________________________________________________________________________________
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
Among
THRUSTMASTER, INC.,
STRONG RIVER INVESTMENTS, INC.,
and
BAY HARBOR INVESTMENTS, INC.
Dated as of June 9, 1999
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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, dated as of June 9, 1999
(this "AGREEMENT"), among ThrustMaster, Inc., an Oregon corporation (the
"Company") and Strong River Investments Inc. ("STRONG RIVER"), a corporation
organized under the laws of the British Virgin Islands, and Bay Harbor
Investments, Inc. ("BAY HARBOR"), a corporation organized under the laws of the
British Virgin Islands. Strong River and Bay Harbor are each referred to herein
as a "PURCHASER" and are collectively referred to herein as the "PURCHASERS".
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell and the Purchasers desire to
purchase from the Company, an aggregate principal amount of $6,000,000 of the
Company's Convertible Debentures, due June 9, 2002 (the "DEBENTURES"), which are
convertible into shares of common stock, par value (the "COMMON STOCK").
NOW THEREFORE, the Company and the Purchasers hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF CONVERTIBLE DEBENTURES
1. THE CLOSING.
(a) THE CLOSING. (i) Subject to the terms and
conditions set forth in this Agreement, the Company shall issue and sell to
the Purchasers and the Purchasers shall purchase from the Company the
Debentures for an aggregate purchase price of $6,000,000. The closing of the
purchase and sale of the Debentures (the "CLOSING") shall take place at the
offices of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP ("RSPAB"), 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, immediately following the
execution hereof or such later date as the parties shall agree. The date of
the Closing is hereinafter referred to as the "CLOSING DATE."
(ii) At the Closing, (a) the Company shall
deliver or shall cause to be delivered to (A) Strong River (1) Debentures
in the aggregate principal amount of $3,000,000 registered in the name of
Strong River, (2) a common stock purchase warrant (the "WARRANT"), in the
form of EXHIBIT D, registered in the name of Strong River, pursuant to which
Strong River shall have the right to acquire shares of Common Stock upon the
terms set forth therein, (3) the legal opinion of Xxxxxxx Coie LLP outside
counsel to the Company, substantially in the form of EXHIBIT C, (4) a waiver
of the Company's right to deliver a written notice to Strong River requiring
Strong River to purchase Tranche 2 Shares (as defined in that certain
Securities Purchase Agreement among the Company, Strong River and certain
other parties dated as of January 28, 1999 (the "SECURITIES PURCHASE
AGREEMENT")) and (5) all other documents, instruments and writings required
to have been delivered at or prior to the Closing Date by the Company to
Strong River pursuant to this Agreement, including an executed Registration
Rights Agreement, dated the date hereof, among the Company and the
Purchasers, in the form of EXHIBIT B (the "REGISTRATION RIGHTS AGREEMENT")
and (B) Bay Harbor (1) Debentures in the aggregate principal amount of
$3,000,000 registered in the name of Bay Harbor, (2) the legal opinion of
Xxxxxxx Coie LLP outside counsel to the Company, substantially in the form of
EXHIBIT C, and (3) all other documents, instruments and writings required to
have been delivered at or prior to the Closing Date by the Company to the
Purchasers pursuant to this Agreement, including the executed Registration
Rights Agreement and (b) Purchasers shall deliver (1) $6,000,000 in United
States dollars in immediately available funds by wire transfer to an account
designated in writing by the Company for such purpose, (2) a certificate
acknowledging that Strong River shall no longer have any right to receive
Adjustment Shares (as defined in the Securities Purchase Agreement) pursuant
to the Securities Purchase Agreement and (3) all documents, instruments and
writings required to have been delivered at or prior to the Closing Date by
such Purchaser pursuant to this Agreement, including, without limitation, an
executed Registration Rights Agreement.
1.2 FORM OF DEBENTURES. The Debentures shall be in the form of
Exhibit A.
1.3 CERTAIN DEFINED TERMS. For purposes of this Agreement,
"CONVERSION PRICE," "ORIGINAL ISSUE DATE" and "TRADING DAY" shall have the
meanings set forth in Exhibit A; "VESTING DATE" shall have the meaning set forth
in Exhibit D; "BUSINESS DAY" shall mean any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York and the State of Oregon are authorized or
required by law or other governmental action to close.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) ORGANIZATION AND QUALIFICATION. The Company is a corporation, duly
incorporated and validly existing under the laws of the jurisdiction of its
incorporation, with the requisite corporate power and authority to own and use
its properties and assets and to carry on its business as currently conducted.
The Company has no subsidiaries other than those set forth on Schedule 2.1(a)
(collectively the "SUBSIDIARIES"). Each of the Subsidiaries is an entity, duly
incorporated or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, be reasonably
expected to have or result in a material adverse effect on the results of
operations, assets, prospects, or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT").
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of this Agreement, the Registration Rights Agreement, the
Debentures and the Warrant (collectively, the "TRANSACTION DOCUMENTS"), and
otherwise to carry out its obligations thereunder. The execution and delivery of
each of the Transaction Documents by the Company and the consummation by it of
the transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of the Company and no further corporate action is
required by the Company. Each of the Transaction
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Documents has been duly executed by the Company and, when delivered (or
filed, as the case may be) in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
articles of incorporation, by-laws or other charter documents.
(c) CAPITALIZATION. The number of authorized, issued and outstanding
capital stock of the Company is set forth in SCHEDULE 2.1(c). No shares of
Common Stock are entitled to statutory preemptive or similar rights, nor is any
holder of the Common Stock entitled to preemptive or similar rights arising out
of any agreement or understanding with the Company by virtue of any of the
Transaction Documents. Except as disclosed in SCHEDULE 2.1(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result of
the purchase and sale of the Securities (as defined in Section 2.1(d)), rights
or obligations convertible into or exchangeable for, or giving any Person any
right to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock. To
the knowledge of the Company, except as specifically disclosed in the SEC
Reports (as defined below) or SCHEDULE 2.1(c), no Person or group of related
Persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")) or
has the right to acquire by agreement with or by obligation binding upon the
Company beneficial ownership of in excess of 5% of the Common Shares. A "PERSON"
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
(d) ISSUANCE OF THE SECURITIES The Securities are duly authorized,
and, when issued and paid for in accordance with the terms hereof or of the
Debentures or the Warrant (as the case may be), shall have been validly
issued, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of first refusal of any kind created by the Company
(collectively, "LIENS"). The Company has on the date hereof and will at all
times while the Debentures and the Warrant are outstanding, maintain an
adequate reserve of duly authorized Common Stock, reserved for issuance to
the holders of the Debentures and the Warrant, to enable it to perform its
conversion, exercise and other obligations under this Agreement, the
Debentures and the Warrant. With respect to the Securities to be issued
hereunder, such number of reserved and available shares of Common Stock is
not less than the sum (i) the maximum number of shares of Common Stock which
may be issued to the Purchasers upon the conversion of the aggregate
principal amount of the Debentures (the "CONVERSION SHARES"), assuming that
the average Per Share Market Value of the Common Stock utilized to determine
the Conversion Price is 50% of the Per Share Market Value on the Trading Day
immediately preceding the Closing Date and (ii) the maximum number shares of
Common Stock which may be issued to Strong River upon the exercise of the
Warrant (the "WARRANT SHARES") at any time after the Closing Date, assuming
that the Per Share Market Value of the Common Stock utilized to determine any
such Reset Price on such date is 50% of the Per Share Market Value on the
Trading Day immediately preceding the Closing Date (such number of shares of
Common Stock to be reserved prior to each Closing Date shall be referred to
as the "INITIAL MINIMUM"). All such
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authorized shares of Common Stock shall be duly reserved for issuance to the
holders of the Debentures and the Warrant. The Debentures, the Conversion
Shares, the Warrant and the Warrant Shares are collectively referred to as,
the "SECURITIES."
(e) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its Articles of Incorporation (as amended through the
date hereof), or (ii) subject to obtaining the Required Approvals (as defined
below), conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, indenture or
instrument (evidencing a Company debt or otherwise) to which the Company or any
Subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company is subject (including
federal and state securities laws and regulations and the rules and regulations
of the principal market or exchange on which the Common Stock is listed or
traded), or by which any property or asset of the Company is bound or affected,
except in the case of each of clauses (ii) and (iii), as could not, individually
or in the aggregate, reasonably be expected to have or result in a Material
Adverse Effect. The business of the Company is not being conducted in violation
of any law, ordinance or regulation of any governmental authority, except for
violations which, individually or in the aggregate, could not reasonably be
expected to have or result in a Material Adverse Effect.
(f) FILINGS, CONSENTS AND APPROVALS. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filing of the registration statements
with the Commission meeting the requirements set forth in the Registration
Rights Agreement and covering the resale of the Conversion Shares and the
Warrant Shares by the Purchasers, (ii) the application(s) to the Nasdaq National
Market (the "NASDAQ") for the listing of the Conversion Shares and the Warrant
Shares with the NASDAQ (and with any other national securities exchange or
market on which the Common Stock is then listed), (iii) applicable Blue Sky
filings, (iv) the filing of Current Reports on Form 8-K with the Commission
disclosing the transaction contemplated hereby, (v) the filing of Forms D with
the Commission as required by Regulation D promulgated under the Securities Act
and (vi) in all other cases where the failure to obtain such consent, waiver,
authorization or order, or to give such notice or make such filing or
registration could not have or result in, individually or in the aggregate, a
Material Adverse Effect (the consents, waivers, authorizations, orders, notices
and filings referred to in (i)-(iv) of this Section are, collectively, the
"REQUIRED APPROVALS").
(g) LITIGATION; PROCEEDINGS. There is no action, suit, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
or any of their respective properties before or by any court, governmental or
administrative agency or regulatory authority (federal, state, county, local or
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foreign) which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
could, individually or in the aggregate, be reasonably expected to have or
result in a Material Adverse Effect.
(h) NO DEFAULT OR VIOLATION. Neither the Company nor any Subsidiary (i)
is in default under or in violation of (and no event has occurred which has not
been waived which, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, except, in each case as could not individually or
in the aggregate, reasonably be expected to, have or result in a Material
Adverse Effect.
(i) PRIVATE OFFERING. Assuming the accuracy of the representations and
warranties of the Purchasers set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchasers as contemplated hereby are
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"). Neither the Company nor, to the Company's
knowledge, any Person acting on its behalf has taken any action which could
subject the offering, issuance or sale of the Securities to the registration
requirements of the Securities Act. Neither the Company nor, to the Company's
knowledge, any Person acting on the Company's behalf has solicited any offer to
buy or sell the Securities by means of any form of general solicitation or
advertising.
(j) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all
reports required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the three years preceding the date hereof
(or such shorter period as the Company was required by law to file such
material) (the foregoing materials being collectively referred to herein as the
"SEC REPORTS" and, together with the Schedules to this Agreement the "DISCLOSURE
MATERIALS") on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Exchange Act and, the rules and
regulations promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All material agreements to which the Company is a party or to which
the property or assets of the Company are subject have been filed as exhibits to
the SEC Reports to the extent required. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved, except as
may be otherwise specified in such financial statements or the notes thereto and
the unaudited financial statement do not contain footnotes required by GAAP, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash
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flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments. Since March
31, 1999, except as specifically disclosed in the SEC Reports or SCHEDULE
2.1(j) annexed hereto, (a) there has been no event, occurrence or development
that has had or that could reasonably be expected to have or result in a
Material Adverse Effect, (b) the Company has not incurred any liabilities
(contingent or otherwise) other than (x) liabilities incurred in the ordinary
course of business consistent with past practice and (y) liabilities not
required to be reflected in the Company's financial statements pursuant to
GAAP or required to be disclosed in filings made with the Commission, (c) the
Company has not altered its method of accounting or the identity of its
auditors and (d) the Company has not declared or made any payment or
distribution of cash or other property to its stockholders or officers or
directors (other than in compliance with existing Company stock option plans)
with respect to its capital stock, or purchased, redeemed (or made any
agreements to purchase or redeem) any shares of its capital stock. The
Company last filed audited financial statements with the Commission on May
17, 1999, and has not received any comments from the Commission in respect
thereof.
(k) INVESTMENT COMPANY. The Company is not, and is not an Affiliate (as
defined in Rule 405 under the Securities Act) of, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(l) CERTAIN FEES. No fees or commissions will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, or bank with respect to the transactions contemplated by this
Agreement. The Purchasers shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement as a result of action by or on
behalf of the Company or any of its Affiliates.
(m) FORM S-3 ELIGIBILITY. The Company is eligible to register
securities for resale with the Commission under Form S-3 promulgated under the
Securities Act.
(n) LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. The Company has
not, in the two years preceding the date hereof, received notice (written or
oral) from the NASDAQ or any other stock exchange, market or trading facility on
which the Common Stock is or has been listed (or on which it has been quoted) to
the effect that the Company is not in compliance with the listing or maintenance
requirements of such exchange or market. The Company is currently in compliance
with all such maintenance requirements and no fact or circumstances currently
exist which could reasonably be expected to result in noncompliance with such
maintenance requirements in the foreseeable future.
(o) PATENTS AND TRADEMARKS. The Company has, or has rights to use, all
patents, patent applications, trademarks, trademark applications, service marks,
trade names, copyrights, licenses and rights (collectively, the "INTELLECTUAL
PROPERTY RIGHTS") which are necessary or material for use in connection with its
business, and which the failure to so have would have a Material Adverse Effect.
To the best knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights.
(p) Registration Rights; Rights of Participation. Except as set forth
on SCHEDULE 6(b) to
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the Registration Rights Agreement, (i) the Company has not granted or agreed
to grant to any Person any rights (including "piggy-back" registration
rights) to have any securities of the Company registered with the Commission
or any other governmental authority which has not been satisfied and (ii) no
Person, has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.
(q) REGULATORY PERMITS. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate Federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports, except where the failure to possess
such permits could not, individually or in the aggregate, have or result in a
Material Adverse Effect ("MATERIAL PERMITS"), and neither the Company nor any
such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(r) TITLE. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property and personal property owned by them
which is material to the business of the Company and its Subsidiaries, in each
case free and clear of all Liens, except for liens, claims or encumbrances as do
not materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company and its
Subsidiaries. Any real property and facilities held under lease by the Company
and its Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not materially interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(s) DISCLOSURE. All disclosure provided to the Purchasers regarding the
Company, its business and the transactions contemplated hereby, including the
Schedules to this Agreement, furnished by or on behalf of the Company are true
and correct and do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. The Purchasers
hereby represent and warrant to the Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate power and authority, to enter into and
to consummate the transactions contemplated by the Transaction Documents and
otherwise to carry out its obligations thereunder. The purchase by each
Purchaser of the Securities hereunder has been duly authorized by all necessary
action on the part of such Purchaser. Each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by such
Purchaser and constitutes the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof or
interest therein, without prejudice, however, to such Purchaser's right, subject
to the provisions of this Agreement and the Registration Rights Agreement, to
sell or otherwise dispose of all or any part of such Securities pursuant to an
effective registration statement
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under the Securities Act and in compliance with applicable federal and state
securities laws or under an exemption from such registration.
(c) PURCHASER STATUS. At the time such Purchaser was offered the
Securities, it was, and at the date hereof, it is, and at each conversion under
its Debentures and each exercise date under its Warrant, it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) EXPERIENCE OF THE PURCHASER. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser has not been
organized for the sole purpose of acquiring the Securities.
(e) ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT. Such Purchaser is
able to bear the economic risk of an investment in the Securities and, at the
present time, is able to afford a complete loss of such investment.
(f) ACCESS TO INFORMATION. Such Purchaser acknowledges receipt of the
Disclosure Materials and further acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(g) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar.
(h) RELIANCE. Such Purchaser understands and acknowledges that (i) the
Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
(i) INVOLVEMENT IN CERTAIN PROCEEDINGS. Neither the Purchasers nor any
of their Affiliates has been involved in any of the proceedings described in
Section 401(f) of Regulation S-K under the Securities Act during the periods
described therein.
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(j) BENEFICIAL OWNERSHIP. Neither the Purchasers nor any of their
Affiliates is the beneficial owner of any shares of the Company's Common Stock
as of the trading day immediately preceding the Closing Date, other than shares
of Common Stock and warrants issued pursuant to that Securities Purchase
Agreement.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 TRANSFER RESTRICTIONS. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal and state securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred securities under the
Securities Act. Notwithstanding the foregoing, the Company hereby consents to
and agrees to register on the books of the Company and with any transfer agent
for the securities of the Company any transfer of Securities by such Purchaser
to any other fund under common management with such Purchaser (a "DESIGNEE") or
any transfer among any such Designees, provided that transferee certifies to the
Company that it is an "accredited investor" within the meaning of Rule 501(a)
under the Securities Act and that it is acquiring the Securities solely for
investment purposes. Any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed from the Debentures and the
Warrant, and the
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Company shall cause its transfer agent to issue a certificate or certificates
without any legend (upon surrender of the legended certificates duly
endorsed) to each holder of the Debentures and/or Warrant upon which it is
stamped if such legend is not required under applicable requirements of the
Securities Act and other applicable securities laws. Conversion Shares and
Warrant Shares shall not contain the legend set forth above nor any other
legend if the conversion of Debentures or exercise of Warrant as contemplated
by the Debentures or the Warrant, as the case may be, occurs at any time such
legend is not required under applicable requirements of the Securities Act
and the applicable securities laws.
3.2 ACKNOWLEDGMENT OF DILUTION. The Company acknowledges that the
issuance of the Conversion Shares upon conversion of the Debentures and the
issuance of Warrant Shares upon exercise of the Warrant may result in dilution
of the outstanding shares of Common Stock, which dilution may be substantial
under certain market conditions.
3.3 FURNISHING OF INFORMATION. As long as the Company is subject to
Sections 13(a) and 15(d) of the Exchange Act, the Company covenants to timely
file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. So long as any
of the Purchasers own Securities, if the Company is not required to file
reports pursuant to such laws, it will prepare and furnish to such Purchaser
and make publicly available in accordance with Rule 144(c) promulgated under
the Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act,
as well as any other information required thereby, in the time period that
such filings would have been required to have been made under the Exchange
Act. The Company further covenants that it will take such further action as
any holder of Securities may reasonably request, all to the extent required
from time to time to enable such Person to sell Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act. Upon the request
of any such Person, the Company shall deliver to such Person a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
3.4 INCREASE IN AUTHORIZED SHARES. At such times as the Company
would be, if a notice of exercise or conversion were to be delivered on such
date, precluded from issuing such number of Conversion Shares as would be
issuable upon conversion in full of the Debentures or issuing such number of
Warrant Shares as would be issuable upon exercise in full of the Warrant due
to the unavailability of a sufficient number of shares of authorized but
unissued or reserved shares of Common Stock, the Company shall promptly (and
in any case, within 30 Business Days from such date) prepare and mail to the
stockholders of the Company proxy materials requesting authorization to amend
the Company's Articles of Incorporation to increase the number of shares of
Common Stock which the Company is authorized to issue to at least such number
of shares as reasonably requested by the Purchasers in order to provide for
such number of authorized and unissued shares of Common Stock to enable the
Company to comply with its exercise and reservation of shares obligations as
set forth in this Agreement, the Debentures and the Warrant. In connection
therewith, the Board of Directors shall (a) adopt proper resolutions
authorizing such
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increase, (b) recommend to and otherwise use its best efforts to promptly and
duly obtain stockholder approval to carry out such resolutions (and hold a
special meeting of the stockholders no later than the 60th day after delivery
of the proxy materials relating to such meeting) and (c) within five (5)
Business Days of obtaining such stockholder authorization, file an
appropriate amendment to the Company's Articles of Incorporation to evidence
such increase.
3.5 LISTING OF CONVERSION SHARES AND WARRANT SHARES. The Company shall
(i) not later than the tenth Business Day following the Closing Date prepare and
file with the NASDAQ (or such other national securities exchange or market or
trading or quotation facility on which the Common Stock is then listed) an
additional shares listing application covering a number of shares of Common
Stock which is not less than the Initial Minimum, (ii) take all steps necessary
to cause such shares to be approved for listing in the NASDAQ (or on the other
primary national securities exchange or market or trading or quotation facility
on which the Common Stock is then listed) as soon as possible thereafter, and
(iii) provide to the Purchasers evidence of such listing, and the Company shall
maintain the listing of its Common Stock thereon.
3.6 EXERCISE AND ISSUANCE PROCEDURES. The Debentures set forth the
totality of the procedures with respect to the conversion of the Debentures,
including such other information and instructions as may be reasonably necessary
to enable the Purchasers to convert the Debentures in accordance with their
terms. The Company shall honor any conversion of the Debentures and shall
deliver Conversion Shares in accordance with the terms, conditions and time
periods set forth in the Debentures. The Warrant sets forth the totality of the
procedures with respect to the exercise of the Warrant, including such other
information and instructions as may be reasonably necessary to enable Strong
River to exercise the Warrant in accordance with their terms. The Company shall
honor any exercise of the Warrant and shall deliver Warrant Shares in accordance
with the terms, conditions and time periods set forth in the Warrant.
3.7 SUBSEQUENT REGISTRATIONS. Except for (w) Tranche 1 Shares (as
defined in the Securities Purchase Agreement) (x) Conversion Shares and Warrant
Shares, (y) Common Stock to be registered for resale in connection with
financings permitted pursuant to paragraph (a) (i), (iii) and (iv) of Section
3.11 (a) of the Securities Purchase Agreement and (z) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered, and securities of the Company permitted pursuant to Schedule 6(b) of
the Registration's Rights Agreement or Schedule 6(b) of that certain
Registration Rights Agreement among the Company, Strong River and certain other
parties, dated as of January 28, 1999 to be registered in the Underlying
Securities Registration Statement in accordance with the Registration Rights
Agreement, the Company shall not, without the prior written consent of the
Purchasers (i) issue or sell any of its or any of its Affiliates' equity or
equity-equivalent securities pursuant to Regulation S promulgated under the
Securities Act, or (ii) register for resale any securities of the Company, in
each case, for a period of not less than 120 Business Days after the date that
any registration statement covering the resale of any of the Conversion Shares
and the Warrant Shares by the Purchasers meeting the requirement of the
Registration Rights Agreement is declared effective by the Commission. Any days
that any Purchaser is unable to sell Conversion Shares or Warrant Shares under
any such registration statement shall be added to such 120 Business Day period
for the purposes of (i) and (ii) above.
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3.8 CERTAIN SECURITIES LAWS DISCLOSURES; PUBLICITY. The Company shall:
(i) issue within one (1) Business Day of each Closing a press release acceptable
to the Purchasers disclosing the transactions contemplated hereby, (ii) file
within ten (10) Business Days after each Closing Date with the Commission a
Current Report on Form 8-K disclosing the transactions contemplated hereby, and
(iii) timely file with the Commission a Form D promulgated under the Securities
Act as required under Regulation D promulgated under the Securities Act and
provide a copy thereof to the Purchasers promptly after the filing thereof. The
Company shall, no less than two (2) Business Days prior to the filing of any
disclosure required by clauses (ii) and (iii) above, provide a copy thereof to
the Purchasers.
3.9 USE OF PROCEEDS. The Company shall not use the net proceeds form
the sale of Securities hereunder to redeem any Company equity or
equity-equivalent securities. Pending application of the proceeds of this
placement in the manner permitted hereby, the Company will invest such proceeds
in interest bearing accounts and/or short-term, investment grade interest
bearing securities.
3.10 LIMITATIONS ON SHORT SALES. Each Purchaser agrees that it will
not enter into any Short Sales (as hereinafter defined) from the period
commencing on the Closing Date and ending on the date which is 300 days after
the date hereof. For purposes of this Section 3.10, a "SHORT SALE" by a
Purchaser shall mean a sale of Common Stock by such Purchaser that is marked
as a short sale and that is made at a time when there is no equivalent
offsetting long position in Common Stock held by the Purchaser. For purposes
of determining whether there is an equivalent offsetting long position in
Common Stock held by a Purchaser, Conversion Shares that have not yet been
converted pursuant to the Debenture shall be deemed to be held long by the
Purchaser, Warrant Shares that have not yet been exercised pursuant to the
Warrant shall be deemed to be held long by the Purchaser, and the number of
Conversion Shares and Warrant Shares then held by a Purchaser on any
particular date of computation shall be equal to (i) with respect to
Conversion Shares, such number of Conversion Shares issuable pursuant to the
Debenture assuming such holder converted all the outstanding principal amount
of the Debenture on such date and (ii) with respect to Warrant Shares, the
number of Warrant Shares issuable pursuant to the Warrant on the next Vesting
Date calculated as if such computation date were such Vesting Date (e.g.
using the lowest ten (10) Per Share Market Values during the twenty-five (25)
days immediately preceding such computation date).
3.11 REIMBURSEMENT. If either Purchaser, other than by reason of its
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith, as such expenses are incurred in an amount not to exceed
$100,000 in the aggregate for both Purchasers as a whole. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any Affiliate of such Purchaser who are actually named in such
action, proceeding or investigation, and partners,
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directors, agents, employees and controlling persons (if any), as the case
may be, of such Purchaser and any Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, such Purchaser and any Affiliate and any such
Person. The Company also agrees that neither such Purchaser nor any
Affiliate, partners, directors, agents, employees or controlling persons
shall have any liability to the Company or any person asserting claims on
behalf of or in right of the Company in connection with or as a result of the
consummation of the Transaction Documents except to the extent that any
losses, claims, damages, liabilities or expenses incurred by the Company
result from the negligence or willful misconduct of such Purchaser.
Notwithstanding anything to the contrary, the Company shall not be obligated
to pay any reimbursements hereunder in the event that a court, in a final
unappealable judgement, determines that such Purchaser is liable for the act
upon which reimbursement is sought and the Company may condition payment of
any reimbursement hereunder upon receipt of an undertaking reasonably
satisfactory to the Company to repay any such reimbursement.
3.12 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at the closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
ARTICLE IV
MISCELLANEOUS
4.1 FEES AND EXPENSES. The Company shall pay $30,000 to RSPAB in
connection with the preparation and negotiation of the Transaction Documents.
Other than the amounts contemplated in the immediately preceding sentence, each
party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all stamp and other taxes and duties levied in
connection with the issuance of the Securities.
4.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
Exhibits and Schedules hereto, the Registration Rights Agreement, the Debentures
and the Warrant contain the entire understanding of the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters.
4.3 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile
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at the facsimile telephone number specified in this Section prior to 6:00
p.m. (New York City time) on a Business Day, (ii) the Business Day after the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in the Purchase
Agreement later than 6:00 p.m. (New York City time) on any date and earlier
than 11:59 p.m. (New York City time) on such date, (iii) the Business Day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice
is required to be given. The address for such notices and communications
shall be as follows:
If to the Company: ThrustMaster, Inc.
0000 X.X. Xxxxxxxxx Xxxxxxx #000
Xxxxxxxxx, Xxxxxx 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Xx., CEO
With copies to: Xxxxxxx Coie LLP
0000 XX Xxxxx Xxx., Xxxxx 0000
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx
If to Strong River: Strong River Investments Inc.
c/x Xxxxxxx Capital Corp.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Avi Vigder
If to Bay Harbor: Bay Harbor Investments, Inc.
c/x Xxxxxxx Capital Corp.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Avi Vigder
With copies to: Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxx
or such other address as may be designated in writing hereafter, in the
same manner, by such Person.
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4.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and the Purchasers, or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
4.5 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
4.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any of the
rights or obligations hereunder or under the Transaction Documents (other than
to a Designee of the respective Purchaser) without the consent of the Company,
except that the Purchasers may assign its rights hereunder and, subject to the
terms thereof, under the Transaction Documents without the consent of the
Company as long as such assignee demonstrates to the reasonable satisfaction of
the Company its satisfaction of the representations and warranties set forth in
Section 2.2.
4.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
4.8 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
4.9 SURVIVAL. The representations, warranties, agreements and covenants
contained herein shall survive the Closings and the issuances of the Warrant
Shares and Conversion Shares.
4.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become
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effective when counterparts have been signed by each party and delivered to
the other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the party executing (or on whose behalf such signature is executed) the same
with the same force and effect as if such facsimile signature page were an
original thereof.
4.11 PUBLICITY. The Company and the Purchasers shall consult with each
other in issuing any press releases or otherwise making public statements or
filings and other communications with the Commission or any regulatory agency or
stock market or trading facility with respect to the transactions contemplated
hereby and neither party shall issue any such press release or otherwise make
any such public statement, filings or other communications without the prior
written consent of the other, which consent shall not be unreasonably withheld
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
party with prior notice of such public statement, filing or other communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any of the Purchasers, or include the name of any of the Purchasers in any
filing with the Commission, or any regulatory agency, trading facility or stock
market without the prior written consent of the respective Purchaser, except to
the extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or by applicable rules, bylaws or policies of the
NASDAQ, in which case the Company shall provide the respective Purchaser with
prior notice of such disclosure.
4.12 SEVERABILITY. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.13 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents. Each of the Company and the Purchasers agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of its obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Debenture Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
COMPANY:
THRUSTMASTER, INC.
By:_____________________________________
Name:
Title:
PURCHASERS:
STRONG RIVER INVESTMENTS, INC.
By:_____________________________________
Name:
Title:
BAY HARBOR INVESTMENTS, INC.
By:_____________________________________
Name:
Title:
