date, of the Chief Executive Officer or the Chief Financial Officer of the
Company confirming such matters and such other matters as the Buyers may
reasonably request;
(c) Receipt by the Buyers of a certificate, dated the Closing Date, of
the Secretary of the Company certifying (i) the Articles of Incorporation and
By-Laws of the Company as in effect on the Closing Date, (ii) all resolutions of
the Board of Directors (and committees thereof) of the Company relating to this
Agreement and the transactions contemplated hereby, and (iii) such other matters
as reasonably requested by the Buyers; and
-30-
(d) Receipt by the Buyers on the Closing Date of an opinion of counsel
for the Company, dated the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyers, to the effect set forth in Annex III.
10. MISCELLANEOUS
(a) Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Washington.
(b) Counterparts. This Agreement may be executed in counterparts and
by the parties hereto on separate counterparts, all of which together shall
constitute one and the same instrument. A telephone line facsimile copy of this
Agreement bearing a signature on behalf of a party hereto shall be legal and
binding on such party.
(c) Headings, etc. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.
(d) 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 or
the validity or enforceability of this Agreement in any other jurisdiction.
(e) Amendments. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Buyers or the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific instance and for the purpose
for which given. No course of dealing between the parties hereto shall operate
as an amendment of this Agreement.
(f) Waivers. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, or any course of dealings between the parties, shall not operate as a
waiver thereof or an amendment hereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
(g) Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be delivered personally (which shall include
telephone line facsimile transmission) or by courier and shall be effective upon
receipt (or on the next Business Day, if the date of such receipt is not a
Business Day), if delivered personally or by courier, in the case of the Company
addressed to the Company at its address shown in the introductory paragraph of
this Agreement, Attention: Chief Financial Officer (facsimile number (206)
-31-
323-1318), with a copy to Stoel Rives LLP, Suite 3600, One Union Square, 000
Xxxxxxxxxx Xxxxxx, Xxxxxxx, XX 00000, Attn: Xxxxxxxxxxx X. Xxxx, Esq. (facsimile
number (206) 386- 7500) or, in the case of each Buyer, at its address shown on
the signature page of this Agreement, with a copy to Genesee International,
Inc., 00000 X.X. 0xx Xxxxxx, Xxxxx 0000, Xxxxxxxx, Xxxxxxxxxx 00000-0000
(facsimile number (000) 000-0000) or such other address or telephone line
facsimile transmission number as a party shall have provided by notice to the
other party in accordance with this provision. Each Buyer hereby designates as
its address for any notice required or permitted to be given to the Buyer
pursuant to the Warrants the address shown on the signature page of this
Agreement, with a copy to: Genesee Fund Limited - Portfolio B, c/o Genesee
International, Inc., 10500 X.X. 0xx Xxxxxx, Xxxxx 0000, Xxxxxxxx, Xxxxxxxxxx
00000-0000 (facsimile number (000) 000-0000), until the Buyer shall designate
another address for such purpose.
(h) Assignment. Prior to any Adjustment Date, each Buyer shall have
the right to assign all of its rights and obligations under this Agreement with
respect to the acquisition of the Adjustment Warrants to any affiliate, provided
that any such assignee, by written instrument duly executed by such assignee,
assumes all obligations of the Buyer hereunder with respect to the acquisition
of the Adjustment Warrants so assigned and makes the same representations and
warranties with respect thereto as the Buyer makes in this Agreement, whereupon
the Buyer shall be relieved of any further obligations, responsibilities, and
liabilities with respect to the acquisition of such Adjustment Warrants, the
right to the acquisition of which has been so assigned. In the case of any such
assignment, the Company shall agree in writing with such assignee to make
available to such assignee the benefits of the Registration Rights Agreements
with respect to the Adjustment Warrants with respect to which the acquisition
under this Agreement has been so assigned.
(i) Survival. The respective representations, warranties, covenants,
and agreements of each Buyer and the Company contained in this Agreement or made
by or on behalf of them, respectively, pursuant to this Agreement shall survive
the delivery of payment for the Initial Shares and the issuance of the Warrants,
the Adjustment Shares, and the Warrant Shares and shall remain in full force and
effect regardless of any investigation made by or on behalf of them or any
person controlling or advising any of them.
(j) Entire Agreement. This Agreement and the annexes and schedules
attached hereto set forth the entire agreement between the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, whether written or oral, with respect thereto.
(k) Termination. The Buyers shall have the right to terminate this
Agreement by giving notice to the Company at any time at or prior to the Closing
Date if:
(i) the Company shall have failed, refused, or been unable at or
prior to the date of such termination of this Agreement to perform any of its
obligations hereunder;
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(ii) any other condition of the Buyers' obligations hereunder is
not fulfilled; or
(iii) the closing shall not have occurred on a Closing Date on or
before December 18, 1998, other than solely by reason of a breach of this
Agreement by a Buyer.
Any such termination shall be effective upon the giving of notice thereof by the
Buyers. Upon such termination, the Buyers shall have no further obligation to
the Company hereunder and the Company shall remain liable for any breach of this
Agreement or the other documents contemplated hereby which occurred on or prior
to the date of such termination.
(l) Further Assurances. Each party to this Agreement will perform any
and all acts and execute any and all documents as may be necessary and proper
under the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.
(m) Public Statements, Press Releases, Etc. The Company and the Buyers
shall have the right to approve before issuance 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 the Buyers, to make any press release or other public disclosure
with respect to such transactions as is required by applicable law or Nasdaq
regulation (although the Buyers shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release and
shall be provided with a copy thereof).
(n) Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
-33-
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyers and
the Company by their respective officers thereunto duly authorized as of the
date set forth above.
GENESEE FUND LIMITED - PORTFOLIO B
By: /s/
-------------------------------------
Title:
----------------------------------
Address: x/x XXXXX
Xxxx Xxxxxxxxx 0
Xxxxxxx, Xxxxxxxxxxx Antilles
Facsimile: 011-599-9732-2008
Number of Initial Shares to be purchased:
100,000
Purchase Price: $10.00 per share
Number of Warrant Shares: 20,168
XXXX INDUSTRIES, INC.
By: /s/
-------------------------------------
Title:
----------------------------------
Address: 0000 Xxxx 00xx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Number of Initial Shares to be purchased:
100,000
Purchase Price: $10.00 per share
Number of Warrant Shares: 20,168
TERA COMPUTER COMPANY
By: /s/
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Financial Officer
