Exhibit 10.19
MONOLITHIC SYSTEM TECHNOLOGY, INC.
NOTE AND WARRANT PURCHASE AGREEMENT
(U.S. SUBSCRIBERS)
This Subordinated Note and Warrant Purchase Agreement (the "Agreement")
is made as of June ___, 1996, by and among Monolithic System Technology, Inc., a
California corporation with its principal office located at 0000 Xxxxxx Xxxx,
Xxx Xxxx, Xxxxxxxxxx 00000 (the "Company"), and each of the persons and entities
listed on the Schedule of Purchasers attached hereto as EXHIBIT A (the
"Purchasers").
SECTION 1
SALE OF NOTES AND STOCK WARRANTS
1.1 AUTHORIZATION. The Company has authorized the sale and
issuance of up to $15,000,000 in aggregate principal amount of indebtedness,
which shall be represented by promissory notes in the form attached hereto as
EXHIBIT B (each, a "Note," and collectively, the "Notes"). The Company has
further authorized the issuance to the Purchasers of warrants in substantially
the form attached hereto as EXHIBIT C (each, a "Warrant," and collectively, the
"Warrants") to acquire up to an aggregate maximum of 1,153,847 shares of the
Company's Common Stock, subject to adjustment of the exercise price and number
of shares as set forth therein.
1.2 SALE OF THE NOTES. Subject to the terms and conditions of this
Agreement, each Purchaser severally agrees to lend to the Company the sum set
forth in Column 2 of EXHIBIT A, and the Company agrees to issue to each such
Purchaser upon delivery by the Purchaser to the Company of the aggregate
consideration therefor, a Note in such principal amount.
1.3 SALE OF THE WARRANTS. Subject to the terms and conditions of
this Agreement, the Purchaser agrees to purchase and the Company agrees to issue
to each Purchaser a Warrant exercisable for the number of shares of the
Company's Common Stock set forth in Column 3 of EXHIBIT A opposite such
Purchaser's name, subject to adjustment of the exercise price and number of
shares as set forth in such Purchaser's respective Warrant. The shares of the
Company's Common Stock issued or issuable upon exercise of the Warrants are
referred to herein as the "Warrant Stock." The Company's agreements with each of
the Purchasers are separate agreements, and the sales of the Notes and the
Warrants to each of the Purchasers are separate sales.
1.4 BIFURCATED OFFERING. Each of the Purchasers acknowledges and
agrees that the Company proposes to sell and issue the Notes and the Warrants
pursuant to this Agreement in reliance on the exemption(s) from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
set forth in Section 4(2) thereof and/or Regulation D promulgated thereunder.
Each of the Purchasers acknowledges and agrees that the Company proposes to sell
and
issue a portion of the Notes and the Warrants outside the United States pursuant
to the exemption from the registration requirements of the Securities Act set
forth in Regulation S promulgated thereunder. Each Purchaser acknowledges and
agrees that the Notes and the Warrants to be sold outside the United States will
be sold pursuant to a separate purchase agreement (the "Foreign Purchase
Agreement") containing financial terms and conditions materially equivalent to
those set forth in this Agreement and the forms of Note and Warrant used in
connection herewith, PROVIDED, HOWEVER, that the Company shall obtain such
representations and warranties of the Purchasers and shall enter such covenants
as are necessary to ensure compliance with applicable securities laws. A list of
those individuals and entities purchasing the Notes and Warrants pursuant to the
Foreign Purchase Agreement is set forth in the Schedule of Foreign Purchasers
attached hereto as EXHIBIT A-1.
SECTION 2
CLOSING DATE; DELIVERY
2.1 MULTIPLE CLOSING DATES. The Company may schedule closings of
the purchase and sale of the Notes and Warrants hereunder (each, a Closing) on
such date or dates prior to June 7, 1996 as the Company may determine; PROVIDED,
HOWEVER, that the Company's Board of Directors may extend the date of the final
Closing at its discretion and provided further that the Company may accept
subscriptions as received. Purchasers purchasing Notes and Warrants at each
Closing shall be deemed to become parties to this Agreement as if all Purchasers
had purchased Notes and Warrants simultaneously at a single Closing. At each
Closing, the Schedule of Purchasers attached hereto shall be amended to include
all Purchasers purchasing at such Closing and all Purchasers who purchased at
any prior Closing. Upon the Company's termination of its offering of the Notes
and the Warrants, the Company shall provide to each Purchaser a revised Schedule
of Purchasers identifying all Purchasers who purchased Notes and Warrants at any
Closing and a revised Schedule of Foreign Purchasers identifying all purchasers
who purchased Notes and Warrants pursuant to the Foreign Purchase Agreement.
2.2 DELIVERY. At each Closing, the Company will deliver to each
Purchaser purchasing at such Closing a Note in the principal amount set forth
opposite such Purchaser's name in Column 2 of EXHIBIT A and a Warrant initially
exercisable for the number of shares of Common Stock set forth opposite such
Purchaser's name in Column 3 of EXHIBIT A. Such delivery shall be made against
payment to the Company of the principal amount of such Purchaser's Note (as set
forth in EXHIBIT A) by cashier's check made payable to the Company or wire
transfer according to the Company's instructions.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Schedule of Exceptions attached hereto as
EXHIBIT D, the Company hereby represents and warrants as of each Closing to the
Purchasers purchasing Notes and Warrants at such Closing as follows:
3.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and existing under, and by virtue of, the laws of the State of
California and is in good standing under such laws. The Company has requisite
corporate power to own and operate its properties and assets and to carry on its
business as presently conducted. The Company is presently qualified to do
business in each state in which the failure to be so qualified would have a
material adverse effect on the Company's business as now conducted.
3.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite legal and corporate power to execute and deliver this Agreement, to
sell and issue the Notes and Warrants hereunder, to issue the Warrant Stock
issuable upon exercise of the Warrants, and to carry out and perform its
obligations under the terms of this Agreement.
3.3 CAPITALIZATION. At each Closing, the authorized capital stock
of the Company will consist of 30,000,000 shares of Common Stock, of which
8,836,860 shares are issued and outstanding and 5,000,000 shares of Preferred
Stock, of which 500,000 shares have been designated as Series A Preferred Stock,
all of which are issued and outstanding; of which 1,000,000 shares have been
designated as Series B Preferred Stock, all of which are issued and outstanding;
of which 1,100,000 shares have been designated as Series C Preferred Stock,
1,010,000 of which are issued and outstanding; of which 300,000 shares have been
designated as Series D Preferred Stock, all of which are issued and outstanding;
of which 420,000 shares have been designated Series E Preferred Stock, of which
264,487 shares are issued and outstanding; and of which 166,667 shares have been
designated as Series I Preferred Stock, none of which is issued and outstanding.
All such issued and outstanding shares have been duly authorized and validly
issued and are fully paid and nonassessable. The Company has reserved (or will
reserve prior to the Closing) (i) 9,223,461 shares of Common Stock for issuance
upon conversion of the outstanding Series A, Series B, Series C, Series D, and
Series E Preferred Stock, (ii) 3,300,000 shares of Common Stock for issuance to
employees and consultants of the Company under the Company's 1992 Stock Option
Plan, (iii) 2,000,000 shares of Common Stock for issuance to employees and
consultants of the Company under the Company's 1996 Stock Option Plan, (iv)
1,153,847 shares for issuance upon exercise of the Warrants, and (v) 384,616
shares for issuance to Xxxxx Labs, Inc. ("Xxxxx"), a Utah corporation, upon
exercise of a warrant granted to Xxxxx in connection with certain debt financing
provided by Xxxxx.
3.4 AUTHORIZATION. Prior to initial Closing, the Company will have
taken all requisite corporate action to execute and deliver this Agreement, to
sell and issue the Notes and the Warrants (and the Common Stock issuable upon
exercise of the Warrants), and to carry out and perform all of its obligations
under the terms of this Agreement. This Agreement, when executed and delivered
by the Company, shall constitute a valid and binding obligation of the Company
enforceable in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency, and the relief of debtors and rules of law
governing specific performance, injunctive relief, or other equitable remedies.
The Notes and the Warrants, when issued in compliance with the provisions of
this Agreement, will be validly issued and will be free of any liens and
encumbrances, assuming the Purchasers take the Notes and the Warrants with no
notice thereof, other than any liens or encumbrances created by or imposed upon
the Purchasers. The Warrant Stock has been duly and validly reserved and, when
issued in compliance with the provisions of this Agreement and the Warrants,
will be validly issued, fully paid, and nonassessable and will be free of any
liens or encumbrances, assuming the Purchasers take the Warrant Stock with no
notice thereof, other than any liens or encumbrances created by or imposed upon
the Purchasers; PROVIDED, HOWEVER, that the Notes,
the Warrants, and the Warrant Stock may be subject to restrictions on transfer
under applicable state and/or federal securities laws and as set forth herein.
3.5 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation of any term of its Articles of Incorporation or Bylaws, as each are
amended to date, or, in any material respect, of any term or provision of any
mortgage, indebtedness, indenture, contract, agreement, instrument, judgment, or
decree and is not in violation of any order, statute, rule, or regulation
applicable to the Company where such violation would materially and adversely
affect the Company. The execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated herein and the issuance of
the Warrant Stock have not resulted and will not result in any violation of, or
conflict with, or constitute a default under the Company's Articles of
Incorporation or Bylaws, as each are amended to date, any of the Company's
agreements, or any applicable statute, rule, regulation, order, or restriction
of any federal or state governmental entity or agency thereof nor result in the
creation of any mortgage, pledge, lien, encumbrance, or charge upon any of the
properties or assets of the Company.
3.6 LITIGATION. There are no actions, suits, proceedings, or
investigations pending against the Company or its properties before any court or
governmental agency (nor, to the best of the Company's knowledge, is there any
basis therefor or threat thereof), which, either in any case or in the
aggregate, might result in any material adverse change in the business or
financial condition of the Company or any of its properties or assets, or in any
material impairment of the right or ability of the Company to carry on its
business as now conducted or as proposed to be conducted, or in any material
liability on the part of the Company.
SECTION 4
INVESTMENT REPRESENTATIONS OF PURCHASERS
Each Purchaser hereby severally represents and warrants to the Company
with respect to the purchase of the Notes and the Warrants as follows:
4.1 EXPERIENCE. It has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.
4.2 INVESTMENT. It is acquiring the Notes, the Warrants, and the
Warrant Stock for investment for its own account, not as a nominee or agent, and
not with the view to, or for resale in connection with, any distribution
thereof. It understands that the Notes, the Warrants, and the Warrant Stock have
not been, and when issued will not be, registered under the Securities Act of
1933, as amended (the "Securities Act"), by reason of a specific exemption from
the registration provisions of the Securities Act, the availability of which
depends upon, among other things, the bona fide nature of the investment intent
and accuracy of such Purchaser's representations as expressed herein and in
response to the Company's inquiries.
4.3 TRANSFERABILITY. It acknowledges that the Notes, the Warrants,
and the Warrant Stock must be held indefinitely unless subsequently registered
under the Securities Act or unless an
exemption from such registration is available. It understands and acknowledges
that the Company is under no obligation to register the Notes, the Warrants, or
the Warrant Stock except as set forth in the Addendum to the Second Amended and
Restated Investor Rights Agreement (the "Rights Agreement") dated as of July 26,
1995 to be executed by the Company and the Purchaser (the "Addendum") in
connection with the sale of the Notes and the Warrants. It understands that the
Notes, the Warrants, and the Warrant Stock may be imprinted with a legend which
prohibits the transfer of such securities unless they are registered under the
Securities Act or such registration is not required in the opinion of counsel
for the Company.
4.4 RULE 144. It acknowledges that it is familiar with the
provisions of Rule 144 promulgated under the Securities Act ("Rule 144"), which,
in substance, permit limited public resale of "restricted securities" acquired,
directly or indirectly, from the issuer thereof (or from an affiliate of such
issuer), in a non-public offering, subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the Company's securities, the availability of certain public information about
the Company, the resale occurring not less than two years after the party has
purchased and paid for the securities to be sold, and the sale being effected
through a broker in an unsolicited "broker transaction" or in a transaction
directly with a "market maker" and the number of shares being sold during any
three-month period not exceeding specified limitations.
4.5 NO PUBLIC MARKET. It understands that no public market now
exists for any of the securities issued by the Company and that the Company has
made no assurances that a public market will ever exist for the Company's
securities. It understands that even if such a public market exists in the
future, the Company may not, at the time such Purchaser wishes to sell the
Notes, the Warrants, or the Warrant Stock, be satisfying the current public
information requirements of Rule 144, and that, in such event, it would be
precluded from selling such securities under Rule 144 even if the two-year
minimum holding period had been satisfied.
4.6 ACCESS TO DATA. It has received all the information it
considers necessary or appropriate for deciding whether to acquire the Notes and
the Warrants. It has had an opportunity to discuss the Company's business,
management, and financial affairs with the Company's management and has had the
opportunity to review the Company's facilities. It has also had an opportunity
to ask questions of officers of the Company concerning the terms of this
offering, which questions were answered to its satisfaction. It understands that
such discussions, as well as any written information issued by the Company were
intended to describe certain aspects of the Company's business and prospects but
were not a thorough or exhaustive description. It acknowledges that any
estimates or projections as to events that may occur in the future are based on
the best judgment of the Company's management as of the date of this Agreement
and that whether or not such estimates or projections may be achieved will
depend upon the Company's achieving its overall business objectives, including
the availability of funds from the sale of the Notes and the Warrants hereby. It
acknowledges that there can be no assurances that any projections will be
attained.
4.7 AUTHORIZATION. This Agreement and the Addendum, when executed
and delivered by the Purchaser, will constitute a valid and legally binding
obligation of such Purchaser, enforceable in accordance with its terms.
4.8 RESPONSIBILITY FOR TAX CONSEQUENCES. It has had an opportunity
to review the federal, state, local, and foreign tax consequences of this
investment and the transactions contemplated by this
Agreement (including any tax consequences that may result now or in the future
under recently enacted tax legislation) and has had the opportunity to consult
with such tax advisors as it deems appropriate regarding such consequences. It
acknowledges that it is not relying on any statements or representations of the
Company or its agents in regard to such tax consequences and understands that it
(and not the Company) shall be responsible for its own tax liability that may
arise as a result of this investment or the transactions contemplated by this
Agreement. It acknowledges that the Company has no obligation in regard to the
future conduct of its business, or to act or refrain from acting in any manner,
regardless of the loss of any tax benefit to the Purchaser in connection with
the purchase, ownership, or sale of the Notes, the Warrants, or the Warrant
Stock.
4.9 NO LEGAL, TAX, OR INVESTMENT ADVICE. It understands that
nothing in this Agreement or any other material presented to it in connection
with the purchase and sale of the Notes, the Warrants, or the Warrant Stock
constitutes legal, tax, or investment advice. It has consulted such legal, tax,
and investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Notes and the Warrants.
4.10 GOVERNMENT APPROVALS. The Purchaser has obtained, or obtained
waivers of, all governmental consents, waivers, approvals, and permits required
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated thereby.
SECTION 5
CONDITIONS TO CLOSING
The Purchasers' and the Company's obligations to purchase and to sell
and issue, respectively, the Notes and Warrants at the Closing are subject to
the fulfillment on or prior to the Closing Date of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES OF COMPANY. The representations
and warranties made by the Company in Section 3 hereof shall be true and correct
when made and shall be true and correct on the Closing Date.
5.2 REPRESENTATIONS AND WARRANTIES OF PURCHASERS. The
representations made by the Purchasers in Section 4 hereof shall be true and
correct when made and shall be true and correct on the Closing Date.
5.3 BLUE SKY COMPLIANCE. The Company shall have obtained all
necessary blue sky law permits and qualifications, or secured exemptions
therefrom, required by any state for the offer and sale of the Notes and the
Warrants.
5.4 RIGHTS AGREEMENT. The Company and each Purchaser shall have
executed the Addendum pursuant to which the Warrant Stock shall become subject
to the registration rights provisions of the Rights Agreement.
SECTION 6
MISCELLANEOUS
6.1 ENTIRE AGREEMENT. This Agreement and the other documents
delivered pursuant hereto at the Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to the other in any
manner by any warranties, representations, or covenants except as specifically
set forth herein or therein.
6.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto;
PROVIDED, HOWEVER, that the rights of a Purchaser to purchase the Notes and the
Warrants shall not be assignable without the consent of the Company.
6.3 AMENDMENT BY AGREEMENT. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged,
or terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge, or termination is
sought, PROVIDED, HOWEVER, that any provision of this Agreement may be waived,
modified, or amended with the written consent of the Company and a
majority-in-interest of the holders of the Notes.
6.4 NOTICES. Any notice, request, or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered, sent by facsimile, or mailed by registered or
certified mail, postage prepaid, or by recognized overnight courier or personal
delivery at the respective addresses or facsimile phone number of the parties as
set forth below. Any party hereto may by notice so given change its address for
future notice hereunder. Notice shall conclusively be deemed to have been given
when received.
If to a Purchaser: At the address set forth in the Schedule of Purchasers
If to Company: Monolithic System Technology, Inc.
0000 Xxxxxx Xxxx
Xxx Xxxx, Xxxxxxxxxx 00000
ATTN: Xxxxx X. Xxxxxx, Chief Financial Officer
FAX: (000) 000-0000
6.5 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision(s) shall be
severed from this Agreement as if such provision(s) were not included, and the
balance of this Agreement shall be enforceable in accordance with its terms.
6.6 EXPENSES. The Company and each Purchaser shall bear its own
expenses and legal fees incurred on its behalf with respect to this Agreement
and the transactions contemplated hereby.
6.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEEPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION, OR EXEMPTION THEREFROM, IS UNLAWFUL. THE
RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION, OR EXEMPTION THEREFROM, BEING OBTAINED.
6.8 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
between California residents entered and to be performed entirely within
California.
6.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.10 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Subordinated
Note and Warrant Purchase Agreement as of the date first above written.
"COMPANY" MONOLITHIC SYSTEM TECHNOLOGY, INC.
a California corporation
By:
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Name:
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Title:
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"PURCHASER"
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By:
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Name:
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Title:
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[SIGNATURE PAGE TO SUBORDINATED NOTE AND WARANT PURCHASE AGREEMENT]
[U.S. SUBSCRIBER]
