Exhibit 4.3
TERAYON COMMUNICATION SYSTEMS, INC.
5% CONVERTIBLE SUBORDINATED NOTES DUE 2007
__________________
PURCHASE AGREEMENT
__________________
July 20, 2000
Deutsche Bank Securities Inc.
Xxxxxx Brothers, Inc.
c/o Deutsche Bank Securities Inc.
0 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Ladies and Gentlemen:
Terayon Communication Systems, Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the several initial purchasers named in Schedule I hereto (the
"Initial Purchasers") $500,000,000 aggregate principal amount of its 5%
convertible subordinated notes due 2007 (the "Firm Securities") and, at the
election of the Initial Purchasers, up to an additional $75,000,000 aggregate
principal 5% convertible subordinated notes due 2007 (the "Optional
Securities"). The Firm Securities and the Optional Securities are herein
collectively referred to as the "Securities," and are issuable pursuant to the
provisions of an Indenture to be dated as of July 26, 2000 (the "Indenture")
between the Company and State Street Bank and Trust Company of California, N.A.,
as trustee (the "Trustee"). The Securities will be convertible into shares (the
"Underlying Securities") of common stock of the Company, par value $.001 per
share (the "Common Stock").
The sale of the Securities to the Initial Purchasers will be made
without registration of the Securities under the Securities Act of 1933, as
amended (the "Act"), in reliance upon exemptions therefrom.
It is understood and acknowledged that upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Act, each of the Securities (and each security issued in
exchange therefor or in substitution thereof) shall have the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET
FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR
ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH LETTER CAN
BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES
TO PERSONS OTHER THAN U.S. PERSONS IN OFFSHORE TRANSACTIONS
MEETING THE REQUIREMENTS OF RULE 904 UNDER REGULATION S
UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT
WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT.
In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum dated July 7, 2000 (including the
documents incorporated by reference therein, the "Preliminary Memorandum") and a
final offering memorandum dated the date hereof (including the documents
incorporated by reference therein, the "Final Memorandum" and, with the
Preliminary Memorandum, collectively, the "Memorandum"), for the information of
the Initial Purchasers and for delivery to prospective purchasers of the
Securities.
The purchasers of the Securities and the Underlying Securities and
their direct and indirect transferees will be entitled to the benefits of a
registration rights agreement, to be dated as of the Closing Date (as defined
below) and to be substantially in the form attached hereto as Exhibit A (the
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"Registration Rights Agreement"). This Agreement, the Securities, the Indenture
and the Registration Rights Agreement are referred to herein as the "Operative
Agreements."
The Company hereby agrees with the Initial Purchasers as follows:
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1. The Company agrees to issue and sell the Firm Securities to the
several Initial Purchasers as hereinafter provided, and each Initial Purchaser,
upon the basis of the representations and warranties herein contained, but
subject to the conditions hereinafter stated, agrees to purchase, severally and
not jointly, from the Company the respective principal amount of Firm Securities
set forth opposite such Initial Purchaser's name in Schedule I hereto at a price
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(the "Purchase Price") equal to 97.0% of their principal amount. Deutsche Bank
Securities Inc. shall be the sole bookrunning manager for the offering and sale
of the Securities.
2. The Company agrees that, without the prior written consent of
Deutsche Bank Securities Inc., it will not, during the period ending ninety (90)
days after the date of the Final Memorandum, (i) offer, pledge, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
or (ii) enter into any swap or other agreement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. Notwithstanding the foregoing, the Company may without such consent
(A) issue and sell the Securities to be sold hereunder and issue the Underlying
Securities upon conversion of the Securities, (B) grant options or issue and
sell stock upon the exercise of outstanding stock options or otherwise pursuant
to the Company's stock option or employee stock purchase plans, (C) issue Common
Stock upon the exercise of warrants outstanding on the date hereof, or (D)
beginning on the date that is 46 days after the date of the Final Memorandum,
issue Common Stock or any securities convertible into or exchangeable or
exercisable for Common Stock as consideration for pending or future acquisitions
or strategic partner transactions.
3. The Company understands that the Initial Purchasers intend to
offer the Securities as soon after this Agreement has become effective as in the
judgment of the Initial Purchasers is advisable, and initially to offer the
Securities upon the terms set forth in the Memorandum.
The Company confirms that it has authorized the Initial Purchasers,
subject to the restrictions set forth below, to distribute copies of the
Memorandum in connection with the offering of the Securities. Each Initial
Purchaser hereby makes to the Company the following representations and
agreements:
(i) it is an institutional "accredited Investor" as defined in Rule
501(a) under the Act;
(ii) (A) it will not solicit offers for, or offer to sell, the
Securities by any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Act ("Regulation D")) and
(B) it will solicit offers for the Securities only from, and will offer the
Securities only to, (1) persons whom it reasonably believes to be
"qualified institutional buyers" within the meaning of Rule
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144A under the Act or (2) non-U.S. persons (as defined in Regulation S
under the Act) in compliance with Regulation S under the Act.
4. Payment for the Firm Securities shall be made by wire transfer in
immediately available funds to the account specified by the Company to the
Initial Purchasers (which account shall be specified no later than noon the
Business Day (as defined below) prior to the First Closing Date (as defined
below)), on July 26, 2000, or on such other date as the Initial Purchasers and
the Company may agree upon in writing. The time and date of such payment are
referred to herein as the "First Closing Date." As used herein, the term
"Business Day" means any day other than a day on which banks are permitted or
required to be closed in New York City.
Payment for the Firm Securities shall be made against delivery to the
nominee of The Depository Trust Company for the respective accounts of the
several Initial Purchasers of the Firm Securities of one or more global notes
representing the Firm Securities (collectively, the "Firm Global Securities"),
with any transfer taxes payable in connection with the transfer to the Initial
Purchasers of the Firm Securities duly paid by the Company. The Firm Global
Securities will be made available for inspection by the Initial Purchasers at
the office of Deutsche Bank Securities Inc. at the address set forth above not
later than 1:00 P.M., New York City time, on the Business Day prior to the First
Closing Date.
In addition, the Initial Purchasers may, upon written notice (the
"Notice") from Deutsche Bank Securities Inc. given to the Company from time to
time, but in any event not more than thirty (30) days subsequent to the date of
this Agreement, purchase all or less than all of the Optional Securities at the
Purchase Price plus imputed interest from the First Closing Date to the related
Optional Closing Date (as defined below) at the rate per annum equal to the
interest rate borne by the Securities. The Company agrees to sell to the
Initial Purchasers the number of Optional Securities specified in such Notice
and the Initial Purchasers agree, severally and not jointly, to purchase such
Optional Securities. Such Optional Securities shall be purchased, if at all,
from the Company for the account of each Initial Purchaser in the same
proportion as the amount of Firm Securities set forth opposite such Initial
Purchaser's name in Schedule I hereto bears to the total amount of Securities
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(subject to adjustment by Deutsche Bank Securities Inc. to eliminate fractions).
No Optional Securities shall be sold or delivered unless the Firm Securities
previously have been, or simultaneously are, sold and delivered. Within thirty
(30) days subsequent to the date of this Agreement, the right to purchase the
Optional Securities or any portion thereof may be exercised from time to time
and to the extent not previously exercised may be surrendered and terminated at
any time upon notice by Deutsche Bank Securities Inc. to the Company.
Payment for the Optional Securities on an Optional Closing Date shall
be made by the Initial Purchasers by wire transfer to the account specified by
the Company to the Initial Purchasers (which account shall be specified no later
than noon the Business Day prior to the Optional Closing Date). The Optional
Closing Date shall be determined by Deutsche Bank Securities Inc. and the
Company, but not more than seven (7) full Business Days after Notice of the
election to purchase the Optional Securities is given to the Company. Each time
for the delivery of and payment for the Optional Securities is referred to
herein as the
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"Optional Closing Date," which may be the First Closing Date (the First Closing
Date and each Optional Closing Date, if any, being referred to, as applicable,
as a "Closing Date").
Payment for the Optional Securities shall be made against delivery to
the nominee of The Depository Trust Company for the respective accounts of the
several Initial Purchasers of the Optional Securities of one or more global
notes representing the Optional Securities (collectively, the "Optional Global
Securities"), with any transfer taxes payable in connection with the transfer to
the Initial Purchasers of the Optional Securities duly paid by the Company. The
Optional Global Securities will be made available for inspection by the Initial
Purchasers at the office of Deutsche Bank Securities Inc. at the address set
forth above not later than 1:00 P.M., New York City time, on the Business Day
prior to the First Closing Date.
5. The Company represents and warrants to each Initial Purchaser
that:
(a) The Preliminary Memorandum did not, as of its date, and the Final
Memorandum will not, in the form used by the Initial Purchasers to confirm
sales of the Securities or as of any Closing Date, contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Company and its
subsidiaries have no material contingent obligations which are not
disclosed in the Company's consolidated financial statements included or
incorporated by reference in the Memorandum; provided, however, that this
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representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished to the
Company in writing by an Initial Purchaser through Deutsche Bank Securities
Inc. expressly for use therein;
(b) The financial statements, and the related notes thereto, included
or incorporated by reference in the Memorandum present fairly the
consolidated financial position of the Company and its consolidated
subsidiaries as of the dates indicated and the results of their operations
and the changes in their consolidated cash flows for the periods specified;
said financial statements have been prepared in conformity with generally
accepted accounting principles and practices applied on a consistent basis.
The pro forma financial information included in the Memorandum presents
fairly the information shown therein, has been prepared in accordance with
the Commission's rules and guidelines with respect to pro forma financial
statements, has been properly compiled on the pro forma bases described
therein, and, in the opinion of the Company, the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein;
(c) The Company's only "Significant Subsidiaries" (as defined in Rule
1-02(w) of Regulation S-X promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), are Imedia Corporation, Telegate
Ltd. and Combox Ltd.;
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(d) Neither the Company nor any of its Significant Subsidiaries has
sustained since March 31,2000 any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Memorandum; and, since the respective dates as of which information is
given in the Memorandum, there has not been any change in the capital stock
or long-term debt of the Company, any of its Significant Subsidiaries or
any material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, management,
consolidated financial position, stockholders' equity or results of
operations of the Company and its Significant Subsidiaries taken as a
whole, otherwise than as set forth or contemplated in the Memorandum;
(e) The Company and its Significant Subsidiaries have good and
indefeasible title to, or a valid leasehold interest in, all of their
material assets, except as is described in the Memorandum or where the
failure thereof would not have a material adverse effect on the earnings,
business, management, properties, assets, rights, prospects, results of
operations or condition (financial or otherwise) of the Company and its
Significant Subsidiaries, taken as a whole (a "Material Adverse Effect");
(f) Each of the Company and its Significant Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation; each of the Company
and its Significant Subsidiaries has the corporate power and authority to
own its properties and to carry on its business as now being and hereafter
proposed to be conducted as described in the Memorandum. Each of the
Company and its Significant Subsidiaries is duly qualified, in good
standing and authorized to do business in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualification or authorization, except where the failure to so qualify
would not reasonably be expected to have a Material Adverse Effect;
(g) The Company has an authorized capitalization as set forth in the
Memorandum, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
nonassessable and conform to the description of the capital stock of the
Company incorporated by reference in the Memorandum. All of the
outstanding shares of capital stock of each of its Significant Subsidiaries
have been duly authorized and validly issued and are fully paid and non-
assessable. The shares of capital stock of its Significant Subsidiaries
held by the Company are owned by the Company free and clear of all liens,
encumbrances, equities and claims; and, to the Company's knowledge, no
options, warrants or other rights to purchase, agreements or other
obligations to issue or other rights to convert any obligations into shares
of capital stock or ownership interest in its Significant Subsidiaries are
outstanding;
(h) The Underlying Securities have been duly authorized and duly
reserved in sufficient numbers for issuance by the Company upon conversion
of the Securities
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and, when issued upon conversion of the Securities in accordance with the
terms of the Securities, will be validly issued, fully paid and
nonassessable, and the issuance of the Underlying Securities is not and
upon issuance will not be subject to any preemptive rights or similar
rights;
(i) As of the First Closing Date, the Indenture will have been duly
and validly authorized by the Company and, upon its execution and delivery
by the Company, and assuming due authorization, execution and delivery by
the Trustee, will be a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except that
the enforcement thereof may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought; the Indenture conforms in all material respects to the description
thereof in the Memorandum;
(j) As of the First Closing Date, the Securities will have been duly
authorized by the Company, and when executed by the Company and
authenticated by the Trustee in accordance with the Indenture and delivered
to the Initial Purchasers against payment therefor in accordance with the
terms hereof, will have been validly issued and delivered, and will
constitute valid and binding obligations of the Company, entitled to the
benefits of the Indenture and enforceable in accordance with their terms,
except as enforcement thereof may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally
and subject to the applicability of general principles of equity; the
Securities conform in all material respects to the description thereof in
the Memorandum;
(k) The Company has all the requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement and
the Registration Rights Agreement; the execution and delivery of, and the
performance by the Company of its obligations under, this Agreement and the
Registration Rights Agreement have been duly and validly authorized by the
Company and each of this Agreement and, as of the First Closing Date, the
Registration Rights Agreement will have been duly executed and delivered by
the Company and will constitute the valid and legally binding agreement of
the Company, enforceable against the Company in accordance with its terms,
except as the enforcement hereof and thereof may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors'
rights generally and subject to the applicability of general principles of
equity, and except as rights to indemnity and contribution hereunder and
thereunder may be limited by federal or state securities laws or principles
of public policy; the Registration Rights Agreement conforms in all
material respects to the description thereof in the Memorandum;
(l) Neither the offering and sale of the Securities nor the use of
the proceeds therefrom will violate or result in a violation of Section 7
of the Exchange Act, or any regulation promulgated thereunder, including,
without limitation, Regulations T, U and X of the Board of Governors of the
Federal Reserve System;
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(m) The Company and its Significant Subsidiaries are in compliance in
all material respects with all of the provisions of their respective
certificates of incorporation or articles of incorporation, as applicable,
and by-laws, and no event has occurred or failed to occur, which has not
been remedied or waived, the occurrence or non-occurrence of which
constitutes, or which with the passage of time or giving of notice or both
would constitute, a violation or default by the Company or any of its
Significant Subsidiaries under its certificate of incorporation or articles
of incorporation, as applicable, or by-laws or any indenture, mortgage,
deed of trust, loan agreement or other material agreement or instrument, or
any judgment, decree or order to which the Company or any of its
Significant Subsidiaries is a party or by which they or any of their
respective properties is bound which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect; the issue
and sale by the Company of the Securities and the issuance of the
Underlying Securities upon conversion of the Securities and the execution,
delivery and performance by the Company of all its obligations under the
Operative Agreements and the consummation of the transactions therein
contemplated will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which the Company or any of its Significant Subsidiaries is a
party or by which the Company or any of its Significant Subsidiaries is
bound or to which any of the property or assets of the Company or any of
its Significant Subsidiaries is subject, except for any such conflicts,
breaches or violations that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect, nor will any such
action result in any violation of the provisions of the certificate of
incorporation or articles of incorporation, as applicable, or by-laws of
the Company or any of its subsidiaries or any applicable law or statute or
any order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any of
their respective properties, except for any such violations that,
individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect; and no consent, approval, authorization, order,
license, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the
Securities or the consummation by the Company of the transactions
contemplated by this Agreement, the Registration Rights Agreement or the
Indenture, except such consents, approvals, authorizations, orders,
licenses, registrations or qualifications as may be required (i) under
state securities or Blue Sky Laws in connection with the purchase and
distribution of the Securities by the Initial Purchasers, (ii) under the
Act with respect to the registration of the Securities and the Underlying
Securities pursuant to the terms of the Registration Rights Agreement or
(iii) except where the failure to obtain any such consents, approvals,
authorizations, orders, licenses, registrations or qualifications would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Except for the Securities, none of the offerings
by the Company of its securities before or during the Offering is part of
the Offering or part of a single plan of financing together with the
Offering;
(n) The statements set forth in the Memorandum (i) under the caption
"Description of Notes," insofar as they purport to constitute a summary of
the terms of
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the Securities, (ii) relating to the description of the common stock of the
Company (as incorporated by reference in the Memorandum), (iii) under the
caption "Certain United States Federal Income Tax Considerations," and (iv)
under the caption "Plan of Distribution," insofar as they purport to
describe the provisions of the laws and documents referred to therein, are
accurate, complete and fair;
(o) Other than as set forth in the Memorandum, there is no action,
suit, proceeding or any other litigation pending or, to the best of the
Company's knowledge, threatened against the Company or any of its
Significant Subsidiaries, or in any other manner relating directly and
materially adverse to the Company or any of its Significant Subsidiaries or
any of their material properties, in any court or before any arbitrator of
any kind or before or by any governmental body which would reasonably be
expected to have a Material Adverse Effect or prevent the consummation of
the transactions contemplated hereby;
(p) All licenses, permits, consents, certificates of need,
authorizations, certifications, accreditations, franchises, approvals,
grants of rights by, or filings or registrations with, any federal, state,
local or foreign court or governmental or public body, authority, or other
instrumentality or third person (including, without limitation, the Federal
Communications Commission (the "FCC")) (any of the foregoing a "License")
necessary for the Company and its subsidiaries to own, build, maintain or
operate their businesses or properties have been duly authorized and
obtained and are in full force and effect except where the failure to be so
obtained or in effect would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; and the Company
and its subsidiaries are and will continue to be in compliance in all
material respects with all provisions thereof; to the Company's knowledge,
no event has occurred which permits (or with the passage of time would
permit) the revocation or termination of any License, or which could result
in the imposition of any restriction thereon, which is of such a nature or
the effect of which would reasonably be expected to have a Material Adverse
Effect; no material License is the subject of any pending or, to the best
of the Company's knowledge, threatened challenge or revocation which, if
such License were revoked, would reasonably be expected to have a Material
Adverse Effect;
(q) The Company and its Significant Subsidiaries are in compliance in
all material respects with all applicable laws; the Company and its
Significant Subsidiaries have duly and timely filed all reports, statements
and filings that are required to be filed by any of them under the
Communications Act of 1934, as amended, and the rules and regulations
promulgated thereunder, and are in all material respects in compliance
therewith, including without limitation the rules and regulations of the
FCC; the Company is not aware of any event or circumstance constituting
noncompliance (or any person alleging noncompliance) with any rule or
regulation of the FCC, which such event or circumstance would reasonably be
expected to have a Material Adverse Effect;
(r) The Company is not required to register under the provisions of
the Investment Company Act of 1940, as amended (the "Investment Company
Act").
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Neither the entering into or performance by the Company of this Agreement
nor the offering and sale of the Securities violates any provision of such
act or requires any consent, approval, or authorization of, or registration
with, the Commission or any other governmental or public body or authority
pursuant to any provisions of such act;
(s) Each of Ernst & Young LLP, who have certified certain financial
statements of the Company and its subsidiaries, and PricewaterhouseCoopers
LLP, who have certified certain financial statements of the Asset Network
Electronics Division of Tyco Electronics Corporation, are independent
public accountants as required by the Act and the rules and regulations of
the Commission thereunder;
(t) Neither the Company nor, to the Company's knowledge, any
affiliate (as defined in Rule 501(b) of Regulation D) of the Company has
directly, or through any agent, sold, offered for sale, solicited offers to
buy, or otherwise negotiated in respect of, any security (as defined in the
Act) which is or will be integrated with the sale of the Securities in a
manner that would require the registration under the Act of the offering
contemplated by the Memorandum;
(u) None of the Company nor, to the Company's knowledge, any
affiliate (as defined in Rule 501(b) of Regulation D) of the Company or any
person acting on its or their behalf has offered or sold the Securities by
means of any general solicitation or general advertising within the meaning
of Rule 502(c) under the Act or, with respect to Securities sold outside
the United States to non-U.S. persons (as defined in Rule 902 under the
Act), by means of any directed selling efforts within the meaning of Rule
902 under the Act, and the Company, and, to the Company's knowledge, any
affiliate of the Company and any person acting on its or their behalf have
complied with and will implement the "offering restrictions" within the
meaning of such Rule 902;
(v) The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Act;
(w) Assuming the accuracy of the representations of the Initial
Purchasers contained in Section 3 hereof, it is not necessary in connection
with the offer, sale and delivery of the Securities in the manner
contemplated by this Agreement to register the Securities under the Act or
to qualify the Indenture under the Trust Indenture Act of 1939, as amended;
(x) No relationship, direct or indirect, exists between or among any
of the Company and its subsidiaries, on the one hand, and any affiliate,
director, officer, stockholder, customer or supplier of any of them, on the
other hand, which is required by the Act or by the rules and regulations
enacted thereunder to be described in a registration statement on Form S-3
which is not so described in the Memorandum;
(y) Except as permitted by the Act, the Company has not distributed
and, prior to the later to occur of the Closing Date and completion of the
distribution of the Securities, will not distribute any offering material
in connection with the offering and
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sale of the Securities other than the Preliminary Memorandum and the Final
Memorandum (and any amendment or supplement thereto in accordance with
Section 6(c) hereof);
(z) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions of the
Company and its subsidiaries are executed in accordance with management's
general or specific authorization; (ii) transactions of the Company and its
subsidiaries are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for
assets; (iii) access to assets of the Company and its subsidiaries is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets of the
Company and its subsidiaries is compared with existing assets of the
Company and its subsidiaries at reasonable intervals and appropriate action
is taken with respect to any differences; and
(aa) Except as set forth in the Memorandum, no holder of any security
of the Company (other than holders of the Securities) has any right to
request or demand registration of any security of the Company because of
the consummation of the transactions contemplated by the Operative
Agreements.
(bb) The Company and its Significant Subsidiaries have good and
marketable title to all of the properties and assets reflected in the financial
statements (or as described in the Memorandum) hereinabove described, subject to
no lien, mortgage, pledge, charge or encumbrance of any kind except those
reflected in such financial statements (or as described in the Memorandum) or
which are not material in amount. The Company and its Significant Subsidiaries
occupy their leased properties under valid and binding leases conforming in all
material respects to the description thereof set forth in the Memorandum;
(cc) The Company and its subsidiaries have filed all federal, state,
local and foreign income tax returns which have been required to be filed and
have paid all taxes indicated by said returns and all assessments received by
them or any of them to the extent that such taxes have become due. All tax
liabilities have been adequately provided for in the consolidated financial
statements of the Company, and the Company does not know of any actual or
proposed additional tax assessments;
(dd) The Company and each of its subsidiaries hold all material
licenses, certificates and permits from governmental authorities which are
necessary to the conduct of their respective businesses. Except as specifically
disclosed in the Memorandum, the Company and each of its subsidiaries owns or
possesses adequate rights to use all trademarks, trade names, patents, patent
rights, mask works, copyrights, licenses, approvals and governmental
authorizations currently used in its business as now conducted and, to the
Company's knowledge, as proposed to be conducted; and, to the Company's
knowledge, neither the Company nor any of its subsidiaries has infringed any
trademark, trade name, patent, patent right, mask work, copyright, license,
trade secret or other similar right of others, and, except as disclosed in the
Memorandum, no written claim has been made against the Company or any of its
subsidiaries regarding trademark, trade name, patent, mask work,
-11-
copyright, license, trade secret or other infringement which would reasonably be
expected to have a Material Adverse Effect. The Company knows of no material
infringement by others of any trademark, trade name, patent, patent right, mask
work, copyright, license, trade secret or other similar right owned by or
licensed to the Company;
(ee) The Company and each of its Significant Subsidiaries carry, or
are covered by, insurance in such amounts and covering such risks as the Company
reasonably believes to be adequate for the conduct of their respective
businesses and the value of their respective properties and as the Company
reasonably believes to be customary for companies engaged in similar industries;
(ff) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification;
(gg) The Company confirms as of the date hereof that it is in
substantial compliance with all material provisions of Section 1 of Laws of
Florida, Chapter 92-198, An Act Relating to Disclosure of Doing Business with
----------------------------------------------------
Cuba;
----
(hh) Except as disclosed to the Underwriters, the Company is not (nor
did it permit any of its officers, directors, agents, representatives or
affiliates to) directly or indirectly, other than as described in the
Memorandum, taking any of the following actions: (A) solicit, entertain,
encourage, initiate or participate in any proposals, or conduct discussions with
or engage in negotiations, relating to, (B) provide information with respect to
it relating to, or otherwise cooperate with, facilitate or encourage any effort
or attempt with regard to, (C) enter into an agreement providing for, or (D)
make or authorize any statement, recommendation or solicitation in support of,
any possible acquisition of the Company or any of its subsidiaries (whether by
merger, purchase of assets, tender offer or otherwise), or any material portion
of its or their capital stock or assets or any equity interest in the Company or
any of its subsidiaries;
(ii) To the best of Company's knowledge, no labor disturbance by the
employees of the Company or any of its subsidiaries exists or is imminent. No
collective bargaining agreement exists with any of the Company's employees and,
to the best of the Company's knowledge, no such agreement is imminent;
-12-
(jj) The Company's Common Stock is duly and validly registered
pursuant to the requirements of the Exchange Act and the rules and regulations
promulgated thereunder. The Company's Common Stock is listed on the Nasdaq
National Market;
(kk) The Company has not at any time during the last four (4) years
(A) made any unlawful contribution to any candidate for foreign office or failed
to disclose fully any contribution in violation of law, or (B) made any payment
to any federal or state governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments required
or permitted by the laws of the United States or any jurisdiction thereof;
(ll) (A) Each of the Company and its subsidiaries is in compliance
with all rules, laws and regulations relating to the use, treatment, storage and
disposal of toxic substances and protection of health or the environment
("Environmental Laws") which are applicable to its respective business, (B)
neither the Company nor any of its subsidiaries has received notice from any
governmental authority or third party of an asserted claim under Environmental
Laws, which claim is required to be disclosed in the Memorandum and is not so
disclosed, (C) to the Company's knowledge, neither the Company nor any of its
subsidiaries will be required to make future material capital expenditures to
comply with existing Environmental Laws, and (D) to the Company's knowledge, no
property which is leased or occupied by the Company or any of its subsidiaries
has been designated as a Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. (S) 9601, et
--
seq.), or otherwise designated as a contaminated site under applicable state or
---
local law;
(mm) There are no outstanding material loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company or any of its subsidiaries to or for the benefit
of any of the officers or directors of the Company or any of its subsidiaries or
any of the members of the families of any of them, except as disclosed in the
Memorandum;
Any certificate signed by any officer of the Company and delivered to
you or to counsel for the Initial Purchasers shall be deemed a representation
and warranty by the Company to each Initial Purchaser as to the matters covered
thereby.
6. The Company covenants and agrees with each of the several Initial
Purchasers as follows:
(a) to deliver to the Initial Purchasers as many copies of the
Preliminary Memorandum and the Final Memorandum (including all amendments
and supplements thereto) as the Initial Purchasers may reasonably request;
(b) before distributing any amendment or supplement to the
Memorandum, to furnish to the Initial Purchasers a copy of the proposed
amendment or supplement for review and not to distribute any such proposed
amendment or supplement to which the Initial Purchasers reasonably object
in writing;
-13-
(c) if, at any time prior to the completion of the initial placement
of the Securities, any event shall occur as a result of which it is
necessary to amend or supplement the Memorandum in order to make the
statements therein, in the light of the circumstances when the Memorandum
is delivered to a purchaser, not misleading, or if it is necessary to amend
or supplement the Memorandum to comply with law, to notify you and upon
your request, forthwith to prepare and furnish, at the expense of the
Company, to the Initial Purchasers and to the dealers to which Securities
may have been sold by the Initial Purchasers on behalf of the Initial
Purchasers and to any other dealers upon request, such amendments or
supplements to the Memorandum as may be necessary so that the statements in
the Memorandum as so amended or supplemented will not, in the light of the
circumstances when the Memorandum is delivered to a purchaser, be
misleading;
(d) to use its best efforts (i) to register or qualify the Securities
for offering and sale by the Initial Purchasers and by dealers under the
securities or Blue Sky laws of such jurisdictions as the Initial Purchasers
shall reasonably request and to continue such qualifications in effect so
long as reasonably required for distribution of the Securities and (ii) to
pay all fees and expenses (including reasonable fees and disbursements of
counsel for the Initial Purchasers) incurred in connection with the
determination of the eligibility of the Securities for investment under the
laws of such jurisdictions as the Initial Purchasers may designate;
provided that in no event shall the Company be obligated to qualify to do
--------
business in any jurisdiction where it is not now so qualified or to take
any action that would subject it to taxation or service of process in
suits, other than those arising out of the offering or sale of the
Securities, in any jurisdiction where it is not now so subject;
(e) so long as the Securities are outstanding, to furnish to the
Initial Purchasers copies of all reports or other communications (financial
or other) furnished to holders of Securities;
(f) to use the net proceeds received by the Company from the sale of
the Securities pursuant to this Agreement in the manner specified in the
Memorandum under the caption "Use of Proceeds";
(g) to use its best efforts to cause the Securities to be eligible
for The Portal Market of the National Association of Securities Dealers,
Inc.;
(h) to submit an application to have the Underlying Securities listed
on the Nasdaq National Market;
(i) to furnish to the holders of the Securities as soon as
practicable after the end of each fiscal year an annual report (including a
balance sheet and statements of income, stockholders' equity and cash flows
of the Company and its consolidated subsidiaries certified by independent
public accountants) and, as soon as practicable after the end of each of
the first three quarters of each fiscal year (beginning with the fiscal
quarter ending after the date of the Memorandum), consolidated summary
-14-
financial information of the Company and its Significant Subsidiaries of
such quarter in reasonable detail;
(j) the Company will not resell any of the Securities which
constitute "restricted securities" under Rule 144 that have been reacquired
by any of them;
(k) whether or not the transactions contemplated by this Agreement
are consummated or this Agreement is terminated and in addition to any
obligations it may have under any other agreements with you and/or your
affiliates, to pay or cause to be paid all costs and expenses incident to
the performance of its obligations hereunder, including without limiting
the generality of the foregoing, all fees, costs and expenses (i) incident
to the preparation, issuance, execution, authentication and delivery of the
Securities, including any expenses of the Trustee, (ii) incident to the
preparation, printing and distribution of the Preliminary Memorandum and
the Final Memorandum (including in each case all exhibits, amendments and
supplements thereto), (iii) incurred in connection with the registration or
qualification and determination of eligibility for investment of the
Securities under the laws of such jurisdictions as the Initial Purchasers
may designate (including reasonable fees of counsel for the Initial
Purchasers and their disbursements), (iv) in connection with the approval
for trading of the Securities on any securities exchange or inter-dealer
quotation system (as well as in connection with the designation of the
Securities as Portal securities), (v) in connection with the printing
(including word processing and duplication costs) and delivery of this
Agreement, the Indenture, the Registration Rights Agreement and the
Preliminary and Supplemental Blue Sky Memoranda and the furnishing to
Initial Purchasers and dealers of copies of the Memorandum, including
mailing and shipping, as herein provided, and (vi) any expenses incurred by
the Company in connection with a "road show" presentation to potential
investors;
(l) while the Securities remain outstanding and are "restricted
securities" within the meaning of Rule 144(a)(3) under the Act, the Company
will, during any period in which it is not subject to Section 13 or 15(d)
under the Exchange Act, make available to the Initial Purchasers and any
holder of Securities in connection with any sale thereof and any
prospective purchaser of Securities and securities analysts, in each case
upon request, the information specified in, and meeting the requirements
of, Rule 144A(d)(4) under the Act (or any successor thereto);
(m) not to take any action prohibited by Regulation M under the
Exchange Act in connection with the distribution of the Securities
contemplated hereby;
(n) not to solicit any offer to buy or offer or sell the Securities
by means of any form of general solicitation or general advertising,
including: (i) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar medium or broadcast over
television or radio; and (ii) any seminar or meeting whose attendees have
been invited by any general solicitation or general advertising;
-15-
(o) not to engage in any directed selling efforts with respect to the
Securities within the meaning of Regulation S under the Act;
(p) not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) which will be
integrated with the sale of the Securities in a manner which would require
the registration under the Act of the Securities or the Underlying
Securities and the Company will take all action that is appropriate or
necessary to assure that their offerings of other securities will not be
integrated for purposes of the Act with the offerings contemplated hereby;
(q) to comply with all of the terms and conditions of the
Registration Rights Agreement; and
(r) prior to any registration of the Securities pursuant to the
Registration Rights Agreement, or at such earlier time as may be so
required, to qualify the Indenture under the Trust Indenture Act of 1939,
as amended, and to enter into any necessary supplemental indentures in
connection therewith.
7. The several obligations of the Initial Purchasers hereunder to
purchase the Securities on the First Closing Date and the Optional Securities on
each Optional Closing Date, if any, are subject to the performance by the
Company of its obligations hereunder and to the following additional conditions:
(a) The representations and warranties of the Company contained
herein are true and correct on and as of the First Closing Date or the
Optional Closing Date, as applicable, as if made on and as of such date and
the Company shall have complied with all agreements and all conditions on
its part to be performed or satisfied hereunder at or prior to the
applicable Closing Date;
(b) Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation,
counsel for the Initial Purchasers, shall have furnished to you such
written opinion or opinions dated such Closing Date, with respect to such
matters as the Initial Purchasers may request;
(c) Xxxxxx Godward LLP (together with New York counsel satisfactory
to the Initial Purchasers with respect to New York law opinions), counsel
for the Company, shall have furnished to you their written opinion, dated
such Closing Date, in form and substance satisfactory to you, to the effect
that:
(i) the Company is a corporation incorporated and validly
existing as a corporation in good standing under the laws of the State
of Delaware. The Company has the corporate power and authority to own
or lease its properties and conduct its business as described in the
Memorandum;
(ii) to the best of such counsel's knowledge, the Company has
been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business as now conducted as described in
-16-
the Memorandum so as to require such qualifications, except where the
failure to so qualify would not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect;
(iii) Imedia Corporation is a corporation incorporated and
validly existing as a corporation in good standing under the laws of
the State of California;
(iv) the Company has an authorized and outstanding
capitalization as set forth in the Memorandum;
(v) the Securities to be issued and sold by the Company to the
Initial Purchasers under this Agreement have been duly and validly
authorized by the Company for issuance and conform in
all material respects to the description thereof in the Memorandum;
(vi) the Underlying Securities have been duly and validly
authorized and duly reserved in sufficient numbers for issuance by the
Company upon conversion of the Securities and, when issued upon
conversion of the Securities in accordance with the terms of the
Securities, will be validly issued, fully paid and nonassessable, and
the issuance of the Underlying Securities is not and upon issuance
will not be subject to any preemptive rights or, to such counsel's
knowledge, similar rights;
(vii) the Indenture has been duly and validly authorized by
the Company and conforms in all material respects to the description
thereof in the Memorandum;
(viii) the Registration Rights Agreement has been duly and
validly authorized by the Company and,
-17-
conforms in all material respects to the description thereof in the
Memorandum;
(ix) the issue and sale of the Securities by the Company
hereunder and the compliance by the Company with all of the provisions
of this Agreement and the consummation of the transactions herein
contemplated will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under,
any agreement that (i) has been filed by the Company with the
Commission pursuant to the Act or the Exchange Act, or (ii) the
Company has advised such counsel as being material, nor will such
action result in any violation of the provisions of the certificate of
incorporation or by-laws of the Company or any statute, order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or Imedia Corporation or any of their
respective properties, except for state securities or Blue Sky laws,
as to which such counsel need give no opinion;
(x) to such counsel's knowledge and other than as set forth in
the Memorandum, there are no legal or governmental proceedings pending
or overtly threatened to which the Company or Imedia Corporation is a
party or of which any property of the Company or Imedia Corporation is
subject which would reasonably be expected to have a Material Adverse
Effect;
(xi) to such counsel's knowledge, no consent, approval,
authorization or order of or with any court or governmental agency or
body is required for the issue and sale of the Securities or the
consummation by the Company of the transactions contemplated by this
Agreement, except such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Initial Purchasers, as to which
no opinion need be rendered;
(xii) this Agreement has been duly authorized, executed and
delivered by the Company;
(xiii) the statements set forth in the Memorandum (i) under the
caption "Description of Notes," insofar as they purport to constitute
a summary of the terms of the Securities or the Indenture (ii) under
the caption "Description of Capital Stock," insofar as they purport to
constitute a description of the capital stock of the Company, (iii)
under the caption "Certain United States Federal Income Tax
Considerations," and (iv) under the caption "Plan of Distribution,"
insofar as they purport to describe the provisions of the
-18-
laws and documents referred to therein fairly present such matters in
all material respects;
(xiv) the Company is not an "investment company," as such term
is defined in the Investment Company Act;
(xv) Each document filed by the Company pursuant to the
Exchange Act (other than the financial statements, schedules,
related notes, other financial data and statistical data derived
therefrom, as to which no opinion need be rendered), and
incorporated by reference in the Memorandum complied when so filed
as to form in all material respects with the Exchange Act and the
regulations promulgated thereunder; and
(xvi) Such counsel has no reason to believe that, as of the
Closing Date, the Memorandum or any further amendment or supplement
thereto made by the Company prior to such Closing Date (other than the
financial statements, schedules, related notes, other financial data
and statistical data derived therefrom, as to which no opinion need be
rendered) contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading or that, as of its date, the Memorandum
or any further amendment or supplement thereto made by the Company
prior to such Closing Date (other than the financial statements,
schedules, related notes, other financial data and statistical data
derived therefrom included in the Memorandum, as to which no opinion
need be rendered) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. With respect to such statement, check and
verification, such counsel may state that their belief is based upon
the procedures set forth therein, but is without independent check or
verification.
In rendering such opinion, such counsel may rely as to matters
governed by the laws of states other than California, the corporate laws of
Delaware or federal securities laws on local counsel in such
jurisdictions, provided that in each cases such counsel shall state that
they believe that they and the Initial Purchasers are justified in relying
on such other counsel. Such counsel may state that they express no opinion
as to the laws of any jurisdiction outside the United States;
(d) On the date of the Final Memorandum and also at each Closing
Date, Ernst & Young LLP shall have furnished to you a comfort letter or
letters, dated the respective dates of delivery thereof, in form and
substance satisfactory to you, and PricewaterhouseCoopers LLP shall have
furnished to you a comfort letter, dated the date of the Final Memorandum,
in form and substance satisfactory to you.
(e) (i) Neither the Company or any of its Significant Subsidiaries
shall have sustained since March 31, 2000 any loss or interference with its
business board's
-19-
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Memorandum,
and (ii) since the respective dates as of which information is given in the
Memorandum, there shall not have been any material adverse change in the
capital stock or long-term debt of the Company or any of its Significant
Subsidiaries or any change, or any development involving a prospective
change, in or affecting the general affairs, management, consolidated
financial position, stockholders' equity or results of operations of the
Company and its Significant Subsidiaries, taken as a whole, otherwise than
as set forth or contemplated in the Memorandum, the effect of which, in any
such case described in clause (i) or (ii), is in the judgment of the
Initial Purchasers so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or the delivery of the Securities
being delivered at such Closing Date on the terms and in the manner
contemplated in the Memorandum;
(f) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities or preferred
stock by any "nationally recognized statistical rating organization," as
that term is defined by the Commission for purposes of Rule 436(g)(2) under
the Act, and (ii) no such organization shall have publicly announced that
it has under surveillance or review, with possible negative implications,
its rating of any of the Company's debt securities or preferred stock;
(g) On or after the date hereof there shall not have occurred any of
the following: (i) since the respective dates as of which information is
given in the Memorandum, any Material Adverse Effect, or any Material
Adverse Effect is reasonably likely to occur; (ii) a suspension or material
limitation in trading in securities generally on the New York Stock
Exchange or the Nasdaq National Market; (iii) a suspension or material
limitation in trading in the Company's securities on the Nasdaq National
Market; (iv) the enactment, publication, decree or other promulgation of
any statute, regulation, rule or order of any court or other governmental
authority which in your opinion is reasonably likely to have a Material
Adverse Effect; (v) a general moratorium on commercial banking activities
declared by either Federal or New York State authorities; (vi) the outbreak
or escalation of hostilities involving the United States or the declaration
by the United States of a national emergency or war, if the effect of any
such event specified in this clause (vi) in the judgment of the Initial
Purchasers makes it impracticable or inadvisable to proceed with the
offering or the delivery of the Securities being delivered at such Closing
Date on the terms and in the manner contemplated in the Memorandum; or
(vii) the taking of any action by any governmental body or agency in
respect of its monetary or fiscal affairs which in your reasonable opinion
has a material adverse effect on the securities markets in the United
States;
(h) The Company has obtained and delivered to the Initial Purchasers
executed copies of a "lock-up" agreement from Xxxx Xxxxx, Xxxxx Xxxxx and
Xxx Xxxxx, substantially to the effect set forth in Exhibit B attached
---------
hereto;
------
-20-
(i) The Company shall have furnished or caused to be furnished to you
at such Closing Date certificates of officers of the Company satisfactory
to you as to the accuracy of the representations and warranties of the
Company herein at and as of such Closing Date, as to the performance by the
Company of all of its obligations hereunder to be performed at or prior to
such Closing Date, as to the matters set forth in subsections (a), (e)(i)
and (ii) and (f) of this Section 7 and as to such other matters as you may
reasonably request;
(j) An application for the listing of additional shares relating to
the Underlying Securities shall have been submitted to the Nasdaq National
Market;
(k) On or prior to the applicable Closing Date, the Company shall
have furnished to the Initial Purchasers such further certificates and
documents as the Initial Purchasers shall reasonably request; and
(l) The Company shall have executed and delivered the Registration
Rights Agreement substantially in the form attached hereto as Exhibit A.
----------
The Company agrees that it will use all reasonable efforts to cause
its officers, counsel and auditors to deliver the certificates, opinions and
letters contemplated by this Section 7 on each Closing Date.
8. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless each Initial
Purchaser against any losses, claims, damages or liabilities, joint or
several, to which such Initial Purchaser may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Memorandum or Final Memorandum or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and will reimburse each
Initial Purchaser for any legal or other expenses reasonably incurred by
such Initial Purchaser in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however, that
-------- -------
the Company shall not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Memorandum or Final Memorandum or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Initial Purchaser through
Deutsche Bank Securities Inc. expressly for use therein.
(b) Each Initial Purchaser will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which the
Company may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue
-21-
statement of a material fact contained in any Preliminary Memorandum or
Final Memorandum or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in any Memorandum or any such amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by such Initial Purchaser through Deutsche Bank
Securities Inc. expressly for use therein; and will reimburse the Company
for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party under such subsection
for any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified
party, effect the settlement or compromise of, or consent to the entry of
any judgment with respect to, any pending or threatened action or claim in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to
such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) 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.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by each party to this
Agreement from the offering of the Securities. If, however, the allocation
provided by the immediately preceding
-22-
sentence is not permitted by applicable law or if the indemnified party
failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of each party to this
Agreement in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Initial Purchasers shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities purchased under this Agreement (before deducting
expenses) received by the Company bear to the total discounts and
commissions received by the Initial Purchasers with respect to the
Securities purchased under this Agreement. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or the Initial Purchasers and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Initial Purchasers agree that it
would not be just and equitable if contributions pursuant to this
subsection (d) were determined by pro rata allocation (even if the Initial
Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages
or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Initial Purchaser shall be required
to contribute any amount in excess of the amount by which the Purchase
Price at which the Securities purchased by it and the price of Securities
on the front cover of the Final Memorandum exceeds the amount of any
damages which such Initial Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Initial Purchasers' obligations in this subsection (d) to contribute are
several in proportion to their respective obligations as initial purchasers
under this Agreement and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability that the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Initial Purchaser within the meaning of the Act; and the
obligations of the Initial Purchasers under this Section 8 shall be in
addition to any liability that the respective Initial Purchasers may
otherwise have and shall extend, upon the same terms and conditions, to
each officer and director of the Company and to each person, if any, who
controls the Company within the meaning of the Act.
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The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
Indemnified Person at law or in equity.
The indemnity and contribution agreements contained in this Section 8
and the representations and warranties of the Company set forth in this
Agreement shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Initial Purchaser or any person controlling any Initial Purchaser or by
or on behalf of the Company, its respective officers or directors or any other
person controlling Company and (iii) acceptance of and payment for any of the
Securities.
9. This Agreement shall become effective upon the execution and
delivery hereof by the parties hereto.
10. If, on any Closing Date, any one or more of the Initial
Purchasers shall fail or refuse to purchase Securities which it or they have
agreed to purchase hereunder on such date, and the aggregate principal amount of
Securities which such defaulting Initial Purchaser or Initial Purchasers agreed
but failed or refused to purchase is not more than one-tenth of the aggregate
principal amount of the Securities to be purchased on such date, the other
Initial Purchasers shall be obligated severally in the proportions that the
principal amount of Securities set forth opposite their respective names in
Schedule I bears to the aggregate principal amount of Securities set forth
----------
opposite the names of all such non-defaulting Initial Purchasers, or in such
other proportions as the Initial Purchasers may specify, to purchase the
Securities which such defaulting Initial Purchaser or Initial Purchasers agreed
but failed or refused to purchase on such date; provided that in no event shall
--------
the principal amount of Securities that any Initial Purchaser has agreed to
purchase pursuant to Section 1 be increased pursuant to this Section 10 by an
amount in excess of one-tenth of such principal amount of Securities without the
written consent of such Initial Purchaser. If, on any Closing Date, any Initial
Purchaser or Initial Purchasers shall fail or refuse to purchase Securities
which it or they have agreed to purchase hereunder on such date, and the
aggregate principal amount of Securities with respect to which such default
occurs is more than one-tenth of the aggregate principal amount of Securities to
be purchased on such date, and arrangements satisfactory to the Initial
Purchasers and the Company for the purchase of such Securities are not made
within 36 hours after such default, this Agreement shall terminate without
liability on the part of any non-defaulting Initial Purchaser or the Company.
In any such case either the Initial Purchasers or the Company shall have the
right to postpone the applicable Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Memorandum or in
any other documents or arrangements may be effected. Any action taken under
this paragraph shall not relieve any defaulting Initial Purchaser from liability
in respect of any default of such Initial Purchaser under this Agreement.
11. If this Agreement shall be terminated by the Initial Purchasers,
or any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement or any condition of the Initial
-24-
Purchasers' obligations cannot be fulfilled, the Company agrees to reimburse the
Initial Purchasers or such Initial Purchasers as have so terminated this
Agreement with respect to themselves, severally, for all out-of-pocket expenses
(including the fees and expenses of their counsel) reasonably incurred by such
Initial Purchasers in connection with this Agreement or the offering
contemplated hereunder.
12. This Agreement shall inure to the benefit of and be binding upon
the Company, the Initial Purchasers, any affiliate of any Initial Purchaser
which assists such Initial Purchaser in the distribution of the Securities, any
controlling persons referred to herein and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any other person, firm or corporation any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. No purchaser of Securities from any Initial
Purchaser shall be deemed to be a successor by reason merely of such purchase.
13. Any action by the Initial Purchasers hereunder may be taken by
the Initial Purchasers jointly or by Deutsche Bank Securities Inc. alone on
behalf of the Initial Purchasers, and any such action taken by Deutsche Bank
Securities Inc. alone shall be binding upon the Initial Purchasers. All notices
and other communications hereunder shall be in writing and shall be deemed to
have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Initial Purchasers shall be given to the
Initial Purchasers c/o Deutsche Bank Securities Inc., 0 Xxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxx 00000; Attention: Equity Syndicate, with a copy to Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, P.C., 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, XX 00000-0000;
Attention: Xxxx X. Xxxx, Esq. Notices to the Company shall be given to it at
0000 Xxxxxx Xxxx Xxxx, Xxxxx Xxxxx, XX 00000; Attention: Chief Financial
Officer, with a copy to Xxxxxx Godward LLP, Xxx Xxxxxxxx Xxxxx, 00/xx/ Xxxxx,
Xxx Xxxxxxxxx, XX 00000 (telefax: (000) 000-0000), Attention: Xxxxx X.
Xxxxxx, Esq.
14. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS
OF LAWS PROVISIONS THEREOF.
15. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
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If the foregoing is in accordance with your understanding, please sign
and return to us counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Initial Purchasers, this letter and such acceptance hereof
shall constitute a binding agreement between each of the Initial Purchasers and
the Company.
Very truly yours,
TERAYON COMMUNICATION SYSTEMS, INC.
By: /s/ Xxxxxx Xxxxx
------------------
Name: Xxxxxx Xxxxx
Title: President and Chief Technical
Officer
Accepted as of the date hereof:
DEUTSCHE BANK SECURITIES INC.
XXXXXX BROTHERS, INC.
By: DEUTSCHE BANK SECURITIES INC.
/s/ Xxxx Xxxxxxxxxx
By: __________________________
Name: Xxxx Xxxxxxxxxx
Title: Acting Director
SCHEDULE I
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Principal
Amount of
Optional
Principal Securities to
Amount of Firm be Purchased
Securities to if Election
Initial Purchaser be Purchased Exercised
---------------------------------------------------- --------------------- -----------------
Deutsche Bank Securities Inc........................ $325,000,000 $48,750,000
Xxxxxx Brothers, Inc................................ 175,000,000 26,250,000
Total...................................... $500,000,000 $75,000,000
============ ===========
EXHIBIT A
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FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT B
----------
FORM OF LOCK-UP AGREEMENT
