10.1
CONFORMED COPY
SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Subscription Agreement"), dated
June 28, 1996, is entered into by and between Xxxx Systems, Inc., a
California corporation ("Xxxx"), and Xxxxxxxx International Limited, a
company organized under the laws of the Cayman Islands ("Xxxxxxxx").
1. PURCHASE AND SALE. On the basis of the representations,
warranties and agreements and subject to the terms and conditions set forth
herein, the parties hereto agree as follows:
a. SERIES C OPTION. Xxxxxxxx agrees to grant to Ross on the
Series C Closing Date (as defined below), an option (the "Series C Option")
to sell to Xxxxxxxx up to $2,000,000 stated value of Ross' Series C
Preferred Stock, having substantially the terms set forth in Annex A hereto
(the "Series C Convertible Preferred Stock"). The Series C Option shall
have the following terms:
(1) The Series C Option shall entitle Ross to sell to
Xxxxxxxx and obligate Xxxxxxxx to purchase from Ross on or before July
12, 1996 (the "Series C Closing Date"), upon the terms and conditions
set forth herein, up to $2,000,000 stated value of Series C
Convertible Preferred Stock at a purchase price equal to the stated
value thereof.
(2) The Series C Option shall be exercisable only by Ross
and only upon the terms and conditions and subject to the limitations
set forth in this Subscription Agreement, and the Series C Option may
not be transferred, sold, pledged, assigned or otherwise disposed of
to any person.
(3) The Series C Option shall be exercisable at any time on
or before July 12, 1996 (the "Series C Exercise Date"), and to the
extent not exercised on such date, shall immediately expire, and
Xxxxxxxx shall have no further obligation whatsoever with respect to
such Series C Option.
(4) On the Series C Exercise Date, Ross may exercise the
Series C Option by delivering written notice thereof to Xxxxxxxx in
accordance with Section 13 hereof. If the Series C Option is so
exercised, Ross shall issue to Xxxxxxxx on the Series C Closing Date
the stated value of Series C Convertible Preferred Stock equal to the
amount of the Series C Option exercised by Ross and deliver to
Xxxxxxxx the certificates representing such Series C Convertible
Preferred Stock, against payment therefor in immediately available
funds in accordance with the Subscription Agreement.
(5) To the extent that the Series C Option is not exercised
by Ross as provided herein, such Series C Option shall expire at 11:59
p.m. (New York time)
on the Series C Exercise Date, and Xxxxxxxx shall have no further
obligation whatsoever with respect to such Series C Option.
b. WARRANT. Ross agrees to sell to Xxxxxxxx, and Xxxxxxxx agrees
to purchase from Ross, on the Series C Closing Date, a warrant having the
terms set forth in Annex B hereto (the "Warrant") to purchase an aggregate
of 640,000 shares of Ross common stock, without par value (the "Shares"),
in consideration for the issuance by Xxxxxxxx to Ross of the Series C
Option.
2. CLOSING. The delivery of any Series C Convertible Preferred
Stock issuable pursuant to the Series C Option and of the Warrant (the
"Closing") shall take place at 11:00 a.m. (New York time) on the Series C
Closing Date or at such other date, time and place as Xxxxxxxx and Ross shall
agree in writing in accordance with the provisions of the Subscription Agreement
(the "Closing Time").
At the Closing, the following deliveries shall be made:
a. SERIES C CONVERTIBLE PREFERRED STOCK. Ross shall deliver to
Xxxxxxxx, at such address as shall be specified by Xxxxxxxx, certificates
representing the Series C Convertible Preferred Stock (if any) issuable
upon exercise of the Series C Option, duly registered in the name of
Xxxxxxxx, against payment therefor by Xxxxxxxx in New York Clearing House
(next day) funds to Xxxx'x account (No. -) at - Bank (ABA No. -), subject
to customary settlement procedures.
b. WARRANT. Ross shall deliver to Xxxxxxxx, at such address as
shall be specified by Xxxxxxxx, the certificate representing the Warrant.
c. OFFICERS' CERTIFICATE. The officers' certificate required
by Section 7(a) hereof shall be delivered to Xxxxxxxx.
d. LEGAL OPINIONS. The legal opinions required by Sections
7(b) and 8(b) hereof shall be delivered to Ross and Xxxxxxxx, respectively.
The foregoing deliveries shall be deemed to occur simultaneously as
part of a single transaction, and no delivery shall be deemed to have been made
until all such deliveries have been made.
3. REPRESENTATIONS AND WARRANTIES OF XXXXXXXX. Xxxxxxxx hereby
represents and warrants to Ross on the date hereof and as of the Closing Time as
follows:
a. This Subscription Agreement has been duly authorized,
executed and delivered by Xxxxxxxx and is a valid and binding agreement,
enforceable against Xxxxxxxx in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights generally and to general principles of equity.
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x. Xxxxxxxx understands that no United States federal or state
agency has passed on or made any recommendation or endorsement of the
Series C Convertible Preferred Stock, the Warrants or the Shares;
c. In making the decision to grant the Series C Option and to
purchase the Series C Convertible Preferred Stock thereunder and to
purchase the Warrants, Xxxxxxxx has relied solely upon independent
investigations made by it and not upon any representations made by Ross
(except as set forth herein).
x. Xxxxxxxx understands that the Series C Convertible Preferred
Stock and the Warrants have not been and will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be
reoffered or resold other than pursuant to such registration or an
available exemption therefrom.
x. Xxxxxxxx is not a U.S. person and is not an affiliate of
Ross. As used in this Subscription Agreement, the term "U.S. person" shall
have the meaning set forth in Rule 902 of Regulation S, and the term
"affiliate," with respect to any person, shall have the meaning set forth
in Rule 144 under the Securities Act.
f. At the time the buy orders for the Series C Convertible
Preferred Stock (if any) and the Warrants were originated, Xxxxxxxx was
located outside the United States.
g. Neither Xxxxxxxx nor any of its affiliates nor anyone acting
on its or their behalf has engaged or will engage in any Directed Selling
Efforts with respect to the Series C Convertible Preferred Stock, the
Warrants or any Shares, and all such persons understand and have complied
and will otherwise comply with the requirements of Regulation X.
x. Xxxxxxxx:
(1) will not, during the period commencing on the date of
issuance of any Series C Convertible Preferred Stock or Warrants and
ending on the 40th day thereafter (each an applicable "Restricted
Period"), offer or sell Series C Convertible Preferred Stock, Warrants
or any Shares (or create or maintain any derivative position
equivalent thereto) in the United States, to or for the account or
benefit of a U.S. Person or other than in accordance with Regulation
S; and
(2) will, after the expiration of the applicable Restricted
Period, offer, sell, pledge or otherwise transfer the Series C
Convertible Preferred Stock, Warrants or any Shares (or create or
maintain any derivative position equivalent thereto) only pursuant to
registration under the Act or an available exemption therefrom and, in
any case, in accordance with applicable state securities laws.
x. Xxxxxxxx is purchasing the Series C Convertible Preferred
Stock (if any) and the Warrants for its own account, for the purpose of
investment and not with a view to a distribution thereof.
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j. The transactions contemplated by this Subscription Agreement
are not part of a plan or scheme on the part of Xxxxxxxx, any of its
affiliates or any person acting on its or their behalf to evade the
registration requirements of the Securities Act.
4. REPRESENTATIONS AND WARRANTIES OF ROSS. Ross hereby represents
and warrants to Xxxxxxxx on the date hereof, as of the Closing Time, on each
Preferred Share Conversion Date (as defined in Annex A hereto) and on each
Warrant Exercise Date (as defined in Annex B hereto) as follows:
x. Xxxx has been duly incorporated and is validly existing in
good standing under the laws of California.
b. This Subscription Agreement have been duly authorized,
executed and delivered by Ross and are valid and binding agreements
enforceable against Ross in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights generally and to general principles of equity.
x. Xxxx has full corporate power and authority necessary to
enter into this Subscription Agreement and to perform its obligations
hereunder and thereunder.
d. No consent, approval, authorization or order of any court,
governmental agency or other body is required for execution by Ross of this
Subscription Agreement or the performance by Ross of any of its obligations
hereunder or thereunder.
e. Neither the execution by Ross of this Subscription Agreement
nor the performance by Ross of any of its obligations hereunder or
thereunder will:
(1) violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or
the lapse of time or both would be reasonably likely to constitute a
default) under (A) the articles of incorporation, by-laws or any other
constitutive document of Ross or any of its affiliates, (B) any
decree, judgment, order, law, treaty, rule, regulation or
determination of which Ross is aware (after due inquiry) of any court,
governmental agency or body, or arbitrator having jurisdiction over
Ross or any of its affiliates or any of their respective properties or
assets, (C) the terms of any bond, debenture, note or any other
evidence of indebtedness, or any agreement, stock option or other
similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which Ross or any of its affiliates is a party, by which
Ross or any of its affiliates is bound, or to which any of the
properties or assets of Ross or any of its affiliates is subject, or
(D) the terms of any "lock-up" or similar provision of any
underwriting or similar agreement to which Ross or any of its
affiliates is a party; or
(2) result in the creation or imposition of any lien,
charge or encumbrance upon (A) the Series C Convertible Preferred
Stock (if any), the
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Warrants or any Shares or (B) any of the properties or assets of
Ross or any of its affiliates.
f. When issued to Xxxxxxxx, each share of Series C Convertible
Preferred Stock (if any), each Warrant and each Share
(1) will have been duly and validly authorized, duly and
validly issued, fully paid and non-assessable;
(2) will be free and clear of any security interests,
liens, claims or other encumbrances;
(3) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of
Ross; and
(4) will not subject the holders thereof to personal
liability by reason of being such holders.
g. When issued to Xxxxxxxx, each Share will be eligible for
quotation on NASDAQ.
x. Xxxx is a Reporting Issuer within the meaning of
Regulation S.
i. There is no pending or, to the best knowledge of Ross,
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over Ross or
any of its affiliates that would materially affect the execution by Ross
of, or the performance by Ross of its obligations under, this Agreement.
j. None of the Company's filings with the Securities and
Exchange Commission under the Securities Act or under Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended (each, an "SEC
Filing"), or press releases material to the business of the Company as a
whole, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements, in the light of
the circumstances under which they were made, not misleading.
k. Since the date of the Company's most recent SEC Filing,
there has not been, and the Company is not aware of any development that
might result in, any material adverse change in the condition, financial or
otherwise, or in the business affairs or business prospects of the Company,
whether or not arising in the ordinary course of business, except as
disclosed in such SEC Filing.
l. The offer and sale of the Series C Convertible Preferred
Stock (if any) and the Warrants pursuant to this Agreement will be made in
accordance with the provisions and requirements of Regulation S and any
applicable state law.
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m. Neither Ross nor any of its affiliates nor any person acting
on its or their behalf has engaged or will engage in any Directed Selling
Efforts with respect to the Series C Convertible Preferred Stock (if any),
the Warrants or any Shares and all such persons understand and have
complied and will otherwise comply with the requirements of Regulation S.
n. The transactions contemplated by this Subscription Agreement
are not part of a plan or scheme on the part of Ross, any of its affiliates
or any person acting on its or their behalf to evade the registration
provisions of the Act.
x. Xxxx has not issued, and after the Closing Date will not
issue, any stop transfer order or other order impeding the sale and
delivery of the Series C Convertible Preferred Stock (if any), the Warrants
or the Shares except for a stop order restricting the sale of the Series C
Convertible Preferred Stock (if any) or the Shares to any person in the
United States or to or for the account or benefit of any U.S. person during
an applicable Restricted Period. Notwithstanding the foregoing provision,
Ross shall place the following legend on the certificate(s) representing
the Series C Convertible Preferred Stock (if any) and the Warrants:
The securities represented by this certificate were issued on
July -, 1996 (the "Original Issue Date") pursuant to the
Subscription Agreement dated June 28, 1996 between Xxxx Systems,
Inc. and Xxxxxxxx International Limited. The securities
represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Act"), and have been
sold in reliance on the exemption from registration provided by
Regulation S under the Act ("Regulation S"). Prior to the
expiration of a 40-day restricted period beginning on the
Original Issue Date (the "Restricted Period"), the securities
represented by this certificate may not be offered or sold,
directly or indirectly, within the United States (as defined in
Regulation S under the Act), to a U.S. Person (as defined in
Regulation S under the Act) or for the account or benefit of a
U.S. Person. Neither Xxxx Systems, Inc. nor its transfer agent
shall be obligated to remove this legend unless it shall have
received an opinion of counsel stating that such removal complies
with the requirements of Regulation S (under the Act).
PROVIDED, HOWEVER, that the Restricted Period specified in such legend shall
at all times be the Restricted Period applicable under Regulation S (or any
applicable successor thereto).
p. Other than pursuant to the Subscription Agreement, neither
Ross nor any of its affiliates has offered to sell or sold any Shares or
any securities convertible or exchangeable into or exercisable for Shares
in reliance upon Regulation S at any time during the past 12 months; and
there are no outstanding convertible or exchangeable securities that have
been offered or sold in reliance upon Regulation S, except in each case the
Series C Convertible Preferred Stock (if any) and the Warrants sold
pursuant hereto.
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q. If at any time after the date hereof the Securities and
Exchange Commission has reinterpreted Regulation S or has promulgated, or
the United States Congress has legislated, a successor or revision to
Regulation S, and such reinterpretation, successor provision or revision
either imposes a Restricted Period applicable to the Series C Convertible
Preferred Stock (if any), the Warrants or the Shares that is greater than
that contemplated hereby or requires the sale or resale of the Series C
Convertible Preferred Stock (if any), the Warrants or the Shares to be
registered under the Securities Act, upon the written request of Xxxxxxxx
(a "Registration Request"), Ross shall, as promptly as practicable
thereafter and at its own expense, file a registration statement under the
Securities Act covering the sale or resale of all Series C Convertible
Preferred Stock (if any), Warrants and Shares issuable or issued to
Xxxxxxxx hereunder. Prior to the effectiveness of such registration
statement, Ross shall not be entitled to exercise any Option under the
Subscription Agreement. Upon the effectiveness of such registration
statement (i) Ross shall issue such Series C Convertible Preferred Stock or
Shares to Xxxxxxxx in accordance with the terms hereof and of the
Subscription Agreement and (ii) the provisions of Sections 3(d), (e), (f),
(g), (h), and (i), 4(l), (m), and (o), 5(a), 6(b), (c) and (d)
(collectively, the "Specified Provisions"), 7(a) and (b) (to the extent
applicable to the Specified Provisions), 8(b), (c) and (d) (to the extent
applicable to the Specified Provisions) shall thereafter be of no force and
effect with respect to the issuance of any Series C Convertible Preferred
Stock, Warrants or Shares covered by such registration statement; PROVIDED,
HOWEVER, that if such registration statement has not been declared
effective before the 180th day following the date of such Registration
Request, then (x) any Options outstanding under the Subscription Agreement
shall immediately expire and shall not thereafter be exercisable, and
Xxxxxxxx shall have no further liability whatsoever with respect thereto
and (y) Ross shall use its best efforts to cause such registration
statement to become effective as promptly as practicable.
5. COVENANTS OF XXXXXXXX. Xxxxxxxx hereby covenants and agrees
with Ross as follows:
a. During any Restricted Period applicable to the Series C
Convertible Preferred Stock (if any), the Warrants or the Shares, neither
Xxxxxxxx nor any of its affiliates nor any person acting on its or their
behalf will:
(1) offer or sell such Series C Convertible Preferred Stock
(if any), Warrants or Shares other than in an Offshore Transaction
(within the meaning of Regulation S);
(2) engage in any Directed Selling Efforts (within the
meaning of Regulation S) with respect to such Series C Convertible
Preferred Stock (if any), Warrants or Shares;
(3) offer or sell such Series C Convertible Preferred Stock
(if any), Warrants or Shares other than: (A) in accordance with Rule
903 or Rule 904 of Regulation S; (B) pursuant to registration under
the Securities Act or (C) pursuant to an available exemption
therefrom; and
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(4) offer or sell such Series C Convertible Preferred Stock
(if any), Warrants or Shares to any U.S. person or for the account or
benefit of any U.S. person.
6. COVENANTS OF ROSS. Ross covenants and agrees with Xxxxxxxx as
follows:
a. For so long as any Series C Convertible Preferred Stock or
the Warrant remain outstanding and for a period of 40 days thereafter, Ross
will continue to be a Reporting Issuer within the meaning of Regulation S
and will maintain the eligibility of the Shares for quotation on NASDAQ;
b. For so long as any Series C Convertible Preferred Stock or
Warrants sold pursuant to Regulation S remain outstanding and for a period
of six months thereafter, Ross will not offer or sell any Shares or any
securities convertible into or exchangeable into Shares in reliance upon
Regulation S;
c. For so long as any Series C Convertible Preferred Stock or
Warrants sold pursuant to Regulation S remain outstanding and for a period
of 40 days thereafter, neither Ross nor any of its affiliates nor any
person acting on its or their behalf will engage in any Directed Selling
Efforts (within the meaning of Regulation S) with respect to such Series C
Convertible Preferred Stock (if any), Warrants or Shares;
d. For so long as any Series C Convertible Preferred Stock or
Warrants sold pursuant to Regulation S remain outstanding and for a period
of 40 days thereafter, Ross will ensure that all applicable Offering
Restrictions with respect to the Series C Convertible Preferred Stock, the
Warrants and the Shares are thoroughly complied with and satisfied;
e. Beginning on the date hereof and for so long as any Series C
Convertible Preferred Stock or Warrants remain outstanding and for a period
of 40 days thereafter, Ross will promptly notify Xxxxxxxx if (i) any event
shall have occurred as a result of which any SEC Filing would include an
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 under which they were made, not misleading, or (ii) there is
any public disclosure of material information regarding Ross or its
financial condition prospects or results of operation; and
f. At any time after the expiration of any Restricted Period
with respect to any Series C Convertible Preferred Stock or Warrant, upon
the request of Xxxxxxxx accompanied by an opinion of Xxxxxx & Xxxxx to the
effect that the removal of the legend referred to in Section 4(o) would
then be permitted under Regulation S, Ross shall, or shall instruct its
transfer agent (if any) to, accept from Xxxxxxxx the legended certificates
representing such Series C Convertible Preferred Stock (if any) or
Warrants, as the case may be, and deliver in their place unlegended
certificates.
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x. Xxxx will comply with the terms and conditions of the
Warrants and the Series C Convertible Preferred Stock (if any).
h. For so long as any Series C Convertible Preferred Stock or
Warrants are outstanding, Ross shall at all times reserve and keep
available, free from pre-emptive rights, out of its authorized but unissued
Shares, for issuance upon conversion of any Series C Convertible Preferred
Stock or exercise of any Warrants, the maximum number of Shares then so
issuable.
7. CONDITIONS PRECEDENT TO XXXXXXXX'X OBLIGATIONS. The
obligations of Xxxxxxxx hereunder are subject to the performance by Ross of
its obligations hereunder and to the satisfaction of the following additional
conditions precedent:
a. The representations and warranties made by Ross in this
Subscription Agreement shall, unless expressly waived in writing by
Xxxxxxxx, be true and correct as of the date hereof, on the date of the
Closing, on each Warrant Exercise Date and on each Preferred Share
Conversion Date (if any), and Xxxxxxxx shall have received, as of each such
date, a certificate, dated such date, of the Chief Executive Officer and
Chief Financial Officer of Ross, to such effect.
b. On the date of the Closing, each Preferred Share Conversion
Date (if any) and each Warrant Exercise Date, Ross shall have delivered to
Xxxxxxxx an opinion of counsel satisfactory to Xxxxxxxx, dated the date of
delivery, confirming in substance the matters covered in paragraphs (a),
(b), (c), (d), (e), (f), (g), (h) and (i) of Section 4 hereof.
8. CONDITIONS PRECEDENT TO XXXX'X OBLIGATIONS. The obligations
of Ross hereunder are subject to the performance by Xxxxxxxx of its
obligations hereunder and to the satisfaction of the following additional
conditions precedent:
a. The representations and warranties made by Xxxxxxxx in this
Agreement shall, unless expressly waived in writing by Ross, be true and
correct as of the date hereof, on the date of the Closing and on each
Warrant Exercise Date.
b. On the date of the Closing, Xxxxxxxx shall have delivered to
Ross a legal opinion dated the date of delivery of Xxxxxx & Xxxxx, counsel
to Xxxxxxxx, stating that
(i) Xxxxxxxx is not a U.S. person; and
(ii) The sale of the Series C Convertible Preferred Stock
(if any) and the Warrants by Ross to Xxxxxxxx on the
Closing Date does not require registration under the
Securities Act and complies with the applicable
provisions of Regulation S thereunder;
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c. On each Preferred Share Conversion Date (if any) and each
Warrant Exercise Date, Xxxxxxxx shall have delivered to Ross a legal
opinion of Xxxxxx & Xxxxx, counsel to Xxxxxxxx, dated the date of delivery,
stating that:
(i) Xxxxxxxx is not a U.S. person; and
(ii) the sale of the Series C Convertible Preferred Stock
and the Warrants by Ross to Xxxxxxxx on such date does
not require registration under the Securities Act.
d. On the date of any transfer by Xxxxxxxx of any Series C
Convertible Preferred Stock or Warrants during the applicable Restricted
Period, Xxxxxxxx shall have delivered to Ross or its transfer agent, as the
case may be, a legal opinion of Xxxxxx & Xxxxx, dated the date of such
transfer, stating that such transfer complies with the requirements of
Regulation S.
9. FEES AND EXPENSES. Each of Xxxxxxxx and Ross agrees to pay
its own expenses incident to the performance of its obligations hereunder,
including, but not limited to, the fees, expenses and disbursements of such
party's counsel.
10. NON-PERFORMANCE.
a. If, on any Warrant Exercise Date or any Preferred Share
Conversion Date, Ross shall fail to deliver the Shares to Xxxxxxxx pursuant
to this Subscription Agreement for any reason other than the failure of any
condition precedent to Xxxx'x obligations hereunder or the failure by
Xxxxxxxx to comply with its obligations hereunder, then Ross shall:
(1) hold Xxxxxxxx harmless against any loss, claim or damage
arising from or as a result of such failure by Ross; and
(2) reimburse Xxxxxxxx for all of its out-of-pocket expenses,
including fees and disbursements of its counsel, incurred by Xxxxxxxx
in connection with this Agreement and the transactions contemplated
herein;
PROVIDED, HOWEVER, that Ross shall then be under no further liability to
Xxxxxxxx except as provided in this Section 10 and Section 11 hereof.
b. If, on the Series C Closing Date, Xxxxxxxx shall fail to
purchase the Series C Convertible Preferred Stock pursuant to this
Subscription Agreement for any reason other than the failure of any condition
precedent to Xxxxxxxx'x obligations hereunder or the failure by Ross to
comply with its obligations hereunder, then Xxxxxxxx shall:
(1) hold Ross harmless against any damage arising from or as a
result of such failure by Xxxxxxxx; and
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(2) reimburse Ross for all of its out-of-pocket expenses,
including fees and disbursements of its counsel, incurred by Ross in
connection with this Agreement and the transactions contemplated herein;
PROVIDED, HOWEVER, that Xxxxxxxx shall then be under no further liability to
Ross except as provided in this Section 10 and Section 11 hereof.
11. INDEMNIFICATION.
a. INDEMNIFICATION OF XXXXXXXX. Ross hereby agrees to
indemnify Xxxxxxxx and each of its officers, directors, employees, agents
and affiliates and each person that controls (within the meaning of Section
20 of the Exchange Act) any of the foregoing persons (each a "Xxxxxxxx
Indemnified Party") against any claim, demand, action, liability, damages,
loss, cost or expense (including, without limitation, reasonable legal
fees) (a "Proceeding"), that it may incur in connection with any of the
transactions contemplated hereby arising out of or based upon:
(1) any untrue or alleged untrue statement of a material
fact by Ross or any of its affiliates or any person acting on its or
their behalf or omission or alleged omission by Ross or any of its
affiliates or any person acting on its or their behalf to state any
material fact necessary in order to make the statements, in the light
of the circumstances under which they were made, not misleading;
(2) any of the representations or warranties made by Ross
herein being untrue or incorrect; and
(3) any breach or non-performance by Xxxx of any of its
covenants, agreements or obligations under this Agreement;
and Xxxx hereby agrees to reimburse each Xxxxxxxx Indemnified Party for any
reasonable legal or other expenses incurred by such Xxxxxxxx Indemnified
Party in investigating or defending any such Proceeding;
PROVIDED, HOWEVER, that the foregoing indemnity shall not apply to any
Proceeding to the extent that it arises out of or is based upon the gross
negligence of Xxxxxxxx in connection therewith.
b. INDEMNIFICATION OF XXXX. Xxxxxxxx hereby agrees to
indemnify Xxxx and each of its officers, directors, employees, agents and
affiliates and each person that controls (within the meaning of Section 20
of the Exchange Act) any of the foregoing persons (each a "Xxxx Indemnified
Party") against any Proceeding, that it may incur in connection with any of
the transactions contemplated hereby arising out of or based upon:
(1) any of the representations or warranties made by
Xxxxxxxx herein being untrue or incorrect; and
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(2) any breach or non-performance by Xxxxxxxx of any of its
covenants, agreements or obligations under this Agreement;
and Xxxxxxxx hereby agrees to reimburse each Xxxx Indemnified Party for any
reasonable legal or other expenses incurred by such Xxxx Indemnified Party
in investigating or defending any such Proceeding;
PROVIDED, HOWEVER, that the foregoing indemnity shall not apply to any
Proceeding to the extent that it arises out of or is based upon the gross
negligence of Xxxx in connection therewith.
c. CONDUCT OF CLAIMS.
(1) Whenever a claim for indemnification shall arise under
this Section, the party seeking indemnification (the "Indemnified
Party"), shall notify the party from whom such indemnification is
sought (the "Indemnifying Party") in writing of the Proceeding and the
facts constituting the basis for such claim in reasonable detail;
(2) Upon delivery of such notice, such Indemnified Party
shall have a duty to take all reasonable steps to mitigate any losses,
liabilities, costs, charges and expenses relating to any such
Proceeding;
(3) Such Indemnifying Party shall have the right to retain
the counsel of its choice in connection with such Proceeding and to
participate at its own expense in the defense of any such Proceeding;
PROVIDED, HOWEVER, that counsel to the Indemnifying Party shall not
(except with the consent of the relevant Indemnified Party) also be
counsel to such Indemnified Party. In no event shall the Indemnifying
Party be liable for fees and expenses of more than one counsel (in
addition to any local counsel) separate from its own counsel for all
Indemnified Parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances; and
(4) No Indemnifying Party shall, without the prior written
consent to the Indemnified Parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever in respect of which
indemnification could be sought under this Section unless such
settlement, compromise or consent (A) includes an unconditional
release of each Indemnified Party from all liability arising out of
such litigation, investigation, proceeding or claim and (B) does not
include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any Indemnified Party.
12. SURVIVAL OF THE REPRESENTATIONS, WARRANTIES, ETC. The
respective representations, warranties, and agreements made herein by or on
behalf of the parties hereto shall remain in full force and effect,
regardless of any investigation made by or on behalf of the other party
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to this Agreement or any officer, director or employee of, or person
controlling or under common control with, such party and will survive
delivery of any payment for the Series C Convertible Preferred Stock (if
any), the Warrants and the Shares.
13. NOTICES. All communications hereunder shall be in writing, and
a. if sent to Xxxxxxxx, shall be delivered by hand, sent by
registered mail or transmitted by telecopy and confirmed to Xxxxxxxx at:
Xxxxxxxx International Limited
c/o Midland Bank Trust Corporation (Cayman) Limited
X.X. Xxx 0000, Xxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxx Xxxxxxx
Xxxxxxx Xxxx Indies
Telephone: (000) 000-0000
Telecopy: _________; or
b. if sent to Xxxx, shall be delivered by hand, sent by
registered mail or transmitted by telecopy and confirmed to Xxxx at:
Xxxx Systems, Inc.
000 Xxxx Xxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy to:
Wilson, Sonsini, Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
14. MISCELLANEOUS.
a. This Agreement may be executed in one or more
counterparts and it is not necessary that signatures of all parties appear on
the same counterpart, but such counterparts together shall constitute but one
and the same agreement.
b. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their respective successors and, with
respect to Section 11 hereof, their respective officers, directors and
affiliates, and no other person shall have any right or obligation hereunder.
-13-
c. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York, and each of the
parties hereto hereby submits to the non-exclusive jurisdiction of any State
or Federal court in the Borough of Manhattan in the City and State of New
York and any court hearing any appeal therefrom, over any suit, action or
proceeding against it arising out of or based upon this Agreement (a "Related
Proceeding"). Each of the parties hereto hereby waives any objection to any
Related Proceeding in such courts whether on the grounds of venue, residence
or domicile or on the ground that the Related Proceeding has been brought in
an inconvenient forum.
d. The provisions of this Agreement are severable, and if any
clause or provision hereof shall be held invalid, illegal or unenforceable in
whole or in part, such invalidity or unenforceability shall not in any manner
affect any other clause or provision of this Agreement.
e. The headings of the sections of this document have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
15. TIME OF ESSENCE. Time shall be of the essence in this Agreement.
[SIGNATURE PAGE FOLLOWS]
-14-
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, all as of the day and year first above written.
XXXX SYSTEMS, INC.
By: /s/ XXXXX X. XXXXX, XX.
------------------------------------
Name: Xxxxx X. Xxxxx, Xx.
Title: Vice President
XXXXXXXX INTERNATIONAL LIMITED
By: /s/ XXXXXXXX XXXXXXXXX, XX.
------------------------------------
Name: Xxxxxxxx Xxxxxxxx, Xx.
Title: Chairman
-15-
ANNEX A
FORM OF SERIES C CONVERTIBLE PREFERRED STOCK
-16-
SERIES A PREFERRED STOCK,
SERIES B PREFERRED STOCK AND
SERIES C PREFERRED STOCK
OF
XXXX SYSTEMS, INC.
The undersigned, Selby F. Little III and Xxxxxx X. Xxxxxx, do hereby
certify that:
A. They are the duly elected and acting Vice President of Finance and
Administration and Chief Financial Officer, and Assistant Secretary,
respectively, of Xxxx Systems, Inc., a California corporation (the
"Corporation").
B. Pursuant to the authority conferred upon the Board of Directors by
the Restated Articles of Incorporation of the Corporation, the said Board of
Directors on December 1, 1995, adopted the following resolution creating a
series of 500,000 shares of Preferred Stock designated as Series A Preferred
Stock, a series of 500,000 shares of Preferred Stock designated as Series B
Preferred Stock and a series of 500,000 shares of Preferred Stock designated
as Series C Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Restated Articles of Incorporation, the
Board of Directors does hereby provide for the issue of a series of Preferred
Stock of the Corporation to be designated "Series A Preferred Stock," a
series of Preferred Stock of the Corporation to be designated "Series B
Preferred Stock," and a series of Preferred Stock of the Corporation to be
designated "Series C Preferred Stock," each initially consisting of 500,000
shares, and to the extent that the designations, powers, preferences and
relative and other special rights and the qualifications, limitations and
restrictions of the Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock are not stated and expressed in the Restated
Articles of Incorporation, does hereby fix and herein state and express such
designations, powers, preferences and relative and other special rights and
the qualifications, limitations and restrictions thereof, as follows (all
terms used herein which are defined in the Restated Articles of Incorporation
shall be deemed to have the meanings provided therein):
1. DESIGNATION AND AMOUNT. The three series of Preferred Stock
authorized herein shall be designated as "Series A Preferred Stock," "Series
B Preferred Stock" and "Series C Preferred Stock," respectively. The Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock are referred to herein collectively as the "Preferred Stock." The
number of shares constituting the Series A Preferred Stock shall be five
hundred thousand (500,000), the number of shares constituting the Series B
Preferred Stock shall be five hundred thousand (500,000), and the number of
shares constituting the Series C Preferred Stock shall be five hundred
thousand (500,000).
2. REDEMPTION.
(a) RIGHT OF REDEMPTION. Subject to Section 2(b) below, at any time
after the earlier of (i) the NASDAQ Stock Market has suspended trading of the
Corporation's shares of Common Stock, such suspension continues for a period of
ten (10) Business Days (as defined in Section 3(d)(i) below), and such
suspension continues on the date on which a Redemption Notice (as defined in
Section 2(c) below) is delivered pursuant to this Section 2, or (ii) three (3)
years from the applicable Original Issuance Date (as defined in Section 3(d)(i)
below) of any share of Preferred Stock, or (iii) the fifteenth (15th) Business
Day prior to the closing of a Change of Control Transaction (as defined in
Section 3(b)(i) below), upon the written request of any holder of shares of any
series of Preferred Stock (the "Preferred Shareholders") (in the case of
subsections 2(a)(i) or (iii) above) or upon the request of any holder of shares
of the applicable series of Preferred Stock (in the case of subsection 2(a)(ii)
above), the Corporation shall, to the extent of funds legally available
therefor, redeem any shares of Preferred Stock eligible for redemption for which
a request for redemption has been made. The price per share to be paid by the
Corporation upon redemption of the shares of Preferred Stock pursuant to this
Section 2 shall be an amount (the "Redemption Payment") equal to:
(X) $4.00 per share of Preferred Stock, adjusted
proportionately for any combinations, consolidations or subdivisions of, or
stock distributions with respect to, such share (the "Redemption Price"),
plus
(Y) an amount per share equal to two percent (2%) per year of
the Redemption Price, compounded annually and computed from and including the
applicable Original Issuance Date thereof to but excluding the Redemption
Date (as defined below) thereof, plus
(Z) any declared but unpaid dividends thereon from and
including the applicable Original Issuance Date thereof to but excluding the
Redemption Date thereof.
(b) TERMINATION OF REDEMPTION OBLIGATION. The Corporation's
obligation to redeem any share of any series of Preferred Stock pursuant to
this Section 2 shall terminate, with respect to such series only, in the
event that the Weighted Average Price (as defined in Section 3(d)(i) below)
on thirty (30) consecutive Business Days during the six (6) month period
beginning forty-five (45) Business Days after the applicable Original
Issuance Date for such series of Preferred Stock shall be greater than
seventy five percent (75%) of the Weighted Average Price for the five (5)
Business Days immediately prior to the applicable Original Issuance Date for
such series of Preferred Stock.
-2-
(c) NOTICE OF REDEMPTION.
(i) Each Preferred Shareholder who holds shares of
Preferred Stock eligible for redemption and desires that the Corporation
redeem such shares shall mail to the principal office of the Corporation by
certified mail a notice of redemption setting forth the number of shares of
Preferred Stock the Preferred Shareholder desires to have redeemed and the
form of Redemption Payment for such shares (either cash or in the form of
shares of Common Stock as set forth in Section 2(e) below) (a "Redemption
Notice").
(ii) In the event of a Change in Control Transaction (as
defined in Section 3(b) below), the Corporation shall give written notice
(the "Change In Control Transaction Notice") to the Preferred Shareholders of
such transaction at least fifteen (15) Business Days prior to the closing of
such transaction. Regardless of whether a Change in Control Transaction
Notice has been received, each Preferred Shareholder who holds shares of
Preferred Stock eligible for redemption and desires that the Corporation
redeem such shares shall mail to the principal office of the Corporation
within ten (10) Business Days after the giving of the Change in Control
Transaction Notice a written statement (also a "Redemption Notice") setting
forth the number of shares of Preferred Stock the Preferred Shareholder
desires to have redeemed in connection with to the closing of the Change in
Control Transaction.
(iii) If the Corporation's obligation to redeem all or any
portion of the shares of the Preferred Stock to be redeemed is suspended
pursuant to Section 2(f), the shares to be redeemed shall be allocated among
all Preferred Shareholders requesting redemption pro rata based on the number
of shares of Preferred Stock specified in each Redemption Notice.
(d) REDEMPTION DATE. From and after the first Business Day after
the date on which a Redemption Notice is delivered pursuant to this Section 2
(a "Redemption Date"), except as provided herein, all rights with respect to
the shares designated for redemption for which a Redemption Notice has been
received by the Corporation shall cease and terminate, and such shares shall
not subsequently be transferred on the books of the Corporation or be deemed
to be outstanding for any purpose whatsoever; PROVIDED, HOWEVER, that if
payment of the total Redemption Payment for any share of Preferred Stock
pursuant to Section 2(e) hereof is not made when due, the Redemption Date for
such share of Preferred Stock shall be postponed for purposes of this Section
2 until such time as such Redemption Payment has been duly paid.
(e) PAYMENT.
(i) The Preferred Shareholders electing to have shares of
Preferred Stock redeemed shall be entitled to receive the Redemption Payment
therefor upon surrender of the certificates representing such shares, duly
endorsed with signatures guaranteed, at the principal office of the Corporation
or any transfer agent of the Preferred Stock. Any Redemption Payment made in
cash pursuant to this Section 2(e) shall be made in immediately available funds
upon surrender of such certificates prior to 12:00 P.M. local time at the
principal office of the Corporation or any transfer agent of the Preferred
Stock, and shall be made in next day funds upon surrender of such certificates
-3-
after 12:00 P.M. local time at the principal office of the Corporation or any
transfer agent of the Preferred Stock. In the event fewer than all the
shares represented by any such certificate are redeemed, the Corporation
shall cause to be issued a new certificate representing the unredeemed
shares. No fractional shares shall be redeemed.
(ii) Subject to Section 2(f) below, the Corporation shall pay
the Redemption Payment in cash or in shares of Common Stock of the
Corporation in accordance with the applicable Redemption Notice and the
further provisions of this Section 2(e)(ii). In the event that the Preferred
Shareholders elect to receive such Redemption Payment in shares of Common
Stock then the number of shares of Common Stock issued shall be determined as
follows:
(1) If such Redemption Notice is made pursuant to the
provisions of Section 2(a)(i) above, then the number of shares of Common
Stock shall be equal to the Redemption Payment divided by fifty percent (50%)
of the fair market value per share of Common Stock on the Redemption Date.
The "fair market value" per share of the Common Stock shall be the price per
share determined by an independent appraiser chosen by mutual agreement of
the Corporation and the holders of a majority of the then outstanding shares
of Preferred Stock.
(2) If such Redemption Notice is made pursuant to the
provisions of Sections 2(a)(ii) or (iii) above, then the number of shares of
Common Stock shall be equal to the Redemption Payment divided by eighty
percent (80%) of the Weighted Average Price for the thirty (30) Business Days
immediately preceding to the Redemption Date for such share.
(f) PAYMENT IN VIOLATION OF CORPORATIONS CODE. The Corporation's
obligation to redeem any Series A Preferred Stock pursuant to this Section 2
is suspended to the extent that such redemption would violate Sections
500-503 of the California Corporations Code or any successor legislation or
similar statute. The Corporation shall nevertheless redeem as many shares
pursuant to this Section 2 as it can redeem without violating said statutes,
and its obligation to redeem the remaining shares shall be suspended only
until such time as the Corporation can satisfy in full its obligation
pursuant to Section 2 hereof without violating said statutes.
3. CONVERSION. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) RIGHTS TO CONVERT. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof, on any Business Day after
the Original Issuance Date applicable for such share and prior to the close
of business on the applicable Redemption Date as may have been fixed with
respect to such share pursuant to Section 2(d) hereof, into such number of
fully paid and nonassessable shares of Common Stock as is determined by
dividing $4.00 by the applicable Conversion Price (determined as hereinafter
provided) in effect at the time of conversion (the "Conversion Ratio").
-4-
(b) AUTOMATIC CONVERSION.
(i) Each outstanding share of Preferred Stock which has not
been previously redeemed shall automatically be converted into fully paid and
non-assessable shares of Common Stock at its then effective Conversion Ratio
immediately prior to the closing of a merger or consolidation of the
Corporation with any other corporation (a "Change in Control Transaction"),
other than a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least fifty
percent (50%) of the total voting power represented by the voting securities
of the Corporation or such surviving entity outstanding immediately after
such merger or consolidation, or the closing of a sale or disposition by the
Corporation of all or substantially all the Corporation's assets (other than
to a subsidiary or subsidiaries of the Corporation).
(c) MECHANICS OF CONVERSION.
(i) OPTIONAL CONVERSION. A Preferred Shareholder may
exercise the right of conversion pursuant to Section 3(a) hereof by
delivering written notice to the Corporation specifying the number of shares
of Preferred Stock to be converted into Common Stock and surrendering
certificates representing such shares, properly endorsed with signatures
guaranteed, at the principal office of the Corporation or any transfer agent
of the Preferred Stock. The conversion of shares of Preferred Stock into
Common Stock pursuant to Section 3(a) hereof shall be deemed to occur
immediately before the close of business on the date of surrender of
certificates duly endorsed with signatures guaranteed representing the shares
of Preferred Stock to be converted (an "Optional Conversion Date"), and a
person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as a record holder of such
shares of Common Stock from and including such date.
(ii) AUTOMATIC CONVERSION. The conversion of the Preferred
Stock to Common Stock pursuant to Section 3(b) hereof shall be deemed to
occur immediately before the close of business on the date of closing of the
transaction referred to in Section 3(b), regardless of when the Preferred
Shareholders surrender their certificates representing the Preferred Stock.
A person entitled to receive shares of Common Stock issuable upon such
conversion (an "Automatic Conversion Date") shall be treated for all purposes
as a record holder of such shares of Common Stock from and including such
date, except that such person shall not be entitled to issuance of a
certificate representing such Common Stock until certificates duly endorsed
with signatures guaranteed representing the converted Preferred Stock have
been duly surrendered. In connection with an automatic conversion, the
Corporation shall promptly provide the holders of Preferred Stock notice of
automatic conversion setting forth: (A) a reasonably detailed summary of the
nature of the transaction giving rise to such automatic conversion; (B) the
number of shares of Preferred Stock that have been converted pursuant to this
Section 3(c)(ii); (C) the computation of the Conversion Ratio used by the
Corporation in the conversion of such shares of Preferred Stock; (D) the
number of shares of Common Stock yielded by the conversion of such shares of
Preferred Stock and (E) the date from which such holder shall be treated as
the holder of such shares of Common Stock.
-5-
(iii) ISSUANCE OF COMMON STOCK CERTIFICATE. The Corporation
shall, within five (5) Business Days after receipt of a certificate duly
endorsed with signatures guaranteed representing converted shares of Preferred
Stock pursuant to Sections 3(c)(i) or (ii) above, but not before the applicable
Automatic Conversion Date, as the case may be, if later, issue and deliver at
the principal office of the person entitled to delivery thereof a certificate
for the number of shares of Common Stock to which such person is entitled and a
check payable to such person in the amount of any cash payable in lieu of any
fractional shares of Common Stock.
(d) CONVERSION PRICE.
(i) DEFINITIONS. The following definitions shall apply:
(1) "BUSINESS DAY" shall mean any calendar day on which the
NASDAQ Stock Market or banks in the City of New York are open for business.
(2) "ORIGINAL ISSUANCE DATE" shall mean, (A) with respect
to the shares of Series A Preferred Stock, the date on which the first share of
Series A Preferred Stock was originally issued by the Corporation, (B) with
respect to the shares of Series B Preferred Stock, the date on which the first
share of Series B Preferred Stock was originally issued by the Corporation, and
(C) with respect to the shares of Series C Preferred Stock, the date on which
the first share of Series C Preferred Stock was originally issued by the
Corporation, .
(3) "WEIGHTED AVERAGE PRICE" shall mean, with respect to
any specified time period, the arithmetic average of the daily volume-weighted
average sale prices (rounded to the nearest tenth of a cent) of the shares of
Common Stock of the Corporation sold on the NASDAQ Stock Market, as reported by
Bloomberg L.P., or, if Bloomberg L.P. is not then reporting such information,
any successor service mutually agreed upon by the Corporation and the holders of
a majority of the then outstanding shares of Preferred Stock.
(ii) DETERMINATION OF CONVERSION PRICE. The Conversion Price,
with respect to each share of Preferred Stock shall be determined as follows:
(1) In the event that such share of Preferred Stock shall
be converted at any time on or prior to six (6) months from the applicable
Original Issuance Date, the Conversion Price for such share shall be equal to
one hundred one percent (101%) of the Weighted Average Price for the thirty (30)
Business Days ending two (2) Business Days prior to such conversion; provided,
however, that in no event shall such Conversion Price be greater than one
hundred fifteen percent (115%) of the Weighted Average Price for the first five
(5) of such thirty (30) Business Days.
(2) In the event that such share of Preferred Stock
shall be converted at any time after six (6) months from the applicable
Original Issuance Date, the Conversion Price for such share shall be equal to
the lesser of (A) one hundred fifteen percent (115%) of the Weighted Average
Price for the five (5) Business Days ending immediately prior to the
applicable
-6-
Original Issuance Date for such share, or (B) one hundred one percent (101%)
of the Weighted Average Price for the last thirty (30) Business Days of the
period ending six (6) months after the applicable Original Issuance Date for
such share.
(e) STOCK SPLITS, DIVIDENDS, RECLASSIFICATION, AND
RECAPITALIZATION. In the event the Corporation effects a split, subdivision,
combination, or consolidation of its Common Stock, whether by
reclassification, distribution of a dividend with respect to the outstanding
Common Stock payable in shares of Common Stock, or otherwise, or any
recapitalization of the Common Stock, provision shall be made (including
adjustment of the applicable Conversion Price then in effect and the number
of shares of Common Stock issuable upon conversion of the Preferred Stock) so
that the Preferred Shareholders shall thereafter be entitled to receive, upon
conversion of the Preferred Stock, the number of shares of stock or other
securities or property of the Corporation or otherwise to which a holder of
Common Stock, holding the number of share issuable upon conversion of the
Preferred Stock held by such Preferred Shareholder before such event, would
be entitled on such event. If the Common Stock issuable upon conversion of
the Preferred Stock shall be changed into the same or a different number of
shares of any other class or classes of stock or other securities or
property, appropriate adjustment (as determined by the Board of Directors)
shall be made in the application of the provisions of this Section (including
adjustment of the applicable Conversion Price then in effect and the number
of shares of Common Stock issuable upon conversion of the Preferred Stock)
with respect to the rights and interest thereafter of the Preferred
Shareholders, to the end that the provisions of this Section shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon conversion of
the Preferred Stock.
(f) NO IMPAIRMENT. The Corporation shall not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issuance or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but shall at
all times in good faith assist in the carrying out of all the provisions of this
Section 3 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the Preferred Stock
against impairment.
(g) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Preferred Stock, such number of
its shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Preferred Stock. If at any
time the number of authorized but unissued shares of Common Stock is not
sufficient to effect the conversion of all the then outstanding shares of
Preferred Stock, the Corporation shall forthwith take 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 to such purpose.
(h) FRACTIONAL SHARES. No fractional shares shall be issued upon the
conversion of any share of Preferred Stock. All shares of Common Stock
(including fractions) issuable upon
-7-
conversion of more than one share of Preferred Stock by a holder of such
stock shall be aggregated for purposes of determining whether the conversion
would result in the issuance of any fractional share. If, after such
aggregation, the conversion would result in the issuance of a fractional
share of Common Stock, the Company shall, in lieu of issuing the fractional
share, pay the holder otherwise entitled to such fraction a sum in cash equal
to the fair market value of such fraction on the date of conversion (as
determined in good faith by the Board of Directors of the Corporation).
4. VOTING RIGHTS. Except as otherwise required by law or by Section 5
hereof, the holders of Common Stock shall have and possess the exclusive
right to notice of shareholders' meetings, and the exclusive voting rights
and powers, and the Preferred Shareholders shall not be entitled to notice of
any shareholders' meeting or to vote on the election of directors or on any
other matter.
5. PROTECTIVE PROVISIONS. The Corporation shall not do any of the
things set forth in this Section without first obtaining the approval of the
holders of at least a majority of the total number of shares of Preferred
Stock outstanding, voting together as a single class.
(a) CREATE NEW SECURITIES. For so long as at least 250,000 shares
of Preferred Stock (as adjusted proportionally for any combinations,
consolidations or subdivisions of, or stock distributions with respect to,
such shares) remain outstanding, create any new class or series of shares
which would rank senior to or, except as provided in Section 5(d) below, pari
passu with, the Preferred Stock with respect to the right to receive
dividends, if any, when due, redemption and distribution of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary;
(b) CHANGE RIGHTS OR AUTHORIZE SHARES. Alter or change the
rights, preferences, privileges, or restrictions of or on the Preferred
Stock, or increase or decrease the authorized number of shares of Preferred
Stock; or
(c) AMEND CHARTER. Amend or repeal any provision of, or add any
provision to, this Corporation's Articles of Incorporation or Bylaws if such
action would adversely affect the preferences, rights, privileges or powers
of, or the restrictions provided for the benefit of, the Preferred Stock.
(d) Notwithstanding any of the provisions of Section 5(a) above to
the contrary, for so long as at least 250,000 shares of Preferred Stock (as
adjusted proportionally for any combinations, consolidations or subdivisions
of, or stock distributions with respect to, such shares) remain outstanding,
the Corporation may create any new class or series of shares with such terms
(including the timing and amount of any dividend payment) as may be
determined by the Board of Directors which would rank pari passu with the
Preferred Stock in all cases as to the right to receive dividends, if any,
when due, redemption and distribution of assets upon liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, provided,
however, that (i) the Corporation may not issue more than $12,000,000 worth
of shares of such new class or series without the prior approval of the
holders of at least 66.67% of the then outstanding shares of
-8-
Preferred Stock voting together as a single class, (ii) immediately upon
issuance of any such shares Section 2(b) above shall be of no further force
and effect, as if it never had been a part of this Certificate, and (iii) the
Corporation shall give written notice to the Preferred Shareholders of any
such issuance within five (5) Business Days after the date of issuance of
such shares.
6. NOTICES. Any notice required by the provisions of this Certificate
to be given shall be deemed delivered upon the sooner of actual receipt or
three days after deposit in the Untied States mail if sent by certified mail,
return receipt requested, postage prepaid, or one day after deposit with an
overnight delivery service, charges prepaid, and if to the Preferred
Shareholders or any of them addressed to such holders of record at the
addresses appearing on the books of the Corporation, and if to the
Corporation addressed to its principal offices, to the attention of the
Secretary of the Corporation.
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this Corporation be, and they hereby
are, authorized and directed to prepare and file a Certificate of
Determination of Rights, Preferences and Privileges in accordance with the
foregoing resolution and the provisions of California law and to take such
actions as they may deem necessary or appropriate to carry out the intent of
the foregoing resolution."
C. That the authorized number of shares of Preferred Stock of the
Corporation is 5,000,000, the number of shares constituting Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (that
are the series created by this Certificate and the resolution set forth
above) is 500,000, 500,000, and 500,000, respectively, and that no such
Preferred Stock has been issued.
-9-
We further declare under penalty of perjury under the laws of this State
of California that the matters set forth in this Certificate are true and
correct of our own knowledge.
Date: December 18, 1995.
/s/ SELBY F. LITTLE III
--------------------------------------------
Xxxxx Little III, Vice President of Finance
and Administration and Chief Financial
Officer
/s/ XXXXXX X. XXXXXX
--------------------------------------------
Xxxxxx X. Xxxxxx, Assistant Secretary
-00-
XXXXX X
XXXX XX XXXXXXX CERTIFICATE
-17-
ANNEX B
[Form of Warrant Certificate]
The Warrant represented by this certificate was issued on
June 28, 1996 (the "Original Issue Date") pursuant to the
Subscription Agreement dated June 28, 1996, as amended by
Amendment No. 1 thereto dated June 28, 1996, between Xxxx
Systems, Inc. and Xxxxxxxx International Limited. The
Warrant represented by this certificate has not been
registered under the Securities Act of 1933, as amended (the
"Act"), and has been sold in reliance on the exemption from
registration provided by Regulation S under the Act
("Regulation S"). Prior to the expiration of a 40-day
restricted period beginning on the Original Issue Date (the
"Restricted Period"), the Warrant represented by this
certificate may not be offered or sold, directly or
indirectly, within the United States (as defined in
Regulation S under the Act), to a U.S. Person (as defined in
Regulation S under the Act) or for the account or benefit of
a U.S. Person. Neither Xxxx Systems, Inc. nor its transfer
agent shall be obligated to remove this legend unless it
shall have received an opinion of counsel stating that such
removal complies with the requirements of Regulation S
(under the Act).
WARRANT NO. 640,000 WARRANT SHARES
---------------
WARRANT CERTIFICATE
XXXX SYSTEMS, INC.
This Warrant Certificate certifies that XXXXXXXX INTERNATIONAL LIMITED, or
registered assigns, is the registered holder of one Warrant (the "Warrant")
expiring on the Termination Date (as defined below) to purchase 640,000 shares
(the "Warrant Shares") of common stock, without par value (the "Common Stock"),
of Xxxx Systems, Inc., a California corporation (the "Issuer"), at the Exercise
Price (as defined below).
The Warrant represented hereby has been issued pursuant to the
Subscription Agreement dated June 28, 1996, as amended by Amendment No. 1
thereto dated June 28, 1996 (as so amended, the "Subscription Agreement"),
between the Issuer and Xxxxxxxx International Limited (the "Subscription
Agreement") and is subject to the terms and conditions thereof. Unless
otherwise defined herein, capitalized terms used herein shall have the
meanings set forth in the Subscription Agreement. A copy of the Subscription
Agreement may be obtained by the registered holder hereof upon written
request to the Issuer.
The Warrant represented hereby may be exercised on any Business Day (a
"Warrant Exercise Date") after June 30, 1997 but not after December 29, 2000
(the "Termination Date"). The Warrant entitles the registered holder hereof
to receive from the Issuer upon exercise up to the number of Warrant Shares
set forth on the face hereof upon surrender of this Warrant Certificate as
provided on the reverse hereof and payment of the Exercise Price defined below
(the "Exercise Price") (plus transfer taxes, if applicable) to the Issuer in
cash or by certified or official bank check.
The Exercise Price per Warrant Share shall be the lesser of (x) $8.00
and (y) 101% of the Weighted Average Price (as defined below) for the 30
Business Days ending two Business Days prior to the relevant Exercise Date;
provided, however, that in no event shall such Exercise Price be greater than
115% of the Weighted Average Price for the first five of such 30 Business
Days.
As used above, the term "Weighted Average Price" means, with respect to
any specified time period, the arithmetic average of the daily
volume-weighted average sale prices (rounded to the nearest one-tenth of one
cent) of the shares of Xxxx Common Stock on the Nasdaq Stock Market, as
reported by Bloomberg L.P., or, if Bloomberg L.P. is not then reporting such
information, by any successor service mutually agreed upon by Xxxx and
Xxxxxxxx.
The Warrant represented hereby shall have the following additional terms:
1. The Warrant represented hereby has been issued pursuant to the Subscription
Agreement and is subject to the terms and conditions thereof. Unless
otherwise defined herein, capitalized terms used herein shall have the
meanings set forth in the Subscription Agreement. A copy of the
Subscription Agreement may be obtained by the registered holder hereof upon
written request to the Issuer.
2. The Warrant entitles the registered holder hereof to receive from the
Issuer upon exercise up to the number of Warrant Shares set forth on the
face hereof upon surrender of this Warrant Certificate as provided below
and payment of the Exercise Price set forth on the face hereof (plus
transfer taxes, if applicable) to the Issuer in cash or by certified or
official bank check.
3. The Warrant represented hereby may be exercised upon surrender of this
Warrant Certificate by the registered holder hereof to the Issuer at its
principal office on any Exercise Date with the Exercise Notice attached
hereto (an "Exercise Notice") duly completed and signed by the registered
holder hereof and upon payment by such holder to the Issuer of the Exercise
Price (plus transfer taxes, if applicable) for the total number of Warrant
Shares in respect of which such Warrant is then exercised. The Warrant
represented hereby shall be exercisable only in the minimum amount of
30,000 Warrant Shares and integral multiples of 30,000 Warrant Shares in
excess thereof.
4. On the third Business Day following an Exercise Date (an "Issue Date") the
Issuer shall issue and cause to be delivered to the registered holder
hereof at such address in the City and State of New York as such holder
shall specify in the Exercise Notice a certificate
2
or certificates for the number of full Warrant Shares issuable upon the
exercise of such Warrant, registered in such holder's name, together with
cash (if any) as provided in paragraph 6. Such certificate or certificates
shall be deemed to have been issued and any person so designated to be
named therein shall be deemed to have become a holder of record of such
Warrant Shares as of such Exercise Date.
5. If on such Issue Date the number of Warrant Shares to be delivered shall
be less than the total number of Warrant Shares deliverable hereunder,
there shall be issued to the holder hereof or his assignee on such Issue
Date a new warrant certificate substantially identical to this Warrant
Certificate, except that such new warrant certificate shall evidence the
right to purchase the number of Warrant Shares equal to (x) the total
number of Warrant Shares deliverable hereunder less (y) the number of
Warrant Shares so delivered.
6. The Issuer shall not be required to issue fractional Warrant Shares on
the exercise of the Warrant represented hereby. The number of full Warrant
Shares which shall be issuable upon the exercise of the Warrant shall be
computed on the basis of the aggregate number of Warrant Shares purchasable
on exercise of the Warrant so presented. If any fraction of a Warrant Share
would, except for the provisions of this paragraph 6, be issuable on the
exercise of the Warrant, the Issuer shall pay an amount in cash equal to
the market value per Warrant Share on the day immediately preceding the
date the Warrant is presented for exercise, multiplied by such fraction.
7. For so long as the Warrant represented hereby has not been exercised
in full, Xxxx shall at all times reserve and keep available, free from
pre-emptive rights, out of its authorized but unissued Shares, for issuance
upon exercise of the Warrant represented hereby, the maximum number of
Shares then so issuable (as adjusted from time to time pursuant to
paragraph 12).
8. By accepting delivery of this Warrant Certificate, the registered
holder hereof covenants and agrees with the Issuer not to exercise or
transfer the Warrant represented hereby except in compliance with the terms
of the Subscription Agreement and this Warrant Certificate.
9. By accepting delivery of this Warrant Certificate, the registered
holder hereof covenants and agrees with the Issuer that no Warrant may be
sold, assigned, conveyanced, pledged, hypothecated or in any other manner
disposed of or transferred unless and until such holder shall deliver to
the Issuer (i) written notice of such transfer and of the name and address
of the transferee has been received by the Issuer; (ii) a written agreement
of the transferee to comply with the terms of the Subscription Agreement
and this Warrant Certificate and (iii) in the case of a transfer hereof
prior to the expiration of the Restricted Period specified on the first
page hereof, an opinion of counsel stating that such transferee is not a
"U.S. person" as defined in Regulation S under the Securities Act of 1933,
as amended.
10. The Issuer will pay all documentary stamp taxes (if any) attributable
to the issuance of Warrant Shares upon the exercise of the Warrant by the
registered holder hereof;
3
PROVIDED, HOWEVER, that the Issuer shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the
registration of the Warrant Certificate or any certificates for Warrant
Shares in a name other than that of the registered holder of the Warrant
Certificate surrendered upon the exercise of a Warrant, and the Issuer
shall not be required to issue or deliver the Warrant Certificate or
certificates for Warrant Shares unless or until the person or persons
requesting the issuance thereof shall have paid to the Issuer the amount of
such tax or shall have established to the satisfaction of the Issuer that
such tax has been paid.
11. In case this Warrant Certificate shall be mutilated, lost, stolen or
destroyed, the Issuer may in its discretion issue in exchange and
substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate
lost, stolen or destroyed, a new Warrant Certificate of like tenor, but
only upon receipt of evidence reasonably satisfactory to the Issuer of such
loss, theft or destruction of such Warrant Certificate and indemnity, if
requested, satisfactory to it. Applicants for a substitute Warrant
Certificate shall also comply with such other reasonable regulations and
pay such other reasonable charges as the Issuer may prescribe.
12. The number of Warrant Shares issuable upon the exercise of the Warrant
(the "Exercise Rate") and the terms and conditions of the Warrant are
subject to adjustment by the Issuer, in consultation with the holder
hereof, from time to time as follows:
(a) If the Issuer:
1. subdivides its outstanding shares of Common Stock into a greater
number of shares;
2. combines its outstanding shares of Common Stock into a smaller
number of shares; or
3. issues by reclassification of its Common Stock any shares of its
Capital Stock (as defined below);
then the Exercise Rate in effect immediately prior to such action
shall be adjusted so that the registered holder hereof shall
thereafter be entitled to receive upon exercise the number of shares
of Common Stock or other Capital Stock of the Issuer which such
holder would have owned immediately following such action if such
holder had exercised the Warrant immediately prior to such action.
As used herein, the term "Capital Stock" means, with respect to any
corporation, any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
Such adjustment shall become effective simultaneously with the
effective date of any subdivision, combination or reclassification.
4
If, after an adjustment, the registered holder hereof would receive
upon exercise shares of two or more classes of Capital Stock of the
Issuer, the Exercise Rate shall thereafter be subject to adjustment
upon the occurrence of an action taken with respect to each such
class of Capital Stock as is contemplated hereby with respect to the
Common Stock, on terms comparable to those applicable to Common Stock
hereunder.
(b) Whenever the Exercise Rate is adjusted, the Issuer shall provide the
notices required by paragraph 15 hereof.
(c) If:
1. the Issuer takes any action that would require an adjustment in
the Exercise Rate pursuant to subparagraph (a) above; or
2. there is a liquidation or dissolution of the Issuer;
then the Issuer shall mail to the registered holder hereof a notice
stating the proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, transfer, lease, liquidation
or dissolution, as the case may be. The Issuer shall mail the notice
at least 15 days before such date.
(d) The Issuer covenants and agrees with the registered holder
hereof not to consolidate or merge with or into, or transfer or lease
all or substantially all its assets to, any person unless:
1. such person shall expressly assume in writing all of the
obligations of the Issuer under the Subscription Agreement and
hereunder and deliver notice thereof to the registered holder
hereof; and
2. upon consummation of such transaction, the Warrant shall
automatically become exercisable for the kind and amount of
securities, cash or other assets that the registered holder hereof
would have owned immediately after the consolidation, merger,
transfer or lease if such holder had exercised the Warrant
immediately before the effective date of such transaction.
(e) After an adjustment to the Exercise Rate hereunder, any subsequent
event requiring an adjustment hereunder shall cause an adjustment
to the Exercise Rate as so adjusted.
13. Upon the issuance of any dividend or distribution pro rata to all holders
of Common Stock, the registered holder hereof on the record date for such
distribution shall be entitled to receive such dividend or distribution on
the same terms as the holders of Common Stock upon exercise hereof.
5
14. If at any time the Issuer grants, issues or sells options, convertible
securities, or rights to purchase Capital Stock, warrants or other
securities pro rata to the record holders of the Common Stock
("Distribution Rights") or, without duplication, makes any dividend or
otherwise makes any distribution ("Distribution") on shares of Common
Stock, then the Issuer shall grant, issue, sell or make to the
registered holder hereof upon exercise of the Warrant represented
hereby the aggregate Distribution Rights or Distribution, as the case
may be, which such holder would have acquired if such holder had held
the maximum number of Warrant Shares acquirable upon complete exercise
of such holder's Warrant immediately before the record date for the
grant, issuance or sale of such Distribution Rights or making of such
Distribution, as the case may be, or, if there is no such record date,
the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Distribution Rights or
making of such Distribution, as the case may be.
15. Upon any adjustment of the Exercise Rate pursuant to paragraph 12, the
Issuer shall promptly thereafter but in any event within 15 days
following such adjustment (i) cause to be delivered to the registered
holder hereof a certificate of its Chief Financial Officer setting
forth the Exercise Rate after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which
such calculations are based, which certificate shall be conclusive
evidence of the correctness of the matters set forth therein, and (ii)
cause to be delivered to the registered holder hereof at his or her
address appearing on the Warrant Register written notice of such
adjustments by first-class mail, postage prepaid. Where appropriate,
such notice may be given in advance and included as part of the notice
required to be mailed under the other provisions of this paragraph 15.
In case:
(a) the Issuer shall authorize the issuance to all holders of shares
of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription
rights or warrants; or
(b) of any consolidation or merger to which the Issuer is a party
and for which approval of any shareholders of the Issuer is
required, or of the conveyance or transfer of the properties and
assets of the Issuer substantially as an entirety, or of any
reclassification or change of Common Stock issuable upon
exercise of the Warrant (other than a change in par value, or
from par value to no par value, or from no par value to par value,
or as a result of a subdivision or combination), or of a
tender offer or exchange offer for shares of Common Stock; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding up of the Issuer; or
(d) the Issuer proposes to take any action which would require an
adjustment of the Exercise Rate pursuant to paragraph 12;
6
then the Issuer shall cause to be given to the registered holder hereof
at his or her address appearing on the Warrant Register, at least 20
days (or 10 days in any case specified in clauses (a) or (b) above)
prior to the applicable record date hereinafter specified, or promptly
in the case of events for which there is no record date, by first class
mail, postage prepaid, a written notice stating (i) the date as of which
the holders of record of shares of Common Stock to be entitled to
receive any such rights, options, warrants or distribution are to be
determined, or (ii) the initial expiration date set forth in any tender
offer or exchange offer for shares of Common Stock, or (iii) the date on
which any such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up is expected to become
effective or consummated, and the date as of which it is expected that
holders of record of shares of Common Stock shall be entitled to
exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up.
16. The Issuer shall serve as warrant agent (the "Warrant Agent") under
this Agreement. The Warrant Agent hereunder shall at all times
maintain a register (the "Warrant Register") of the holders of Warrants.
Upon 30 days' notice to the registered holder hereof, the Issuer may
appoint a new Warrant Agent. Such new Warrant Agent shall be a
corporation doing business under the laws of the United States or any
state thereof, in good standing and having a combined capital and
surplus of not less than $50,000,000. The combined capital and surplus
of any such new Warrant Agent shall be deemed to be the combined
capital and surplus as set forth in the most recent annual report of
its condition published by such Warrant Agent prior to its appointment;
PROVIDED that such reports are published at least annually pursuant
to law or to the requirements of a federal or state supervising or
examining authority. After acceptance in writing of such appointment
by the new Warrant Agent, it shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance,
act or deed; but if for any reason it shall be necessary or
expedient to execute and deliver any further assurance, conveyance,
act or deed, the same shall be done at the expense of the Issuer and
shall be legally and validly executed and delivered by the Issuer.
Any corporation into which the Issuer or any new Warrant Agent may be
merged or any corporation resulting from any consolidation to which
the Issuer or any new Warrant Agent shall be a party or any
corporation to which the Issuer or any new Warrant Agent transfers
substantially all of its corporate trust or shareholders services
business shall be a successor Warrant Agent under this Agreement
without any further act; PROVIDED that such corporation (i) would be
eligible for appointment as successor to the Warrant Agent under the
provisions of this paragraph 16 or (ii) is a wholly owned subsidiary
of the Warrant Agent. Any such successor Warrant Agent shall promptly
cause notice of its succession as Warrant Agent to be mailed (by first
class mail, postage prepaid) to the registered holder hereof at such
holder's last address as shown on the Warrant Register.
This Warrant Certificate shall not be valid unless signed by the Issuer.
7
IN WITNESS WHEREOF, Xxxx Systems, Inc. has caused this Warrant
Certificate to be signed by its duly authorized officer.
Dated: July 3, 1996
Xxxx Systems, Inc.
By: /s/ Xxxxx X. Xxxxx Xx
----------------------------
Name: Xxxxx X. Xxxxx Xx
Title: Vice President
8
FORM OF EXERCISE NOTICE
(To Be Executed Upon Exercise Of the Warrant)
[DATE]
Xxxx Systems, Inc.
[Address]
[Address]
[Address]
Re: Warrant No.
----------------------
Ladies and Gentlemen:
The undersigned is the registered holder of the above-referenced warrant
(the "Warrant") issued by Xxxx Systems, Inc., evidenced by the Warrant
Certificate attached hereto, and hereby elects to exercise the Warrant to
purchase ____ shares of Warrant Shares (as defined in such Warrant
Certificate) and herewith tenders $______ [in cash] [by certified or official
bank check to the order of Xxxx Systems, Inc.] as payment for such Warrant
Shares in accordance with the terms of such Warrant Certificate.
In accordance with the terms of the attached Warrant Certificate, the
undersigned requests that certificates for such shares be registered in the
name of and delivered to the undersigned at the following address in the City
and State of New York:
--------------------
--------------------
--------------------
[IF THE NUMBER OF WARRANT SHARES TO BE DELIVERED IS LESS THAN THE TOTAL
NUMBER OF WARRANT SHARES DELIVERABLE UNDER THE WARRANT, INSERT THE FOLLOWING --
The undersigned requests that a new warrant certificate substantially identical
to the attached Warrant Certificate be issued to the undersigned evidencing
the right to purchase the number of Warrant Shares equal to (x) the total
number of Warrant Shares deliverable under the Warrant less (y) the number of
Warrant Shares to be delivered in connection with this exercise.
NAME OF REGISTERED HOLDER
[ADDRESS]
[ADDRESS]
[ADDRESS]
By:
------------------------------
Name:
Title:
9
