Exhibit 4.1
SBE, INC.
SECURITIES PURCHASE AGREEMENT
JUNE 27, 2003
SBE, INC.
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT") is made as of
June 27, 2003, by and among SBE, INC., a Delaware corporation (the "COMPANY"),
and the persons listed on the Schedule of Purchasers attached hereto as EXHIBIT
A (the "PURCHASERS").
The parties to this Agreement agree as follows:
ARTICLE 1
AUTHORIZATION AND SALE OF COMMON SHARES AND WARRANTS
1.1 AUTHORIZATION. The Company has authorized (a) the sale and issuance
of up to 500,000 shares of its Common Stock (the "COMMON SHARES") and (b) the
sale and issuance of warrants, in the form attached hereto as EXHIBIT B (the
"WARRANTS"), to purchase up to 50,000 shares of the Company's Common Stock (the
"COMMON STOCK") pursuant to this Agreement.
1.2 SALE OF COMMON SHARES AND WARRANTS. At the Closing (as defined in
Section 2.1), on the terms and subject to the conditions of this Agreement, the
Company will issue and sell to each Purchaser and each Purchaser will purchase
from the Company:
(A) Common Shares in the amount and at the purchase price set
forth opposite each Purchaser's name on EXHIBIT A; and
(B) Warrants to purchase shares of the Company's Common Stock in
the amount set forth opposite each Purchaser's name on EXHIBIT A at an exercise
price equal to $1.50 per share of Common Stock (the "WARRANT PRICE"). The shares
of Common Stock issuable upon exercise of or otherwise pursuant to the Warrants
are referred to herein as the "WARRANT SHARES." The Common Shares, the Warrant
Shares and the Warrants are collectively referred to herein as the "SECURITIES."
ARTICLE 2
CLOSING; DELIVERY
2.1 CLOSING DATE. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Article 5 and Article 6 of this Agreement, the
closing of the purchase and sale of the Common Shares and Warrants hereunder
(the "CLOSING") shall be held at the offices of Xxxxxx Godward LLP, Xxx Xxxxxxxx
Xxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, upon execution of this
Agreement.
2.2 DELIVERY. At the Closing, the Company will deliver to each
Purchaser a duly executed Warrant, and as soon as practicable thereafter will
deliver to each Purchaser a certificate representing the number of Common Shares
to be purchased by such Purchaser, registered in the Purchaser's name as shown
on EXHIBIT A. Such delivery shall be against
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payment of the purchase price therefor at the Closing by wire transfer of
immediately available funds to the Company in accordance with the Company's
written wiring instructions.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers as of the date of
this Agreement:
3.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing as a domestic corporation under the laws of
said state. The Company is duly qualified as a foreign corporation to do
business and is in good standing in each jurisdiction where the nature of the
business conducted or property owned by it makes such qualification necessary
other than those jurisdictions in which the failure to so qualify would not have
a material and adverse effect on the business, operations, properties, prospects
or condition (financial or otherwise) of the Company.
3.2 CORPORATE POWER; AUTHORIZATION. The Company has all requisite legal
and corporate power and has taken all requisite corporate action to execute and
deliver this Agreement, to sell and issue the Common Shares and Warrants, to
issue the Warrant Shares upon exercise of the Warrants in accordance with the
terms of such Warrants, and to carry out and perform all of its obligations
under this Agreement. This Agreement constitutes, and upon execution and
delivery by the Company of the Warrants, the Warrants will constitute, legal,
valid and binding obligations of the Company, enforceable in accordance with
their respective terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally and (b) as limited by equitable
principles generally. The execution and delivery of this Agreement does not, and
the performance of this Agreement and the compliance with the provisions hereof,
the issuance, sale and delivery of the Common Shares and the Warrants by the
Company will not materially conflict with, or result in a material breach or
violation of the terms, conditions or provisions of, or constitute a material
default under, or result in the creation or imposition of any material lien
pursuant to the terms of, the Certificate of Incorporation (the "CERTIFICATE")
or Bylaws of the Company or any statute, law, rule or regulation or any state or
federal order, judgment or decree or any indenture, mortgage, lease or other
material agreement or instrument to which the Company or any of its properties
is subject.
3.3 ISSUANCE AND DELIVERY OF THE SECURITIES; CAPITALIZATION. When
issued in compliance with the provisions of this Agreement and the Certificate,
the Common Shares will be validly issued, fully paid and nonassessable. Upon
exercise of the Warrants in accordance with the terms thereof, the Warrant
Shares will be validly issued, fully paid and nonassessable. The issuance and
delivery of the Common Shares and the Warrants is not subject to preemptive or
any other similar rights of the stockholders of the Company or any liens or
encumbrances. As of the date of this Agreement, prior to issuances contemplated
by this Agreement, 4,182,417 shares of the Company's Common Stock, options to
purchase 1,548,811 shares of the Company's Common Stock and warrants to purchase
122,429 shares of the Company's Common Stock are outstanding.
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3.4 SEC DOCUMENTS. The Company has filed in a timely manner all
documents that the Company was required to file with the Securities and Exchange
Commission (the "SEC") under Sections 13, 14(a) and 15(d) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), during the 12 months
preceding the date of this Agreement. As of their respective filing dates, all
documents filed by the Company with the SEC (the "SEC DOCUMENTS") complied in
all material respects with the requirements of the Exchange Act or the
Securities Act of 1933, as amended (the "SECURITIES ACT"), as applicable. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act or the Exchange Act as the case may be
and the rules and regulations of the SEC promulgated thereunder, and none of the
SEC Documents 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. As of their filing with the SEC, the financial statements
of the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC or other applicable rules and regulations with respect
thereto. Such financial statements were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary statements)
and fairly presented in all material respects the financial position of the
Company as of the dates thereof and the results of operations and cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
3.5 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement except for (a) compliance with the securities and blue sky laws
in the states in which the Common Shares and Warrants are offered and/or sold,
which compliance will be effected in accordance with such laws, (b) the filing
of the Registration Statement (as defined in Section 7.1) and all amendments
thereto with the SEC as contemplated by Section 7.2 of this Agreement, and (c)
the filing of the Nasdaq Stock Market Notification Form with the Nasdaq Stock
Market.
3.6 LITIGATION. Except as disclosed in the SEC Documents, there are no
actions, suits proceedings or investigations pending or, to the best of the
Company's knowledge, threatened against the Company or any of its properties
before or by any court or arbitrator or any governmental body, agency or
official in which there is a reasonable likelihood (in the judgment of the
Company) of an adverse decision that (a) could have a material adverse effect on
the Company's properties or assets or the business of the Company as currently
conducted, or (b) could impair the ability of the Company to perform in any
material respect its obligations under this Agreement.
3.7 ELIGIBILITY TO USE FORM S-3. The Company is eligible to use Form
S-3 for the registration of its securities under the Securities Act that are
offered in transactions involving secondary offerings.
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3.8 ABSENCE OF CERTAIN CHANGES. Since April 30, 2003, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, or results of operations of the
Company.
3.9 FULL DISCLOSURE. There is no fact known to the Company (other than
general economic or industry conditions known to the public generally or as
disclosed in the documents referred to in Section 3.4) that has not been
disclosed to Xxxxxxx & Co. that (i) would reasonably be expected to have a
material adverse effect on the business or financial condition of the Company or
(ii) would reasonably be expected to materially and adversely affect the ability
of the Company to perform its obligations pursuant to this Agreement.
3.10 USE OF PROCEEDS. The proceeds of the sale of the Common Shares and
the Warrants hereunder shall be used by the Company for working capital and
general corporate purposes, including funding acquisitions of other businesses
and assets.
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
The Purchaser hereby jointly and severally represent and warrant to,
and covenant with, the Company as follows:
4.1 AUTHORIZATION. Each Purchaser has all requisite legal and corporate
or other power and capacity and has taken all requisite corporate or other
action to execute and deliver this Agreement, to purchase the Common Shares and
the Warrants to be purchased by it and to carry out and perform all of its
obligations under this Agreement. This Agreement constitutes the legal, valid
and binding obligation of each Purchaser, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, or similar laws relating to or affecting the enforcement of
creditors' rights generally and (ii) as limited by equitable principles
generally.
4.2 INVESTMENT EXPERIENCE. Each Purchaser is an "accredited investor"
as defined in Rule 501(a) under the Securities Act. Each Purchaser is aware of
the Company's business affairs and financial condition and has had access to and
has acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Common Shares and the Warrants. Each
Purchaser has such business and financial experience as is required to give it
the capacity to protect its own interests in connection with the purchase of the
Common Shares and Warrants.
4.3 INVESTMENT INTENT. Each Purchaser is purchasing the Common Shares
and the Warrants for its own account as principal, for investment purposes only,
and not with a present view to, or for, resale, distribution or
fractionalization thereof, in whole or in part, within the meaning of the
Securities Act, other than as contemplated by Article 7. Each Purchaser
understands that the Common Shares and the Warrants have not been registered
under the Securities Act or registered or qualified under any state securities
law in reliance on specific exemptions therefrom, which exemptions may depend
upon, among other things, the bona fide nature of Purchaser's investment intent
as expressed herein. Each Purchaser has completed or
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caused to be completed the Purchaser Questionnaire attached hereto as EXHIBIT C
for use in preparation of the Registration Statement, and the responses provided
therein shall be true and correct as of the Closing and will be true and correct
as of the effective date of the Registration Statement. Each Purchaser, in
connection with its decision to purchase the Common Shares and the Warrants, has
relied solely upon the SEC Documents and the representations and warranties of
the Company contained herein. Each Purchaser will not, directly or indirectly,
offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) any of the Securities
except in compliance with the Securities Act, and the rules and regulations
promulgated thereunder.
4.4 REGISTRATION OR EXEMPTION REQUIREMENTS. Each Purchaser further
acknowledges and understands that the Securities may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or
unless an exemption from such registration is available.
4.5 DISPOSITIONS. Each Purchaser will not, prior to the effectiveness
of the Registration Statement, if then prohibited by law or regulation: (a)
sell, offer to sell, solicit offers to buy, dispose of, loan, pledge or grant
any right with respect to (collectively, a "DISPOSITION") the Securities; or (b)
engage in any hedging or other transaction that is designed or could reasonably
be expected to lead to or result in a Disposition of Securities by such
Purchaser or any person or entity. In addition, each Purchaser agrees that for
so long as it owns any Shares, it will not enter into any short sale of Shares
or similar hedging transaction if such short sale results in the Purchaser
having a net short position in the Shares.
4.6 RESIDENCY. Each Purchaser's principal executive offices are in the
jurisdiction set forth immediately below Purchaser's name on the Schedule of
Purchasers attached hereto as EXHIBIT A.
4.7 LEGEND. Each Purchaser understands that, until such time as the
Registration Statement has been declared effective or the Securities may be sold
pursuant to Rule 144 under the Securities Act without any restriction as to the
number of securities as of a particular date that can then be immediately sold,
the Securities may bear a restrictive legend in substantially the following form
(and a stop transfer order may be placed against transfer of the certificates
for the Securities):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR IN ANY OTHER
JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED,
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS."
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ARTICLE 5
CONDITIONS TO CLOSING OBLIGATIONS OF PURCHASERS
The Purchasers' obligation to purchase the Common Shares and the
Warrants at the Closing is, at the option of a majority in interest of the
Purchasers, subject to the fulfillment or waiver as of the Closing of the
following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Company in Article 3 hereof shall be true and correct as of the
Closing.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company at or prior to the Closing shall
have been performed or complied with in all material respects.
5.3 LISTING. The Company shall have complied with all requirements with
respect to the listing of the Common Shares on the Nasdaq SmallCap Market,
except for such requirements not required until after the issuance of the Common
Shares, such requirements to be complied with promptly after Closing.
5.4 JUDGMENTS. No judgment, writ, order, injunction, award or decree of
or by any court, or judge, justice or magistrate, including any bankruptcy court
or judge, or any order of or by any governmental authority, shall have been
issued, and no action or proceeding shall have been instituted by any
governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby.
ARTICLE 6
CONDITIONS TO CLOSING OBLIGATIONS OF COMPANY
The Company's obligation to sell and issue the Common Shares and the
Warrants at the Closing is, at the option of the Company, subject to the
fulfillment or waiver of the following conditions:
6.1 RECEIPT OF PAYMENT. The Purchasers shall have delivered payment of
the purchase price to the Company for the Common Shares and the Warrants being
issued hereunder.
6.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Purchasers in Article 4 hereof shall be true and correct as of the
Closing.
6.3 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchasers at or prior to the Closing
shall have been performed or complied with in all material respects.
6.4 DELIVERY OF PURCHASER QUESTIONNAIRE. The Company shall have
received from each Purchaser a fully completed Purchaser Questionnaire in the
form attached hereto as EXHIBIT C
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prior to the Closing for the Company's use in preparing the Registration
Statement pursuant to Article 7 below.
ARTICLE 7
COVENANTS
7.1 DEFINITIONS. For the purpose of this Article 7:
(A) the term "REGISTRATION STATEMENT" shall mean any registration
statement required to be filed by Section 7.2 below, and shall include any
preliminary prospectus, final prospectus, exhibit or amendment included in or
relating to such registration statements;
(B) the term "REGISTRABLE SHARES" shall mean all of the Common
Shares and the Warrant Shares, and any securities of the Company or securities
of any successor corporation issued as or issuable upon the conversion or
exercise of any warrant, right or other security that is issued as a dividend or
other distribution with respect to, or in exchange for, or in replacement of,
the Common Shares or Warrant Shares; and
(C) The terms "REGISTER," "REGISTERED," and "REGISTRATION" refer
to a registration under the Securities Act, effected by preparing and filing a
registration statement or similar document in compliance with the Securities
Act, and the declaration or ordering of effectiveness of such registration
statement, document or amendment thereto.
7.2 REGISTRATION PROCEDURES AND EXPENSES. The Company shall:
(A) use its best efforts to file a Registration Statement with the
SEC within 30 days following the Closing to register the Registrable Shares for
resale on Form S-3 under the Securities Act (providing for shelf registration of
such Registrable Shares under SEC Rule 415);
(B) use all commercially reasonable efforts, subject to receipt of
necessary information from the Purchasers, to cause any such Registration
Statement filed pursuant to Section 7.2(a) above to become effective as promptly
after filing of such Registration Statement as practicable, and in any event not
later than 120 days following the Closing;
(C) prepare and file with the SEC such amendments and supplements
to such Registration Statement and the prospectus used in connection therewith
as may be necessary to keep such Registration Statement effective until
termination of such obligation as provided in Section 7.7 below, subject to the
Company's right to suspend pursuant to Section 7.6;
(D) furnish to each Purchaser such number of copies of
prospectuses in conformity with the requirements of the Securities Act and such
other documents as the Purchasers may reasonably request, in order to facilitate
the public sale or other disposition of all or any of the Registrable Shares by
the Purchasers;
(E) file such documents as may be required of the Company for
normal securities law clearance for the resale of the Registrable Shares in such
states of the United States as may be reasonably requested by each Purchaser;
provided, however, that the Company shall
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not be required in connection with this paragraph (e) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction;
(F) advise each Purchaser promptly:
(I) of any request by the SEC for amendments to the Registration
Statement or amendments to the prospectus or for additional information relating
thereto;
(II) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement under the Securities Act or of the
suspension by any state securities commission of the qualification of the
Registrable Shares for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes; and
(III) of the existence of any fact and the happening of any event
that makes any statement of a material fact made in the Registration Statement,
the prospectus and amendment or supplement thereto, or any document incorporated
by reference therein, untrue, or that requires the making of any additions to or
changes in the Registration Statement or the prospectus in order to make the
statements therein not misleading;
(G) use its best efforts to cause all Registrable Shares to be
listed on each securities exchange, if any, on which the common stock of the
Company is then listed; and
(H) bear all expenses in connection with the procedures in
paragraphs (a) through (g) of this Section 7.2 and the registration of the
Registrable Shares on such Registration Statement and the satisfaction of the
blue sky laws of such states.
7.3 OTHER REGISTRATIONS. As of the date hereof and through the 60-day
period following the first date of effectiveness of the Registration Statement
(the "RESTRICTION PERIOD"), the Company shall not, without the prior consent of
Xxxxxxx & Co., file a registration statement with respect to any securities
other than (i) with respect to any merger, consolidation or acquisition or (ii)
shares of equity securities and/or options or other rights in respect thereof to
be offered solely to directors, employees, consultants or sales agents,
distributors or similar representatives of the Company solely on Form S-8 or any
successor form. Notwithstanding the foregoing, the Company agrees to enter into
lock-up agreements with the Company's directors and officers pursuant to which
each director and officer will not engage in a public sale of the Company's
securities owned by him during the Restriction Period for so long as he serves
as a director or officer.
7.4 DELAY IN FILING. If the Registration Statement is not filed with
the SEC by the date specified in Section 7.2(a), then for each 30-day period
following such date, until the date the Registration Statement is filed, the
Company shall, for such period, pay each Purchaser, as liquidated damages and
not as a penalty, an amount equal to 3.0% of the purchase price of the Common
Shares purchased by such Purchaser hereunder, for such period (or prorated for
any partial period); and for any such period, such payment shall be made no
later than the first business day of the calendar month next succeeding the last
month in which such period occurs. If the Registration Statement is not declared
effective by the date specified in Section 7.2(b), then for each 30-day period
following such date, until the date the Registration Statement is declared
effective, the per-share exercise price of the Warrants shall be decreased by
$0.10 (as
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adjusted for stock splits, combinations, dividends and the like). The parties
hereto agree that the liquidated damages provided for in this Section 7.4
constitute a reasonable estimate of the damages that may be incurred by the
Purchasers by reason of the failure of the Registration Statement to be filed in
accordance with the provisions hereof.
7.5 INDEMNIFICATION.
(A) The Company agrees to indemnify and hold harmless each
Purchaser from and against any losses, claims, damages or liabilities to which
such Purchaser may become subject (under the Securities Act or otherwise)
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any omission or alleged omission to state therein 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 arise out of any failure by the Company to fulfill any undertaking
included in the Registration Statement and the Company will, as incurred,
reimburse such Purchaser for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Company shall not be liable in any such case
to the extent that such loss, claim, damage or liability (collectively, "LOSS")
arises out of, or is based upon, an untrue statement or omission or alleged
untrue statement or omission made in such Registration Statement in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such Purchaser specifically for use in preparation of the
Registration Statement or any breach of this Agreement by such Purchaser; and
provided further, however, that the Company shall not be liable to any Purchaser
of Registrable Shares to the extent that any such Loss is caused by an untrue
statement or omission or alleged untrue statement or omission made in any
preliminary prospectus if either (i)(A) such Purchaser failed to send or deliver
a copy of the final prospectus with or prior to the delivery of written
confirmation of the sale by such Purchaser to the person asserting the claim
from which such Loss resulted and (B) the final prospectus corrected such untrue
statement or omission, (ii) (X) such untrue statement or omission is corrected
in an amendment or supplement to the prospectus and (Y) having previously been
furnished by or on behalf of the Company with copies of the prospectus as so
amended or supplemented, such Purchaser thereafter fails to deliver such
prospectus as so amended or supplemented, with or prior to the delivery of
written confirmation of the sale of a Registrable Share to the person asserting
the claim from which such Loss resulted or (iii) such Purchaser sold Registrable
Shares in violation of such Purchaser's covenant contained in Section 7.6 of
this Agreement.
(B) The Purchasers, severally and not jointly, agree to indemnify
and hold harmless the Company each officer of the Company who signs the
Registration Statement and each director of the Company, from and against any
Losses to which the Company (or any such officer or director) may become subject
(under the Securities Act or otherwise), insofar as such Losses (or actions or
proceedings in respect thereof) arise out of, or are based upon, any breach of
this Agreement by a Purchaser or any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
omission or alleged omission to state therein 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 in each case, on the
effective date thereof, if, and to the extent, such untrue
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statement or omission or alleged untrue statement or omission was made in
reliance upon and in conformity with written information furnished by or on
behalf of a Purchaser specifically for use in preparation of the Registration
Statement, and the Purchasers will reimburse the Company (and each of its
officers and directors) for any legal or other expenses incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that in no event shall any indemnity under this
Section 7.5(b) be greater in amount than the dollar amount of the proceeds (net
of the amount of any damages the Purchasers have otherwise been required to pay
by reason of such untrue statement or omission or alleged untrue statement or
omission) received by the Purchasers upon the sale of the Registrable Securities
included in the Registration Statement giving rise to such indemnification
obligation.
(C) Promptly after receipt by any indemnified person of a notice
of a claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 7.5, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified
thereof, such indemnifying person shall be entitled to participate therein, and,
to the extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof; provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the indemnified person for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
further, that no indemnifying person shall be responsible for the fees and
expense of more than one separate counsel for all indemnified parties. The
indemnifying party shall not settle an action without the consent of the
indemnified party, which consent shall not be unreasonably withheld.
(D) If after proper notice of a claim or the commencement of any
action against the indemnified party, the indemnifying party does not choose to
participate, then the indemnified party shall assume the defense thereof and
upon written notice by the indemnified party requesting advance payment of a
stated amount for its reasonable defense costs and expenses, the indemnifying
party shall advance payment for such reasonable defense costs and expenses (the
"ADVANCE INDEMNIFICATION PAYMENT") to the indemnified party. In the event that
the indemnified party's actual defense costs and expenses exceed the amount of
the Advance Indemnification Payment, then upon written request by the
indemnified party, the indemnifying party shall reimburse the indemnified party
for such difference; in the event that the Advance Indemnification Payment
exceeds the indemnified party's actual costs and expenses, the indemnified party
shall promptly remit payment of such difference to the indemnifying party.
7.6 PROSPECTUS DELIVERY. Each Purchaser hereby covenants with the
Company not to make any sale of the Registrable Shares without complying with
Section 8.3. Each Purchaser acknowledges that there may be times when the
Company must suspend the use of the prospectus forming a part of the
Registration Statement until such time as an amendment to the
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Registration Statement has been filed by the Company and declared effective by
the SEC, or until such time as the Company has filed an appropriate report with
the SEC pursuant to the Exchange Act. Each Purchaser hereby covenants that it
will not sell any Registrable Shares pursuant to said prospectus during the
period commencing at the time at which the Company gives such Purchaser notice
of the suspension of the use of said prospectus and ending at the time the
Company gives such Purchaser notice that the Purchaser may thereafter effect
sales pursuant to said prospectus; provided that such suspension periods shall
in no event exceed 45 days in any 12-month period and that, in the good faith
judgment of the Company's Board of Directors, the Company would, in the absence
of such delay or suspension hereunder, be required under state or federal
securities laws to disclose any corporate development, a potentially significant
transaction or event involving the Company, or any negotiations, discussions, or
proposals directly relating thereto, in either case the disclosure of which
would reasonably be expected to have a material adverse effect upon the Company
or its stockholders.
7.7 TERMINATION OF OBLIGATIONS. The obligations of the Company pursuant
to Section 7.2 hereof shall cease and terminate upon the earlier to occur of (a)
such time as all of the Registrable Shares have been resold and (b) the second
anniversary of the Closing.
7.8 REPORTING REQUIREMENTS.
(A) With a view to making available the benefits of certain rules
and regulations of the SEC that may at any time permit the sale of the
Securities to the public without registration or pursuant to a registration
statement on Form S-3, the Company will use all commercially reasonable efforts
to:
(I) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(II) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
so long as any of the Purchasers own Registrable Shares, to furnish to
any Purchaser upon request (A) a written statement by the Company as to whether
it is in compliance with the reporting requirements of Rule 144, the Securities
Act and the Exchange Act, or whether it is qualified as a registrant whose
securities may be resold pursuant to SEC Form S-3, and (B) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company.
7.9 ASSIGNMENT OF RIGHTS. The rights to cause the Company to register
all or any portion of Registrable Shares pursuant to this Section 7 may be
assigned by Purchasers to a proper transferee or assignee under Section
8.3(a)(iii). Within a reasonable time after such transfer, the Purchaser shall
notify the Company of the name and address of such transferee or assignee, and
the securities with respect to which such registration rights are being
assigned. Such assignment shall be effective only if, (i) the Purchaser agrees
in writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
transfer or assignment (subject to the purchase price of the shares being kept
confidential by the Purchaser and such transferee or assignee), (ii) the Company
11
is, within a reasonable time after such transfer or assignment, furnished with
written notice of (A) the name and address of such transferee or assignee and
(B) the Registrable Shares with respect to which such registration rights are
being assigned, (iii) following such transfer or assignment, the further
disposition of the Registrable Securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, (iv)
at or before the time that the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein, (v) such
transfer shall have been made in accordance with Section 8.3(a)(iii) and (vi)
such transferee shall be an "accredited investor," as that term is defined in
Rule 501 of Regulation D, promulgated under the Securities Act.
7.10 RIGHT OF FIRST REFUSAL.
(A) SUBSEQUENT OFFERINGS. Subject to applicable securities laws,
each Purchaser shall have a right of first refusal to purchase its pro rata
share of all Equity Securities, as defined below, that the Company may, from
time to time, propose to sell and issue, other than the Equity Securities
excluded by Section 7.10(f) hereof. Each Purchaser's pro rata share is equal to
the ratio of (a) the number of shares of the Common Stock purchased by such
Purchaser under this Agreement (as adjusted for stock splits, dividends,
combinations and the like) or the number of shares of the Common Stock held by
such Purchaser immediately prior to the issuance of such Equity Securities,
whichever is less, to (b) the total number of shares of the Common Stock
outstanding immediately prior to the issuance of the Equity Securities. The term
"EQUITY SECURITIES" shall mean (i) the Common Stock, (ii) any security
convertible into or exercisable or exchangeable for, with or without
consideration, the Common Stock, (iii) any security carrying any warrant or
right to subscribe for or purchase any Common Stock or (iv) any such warrant or
right.
(B) EXERCISE OF RIGHTS. If the Company proposes to issue any
Equity Securities, it shall give each Purchaser then holding shares of the
Common Stock written notice of its intention, describing the Equity Securities,
the price and the terms and conditions upon which the Company proposes to issue
the same. Each such Purchaser shall have 10 days from the giving of such notice
to agree to purchase its pro rata share of the Equity Securities for the price
and upon the terms and conditions specified in the notice by giving written
notice to the Company and stating therein the quantity of Equity Securities to
be purchased. Notwithstanding the foregoing, the Company shall not be required
to offer or sell such Equity Securities to any Purchaser who would cause the
Company to be in violation of applicable federal securities laws by virtue of
such offer or sale.
(C) ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If the
Purchasers fail to exercise in full the rights of first refusal, the Company
shall have 90 days thereafter to sell the Equity Securities in respect of which
the Purchasers' rights were not exercised, at a price and upon general terms and
conditions not materially more favorable to the purchasers thereof than
specified in the Company's notice pursuant to Section 7.10(b) hereof. If the
Company has not sold such Equity Securities within 90 days of the notice
provided pursuant to Section 7.10(b), the Company shall not thereafter issue or
sell such Equity Securities without first offering such securities to the
Purchasers in the manner provided above.
12
(D) SALE WITHOUT NOTICE. In lieu of giving notice to the
Purchasers prior to the issuance of Equity Securities as provided in Section
7.10(b), the Company may elect to give notice to the Purchasers within 30 days
after the issuance of Equity Securities. Such notice shall describe the type,
price and terms of the Equity Securities. Each Purchaser then holding shares of
the Common Stock shall have 10 days from the date of receipt of such notice to
elect to purchase up to the number of shares that would, if purchased by such
Purchaser, maintain such Purchaser's pro rata share (as set forth in Section
7.10(a)) of the Common Stock. The closing of such sale shall occur within 60
days of the date of notice to the Purchasers.
(E) TERMINATION. The right of first refusal established by this
Section 7.10 shall terminate upon the first anniversary of the date of this
Agreement.
(F) EXCLUDED SECURITIES. The right of first refusal established by
this Section 7.10 shall have no application to any of the following Equity
Securities:
(I) shares of Common Stock and/or options, warrants or other
Common Stock purchase rights and the Common Stock issued pursuant to such
options, warrants or other rights issued or to be issued after the date hereof
to employees, officers or directors of, or consultants or advisors to the
Company or any subsidiary, pursuant to stock purchase or stock option plans or
other arrangements that are approved by the Board of Directors;
(II) stock issued or issuable pursuant to any rights or
agreements, options, warrants or convertible securities outstanding as of the
date of this Agreement; and stock issued pursuant to any such rights or
agreements granted after the date of this Agreement, so long as the right of
first refusal established by this Section 7.10 were complied with or were
inapplicable pursuant to any provision of this Section 7.10(f) with respect to
the initial sale or grant by the Company of such rights or agreements;
(III) any Equity Securities issued for consideration other than
cash pursuant to a merger, consolidation, strategic alliance, acquisition or
similar business combination;
(IV) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(V) any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act;
(VI) any Equity Securities issued in connection with strategic
transactions involving the Company and other entities, including (A) joint
ventures, manufacturing, marketing or distribution arrangements or (B)
technology transfer or development arrangements; provided that such transaction
is not substantially for equity financing purposes;
(VII) any Common Stock issued for a purchase price in excess of
$1.10 per share (as adjusted for stock splits, dividends, combinations and the
like); and
13
(VIII) any securities exchangeable or exercisable for, or
convertible into, shares of Common Stock where the deemed issuance price of the
Common Stock upon such exchange, exercise or conversion is in excess of $1.10
per share (as adjusted for stock splits, dividends, combinations and the like).
ARTICLE 8
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT
8.1 RESTRICTIONS ON TRANSFERABILITY. The Securities shall not be
transferable in the absence of an effective registration statement therefor
under the Securities Act or an exemption therefrom. The Company shall be
entitled to give stop transfer instructions to its transfer agent with respect
to the Securities in order to enforce the foregoing restrictions.
8.2 INSTRUCTION SHEET. Each certificate representing Registrable Shares
shall bear the Instruction Sheet attached hereto as EXHIBIT D (in addition to
any legends required hereunder or under applicable securities laws).
8.3 TRANSFER OF SECURITIES.
(A) Each Purchaser hereby covenants with the Company not to make
any sale of the Securities except:
(I) in accordance with the Registration Statement, in which
case such Purchaser covenants to comply with the requirement of delivering a
current prospectus; or
(II) in accordance with Rule 144, in which case such Purchaser
covenants to comply with Rule 144; or
(III) (A) If the transferee has agreed in writing to be bound
by the terms of this Agreement, (B) such Purchaser shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition,
and (C) if reasonably requested by the Company, such Purchaser shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of such shares
under the Securities Act and applicable state securities laws.
(B) Each Purchaser further acknowledges and agrees that, if such
Purchaser is selling the Securities using the prospectus forming a part of the
Registration Statement, such Securities are not transferable on the books of the
Company unless the certificate submitted to the Company's transfer agent
evidencing such Securities is accompanied by a separate certificate executed by
an officer of, or other person duly authorized by, the Purchaser in the form
attached hereto as EXHIBIT E.
8.4 PURCHASER INFORMATION. Each Purchaser covenants that it will
promptly notify the Company of any changes in the information set forth in the
Registration Statement regarding such Purchaser or such Purchaser's "Plan of
Distribution."
14
8.5 FILINGS. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Shares to the Purchasers under any
United States laws and regulations, or by any domestic securities exchange or
trading market, and upon the request of any Purchaser, to provide a copy thereof
to such Purchasers promptly after such request or filing, whichever occurs
later.
8.6 REPORTING STATUS. Until the second anniversary of this Agreement or
until the Purchasers no longer own any of the Securities, the Company shall use
its best efforts to file all reports required to be filed with the SEC pursuant
to Section 13 or 15(d) of the 1934 Act, and the Company shall not file a Form 15
to terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination.
ARTICLE 9
MISCELLANEOUS
9.1 WAIVERS AND AMENDMENTS. The terms of this Agreement with respect to
any Purchaser may be waived or amended with the written consent of the Company
and such Purchaser. In addition, with the written consent of the Company and the
record holders of a majority of the Registrable Shares then outstanding and held
by Purchasers, the terms of this Agreement may be waived or amended and any such
amendment or waiver shall be binding upon the Company and all holders of
Registrable Shares.
9.2 BROKER'S FEE. Each Purchaser acknowledges that the Company intends
to pay a fee in respect of the sale of the Securities to Xxxxxxx & Co. Each of
the parties to this Agreement represents that, on the basis of any actions and
agreements by it, there are no other brokers or finders entitled to compensation
in connection with the sale of Securities to the Purchasers.
9.3 GOVERNING LAW. This Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of New York without any
regard to conflicts of laws principles.
9.4 SURVIVAL. The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Company or
the Purchasers and the Closing for a period of one year following the Closing.
9.5 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement. Upon a permitted transfer of a
Purchaser's Securities on the books of the Company in accordance with the terms
of Sections 8.3(a)(iii) or 8.3(b), the Purchaser may assign its rights and
obligations under this Agreement to the permitted transferee upon prior written
notice to the Company. Except as set forth in the previous sentence, no
Purchaser shall assign this Agreement without the prior written consent of the
Company.
9.6 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
thereof.
15
9.7 NOTICES, ETC. All notices and other communications required or
permitted under this Agreement shall be in writing and may be delivered in
person, by telecopy, overnight delivery service or registered or certified
United States mail, addressed to the Company or the Purchasers, as the case may
be, at their respective addresses set forth at the beginning of this Agreement
or on EXHIBIT A, or at such other address as the Company or the Purchasers shall
have furnished to the other party in writing. All notices and other
communications shall be effective upon the earlier of actual receipt thereof by
the person to whom notice is directed or (a) in the case of notices and
communications sent by personal delivery or telecopy, one business day after
such notice or communication arrives at the applicable address or was
successfully sent to the applicable telecopy number, (b) in the case of notices
and communications sent by overnight delivery service, at noon (local time) on
the second business day following the day such notice or communication was sent,
and (c) in the case of notices and communications sent by United States mail,
seven days after such notice or communication shall have been deposited in the
United States mail.
9.8 SEVERABILITY OF THIS AGREEMENT. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
9.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9.10 FURTHER ASSURANCES. Each party to this Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
9.11 EXPENSES. Except as set forth in the letter agreement, dated as of
June 18, 2003, between the Company and Xxxxxxx & Co., each party shall bear the
expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby, including fees of legal counsel.
16
The foregoing agreement is hereby executed as of the date first above
written.
SBE, INC.
By: /s/ Xxxxx Xxxxxxx
-----------------------------
Xxxxx Xxxxxxx
Chief Financial Officer
PURCHASERS:
XXXXXXX CAPITAL PARTNERS, X.X. XXXXXXXXXXXX QUALIFIED
ASSOCIATES, L.P.
By: Its General Partner By: Its General Partner
------------------------------- ----------------------------
By: /s/ Xxxxxxx Xxxxxxx By: /s/ Xxxxxxx Xxxxxxxxxxxx
------------------------------- ----------------------------
/s/ Xxxx Xxxxxxxx /s/ Xxxxx Xxxx
------------------------------- ----------------------------
XXXX XXXXXXXX XXXXX XXXX
/s/ Xxxxx Xxxx /s/ Xxxxxxxxxxx XxXxxxxxx
------------------------------- ----------------------------
XXXXX XXXX XXXXXXXXXXX XXXXXXXXX
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
EXHIBIT A
SCHEDULE OF PURCHASERS
PURCHASER PURCHASE PRICE COMMON SHARES WARRANTS
--------- -------------- ------------- --------
Xxxxxxx Capital Partners, L.P. $220,000 200,000 20,000
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxx
Xxxxxxxxxxxx Qualified Associates, L.P. 220,000 200,000 20,000
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxxxxxx
Xxxx Xxxxxxxx 27,500 25,000 2,500
000 Xxxx 00xx Xxxxxx, #00X
Xxx Xxxx, XX 00000
Xxxxx Xxxx 27,500 25,000 2,500
000 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Xxxxx Xxxx 27,500 25,000 2,500
000 Xxxxxxx Xxxx
Xxx Xxxxxx, XX 00000
Xxxxxxxxxxx XxXxxxxxx 27,500 25,000 2,500
000 Xxxxx Xxxxx Xxxx
Xxxxxxxxx, XX 00000
TOTAL $550,000.00 500,000 50,000
A-1
EXHIBIT B
FORM OF WARRANT
THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
SBE, INC.
WARRANT TO PURCHASE COMMON STOCK
______________, 2003
VOID AFTER _____________, 2008
THIS CERTIFIES THAT, for value received, ___________________________,
with its principal office at __________________________, or permitted assigns
(the "Holder"), is entitled to subscribe for and purchase at the Exercise Price
(defined below) from SBE, Inc., a Delaware corporation (the "Company"), up to
__________ shares of the Common Stock of the Company (the "Common Stock"), as
adjusted as provided below.
1. DEFINITIONS. As used herein, the following terms shall have the
following respective meanings:
(A) "Exercise Period" shall mean the period commencing with the
date hereof and ending at 5:00 p.m. (California time) on the fifth anniversary
of the date hereof.
(B) "Exercise Price" shall mean $1.50 per share, subject to
adjustment pursuant to Section 5 below.
(C) "Exercise Shares" shall mean the shares of the Company's
Common Stock issuable upon exercise of this Warrant.
2. EXERCISE OF WARRANT. The rights represented by this Warrant may be
exercised in whole or in part at any time during the Exercise Period, by
delivery of the following to the Company at its address set forth above (or at
such other address as it may designate by notice in writing to the Holder):
(A) An executed Notice of Exercise in the form attached hereto;
(B) Payment of the Exercise Price either in cash or by check; and
(C) This Warrant.
B-1
Upon the exercise of the rights represented by this Warrant, a
certificate or certificates for the Exercise Shares so purchased, registered in
the name of the Holder or persons affiliated with the Holder, if the Holder so
designates, shall be issued and delivered to the Holder within a reasonable time
after the rights represented by this Warrant shall have been so exercised.
The person in whose name any certificate or certificates for Exercise
Shares are to be issued upon exercise of this Warrant shall be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
Notwithstanding any provisions herein to the contrary, if the fair
market value of one share of the Company's Common Stock is greater than the
Exercise Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant by payment of cash, the Holder may elect to receive
shares equal to the value (as determined below) of this Warrant (or the portion
thereof being canceled) by surrender of this Warrant at the principal office of
the Company together with the properly endorsed Notice of Exercise in which
event the Company shall issue to the Holder a number of shares of Common Stock
computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being canceled (at the
date of such calculation)
A = the fair market value of one share of the Company's Common
Stock (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
For purposes of the above calculation, the "fair market value" of one
share of Common Stock shall mean (i) the average of the closing sales prices for
the shares of Common Stock on the Nasdaq SmallCap Market or other trading market
where such security is listed or traded as reported by Bloomberg Financial
Markets (or a comparable reporting service of national reputation selected by
the Company and reasonably acceptable to the holders if Bloomberg Financial
Markets is not then reporting sales prices of such security) (collectively,
"Bloomberg") for the 10 consecutive trading days immediately preceding such
date, or (ii) if the Nasdaq SmallCap Market is not the principal trading market
for the shares of Common Stock, the average of the reported sales prices
reported by Bloomberg on the principal trading market for the Common Stock
during the same period, or, if there is no sales price for such period, the last
sales price reported by Bloomberg for such period, or (iii) if neither of the
foregoing applies, the
B-2
last sales price of such security in the over-the-counter market on the pink
sheets or bulletin board for such security as reported by Bloomberg, or if no
sales price is so reported for such security, the last bid price of such
security as reported by Bloomberg, or (iv) if fair market value cannot be
calculated as of such date on any of the foregoing bases, the fair market value
shall be as determined by the Board of Directors of the Company in the exercise
of its good faith judgment.
3. COVENANTS OF THE COMPANY.
(A) COVENANTS AS TO EXERCISE SHARES. The Company covenants and
agrees that all Exercise Shares that may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued and
outstanding, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issuance thereof.
(B) NO IMPAIRMENT. Except as and to the extent waived or consented
to by the Holder, the Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Warrant and in
the taking of all such action as may be necessary or appropriate in order to
protect the exercise rights of the Holder against impairment.
(C) NOTICES OF RECORD DATE. In the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, the Company shall mail to the Holder, at least 10 days prior
to the date specified herein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.
4. REPRESENTATIONS AND COVENANTS OF HOLDER.
(A) ACQUISITION OF WARRANT FOR PERSONAL ACCOUNT. The Holder
represents and warrants that it is acquiring the Warrant solely for its account
for investment and not with a view to or for sale or distribution of said
Warrant or any part thereof. The Holder also represents that the entire legal
and beneficial interests of the Warrant and Exercise Shares the Holder is
acquiring is being acquired for, and will be held for, its account only.
(B) SECURITIES ARE NOT REGISTERED.
(1) The Holder understands that the Warrant and the Exercise
Shares have not been registered under the Securities Act of 1933, as amended
(the "Act"), on the basis that no distribution or public offering of the stock
of the Company is to be effected. The Holder realizes that the basis for the
exemption may not be present if, notwithstanding its representations, the Holder
has a present intention of acquiring the securities for a fixed or determinable
period in the future, selling (in connection with a distribution or otherwise),
granting any participation in, or otherwise distributing the securities. The
Holder has no such present intention except as set forth in Article 7 of the
Securities Purchase Agreement dated as of
B-3
the date hereof by and among the Company and the purchasers named therein (the
"Securities Purchase Agreement").
(2) The Holder recognizes that the Warrant and the Exercise Shares
must be held indefinitely unless they are subsequently registered under the Act
or an exemption from such registration is available. The Holder recognizes that
the Company will register the Exercise Shares pursuant to the provisions of
Section 7 of the Securities Purchase Agreement.
(3) The Holder is aware that neither the Warrant nor the Exercise
Shares may be sold pursuant to Rule 144 adopted under the Act unless certain
conditions are met, including, among other things, the existence of a public
market for the shares, the availability of certain current public information
about the Company, the resale following the required holding period under Rule
144 and the number of shares being sold during any three month period not
exceeding specified limitations.
(C) DISPOSITION OF WARRANT AND EXERCISE SHARES.
(1) The Holder will not make any disposition of all or any part of
the Warrant or Exercise Shares in any event unless and until:
(A) The Company shall have received a letter secured by the Holder
from the Securities and Exchange Commission stating that no action will be
recommended to the Commission with respect to the proposed disposition;
(B) There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement; or
(C) The Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and if reasonably
requested by the Company, the Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, for the Holder to
the effect that such disposition will not require registration of such Warrant
or Exercise Shares under the Act or any applicable state securities laws.
(2) The Holder understands and agrees that all certificates
evidencing the shares to be issued to the Holder may bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
B-4
5. ADJUSTMENT OF EXERCISE PRICE AND SHARES.
(A) In the event of changes in the outstanding Common Stock of the
Company by reason of stock dividends, split-ups, recapitalizations,
reclassifications, combinations or exchanges of shares, separations,
reorganizations, liquidations, consolidation, acquisition of the Company
(whether through merger or acquisition of substantially all the assets or stock
of the Company), or the like, the number and class of shares available under the
Warrant in the aggregate and the Exercise Price shall be correspondingly
adjusted to give the Holder of the Warrant, on exercise for the same aggregate
Exercise Price, the total number, class, and kind of shares or other property as
the Holder would have owned had the Warrant been exercised prior to the event
and had the Holder continued to hold such shares until the event requiring
adjustment. The form of this Warrant need not be changed because of any
adjustment in the number of Exercise Shares subject to this Warrant.
(B) If at any time or from time to time the holders of Common
Stock of the Company (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant) shall have received or become
entitled to receive, without payment therefor,
(1) Common Stock or any shares of stock or other securities which
are at any time directly or indirectly convertible into or exchangeable for
Common Stock, or any rights or options to subscribe for, purchase or otherwise
acquire any of the foregoing by way of dividend or other distribution (other
than a dividend or distribution covered in section 5(a) above),
(2) any cash paid or payable otherwise than as a cash dividend, or
(3) Common Stock or additional stock or other securities or
property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement (other than shares of
Common Stock pursuant to Section 5(a) above),
then and in each such case, the Holder hereof will, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Common
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (2) and (3) above) which such Holder would
hold on the date of such exercise had he been the holder of record of such
Common Stock as of the date on which holders of Common Stock received or became
entitled to receive such shares or all other additional stock and other
securities and property.
(C) SALE OF COMMON STOCK BELOW EXERCISE PRICE.
(I) If at any time or from time to time after the issuance hereof,
the Company issues or sells, or is deemed by the express provisions of this
Section 5(c) to have issued or sold Additional Shares of Common Stock (as
defined below) for an Effective Price (as defined below) less than the
then-existing Exercise Price (a "Qualifying Dilutive Issuance"), then and in
each such case, the then-existing Exercise Price shall be reduced, as of 12:01
a.m. New York time on the date immediately after such issue or sale, to a price
equal to the Effective Price
B-5
of such Additional Shares of Common Stock issued or deemed to be issued in the
Qualifying Dilutive Issuance.
(II) No adjustment shall be made to the Exercise Price in an
amount less than one cent per share. Any adjustment otherwise required by this
Section 5(c) that is not required to be made due to the preceding sentence shall
be included in any subsequent adjustment to the Exercise Price.
(III) For the purpose of making any adjustment required under this
Section 5(c), the consideration received by the Company for any issue or sale of
securities (the "Aggregate Consideration") shall be computed at the net amount
of cash received by the Company after deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the Company in
connection with such issue or sale but without deduction of any expenses payable
by the Company. If Additional Shares of Common Stock or Convertible Securities
(as defined below) are sold together with other stock or securities or other
assets of the Company for a consideration that covers both, Aggregate
Consideration will be computed as the portion of the consideration so received
that may be reasonably determined in good faith by the Board to be allocable to
such Additional Shares of Common Stock, Convertible Securities or rights or
options.
(IV) (1) For the purpose of the adjustment required under this
Section 5(c), if the Company sells preferred stock, options, warrants, purchase
rights or other securities convertible into or exercisable for Additional Shares
of Common Stock ("Convertible Securities"), the Company shall be deemed to have
issued at the time of the issuance of such Convertible Securities the maximum
number of Additional Shares of Common Stock issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such shares an
amount equal to the total amount of the consideration, if any, received by the
Company for the issuance of such Convertible Securities plus the minimum amounts
of consideration, if any, payable to the Company upon the conversion or exercise
thereof (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities); provided that if the minimum amounts of such
consideration cannot be ascertained, but are a function of antidilution or
similar protective clauses, the Company shall be deemed to have received the
minimum amounts of consideration without reference to such clauses.
(2) If the minimum amount of consideration payable to the Company
upon the exercise or conversion of Convertible Securities is reduced over time
or on the occurrence or non-occurrence of specified events other than by reason
of antidilution adjustments, the Effective Price on the then-unexercisable
portion of this Warrant shall be recalculated using the figure to which such
minimum amount of consideration is reduced; provided further, that if the
minimum amount of consideration payable to the Company upon the exercise or
conversion of such rights, options or Convertible Securities is subsequently
increased, the Effective Price shall be again recalculated using the increased
minimum amount of consideration payable to the Company upon the exercise or
conversion of such Convertible Securities.
(3) No further adjustment of the Exercise Price, as adjusted upon
the issuance of such Convertible Securities, shall be made as a result of the
actual
B-6
issuance of Additional Shares of Common Stock the conversion or exercise of any
such Convertible Securities. If the conversion or exercise privilege represented
by any such Convertible Securities shall expire without having been exercised,
the Exercise Price as adjusted upon the issuance of such Convertible Securities
shall be readjusted to the Exercise Price that would have been in effect had an
adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise or conversion of such Convertible Securities, and
such Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for issuing or selling
the Convertible Securities actually converted, plus the consideration, if any,
actually received by the Company (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) on the conversion of such
Convertible Securities.
(V) For the purpose of making any adjustment to the Exercise Price as
required under this Section 5(c), "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued by the Company or deemed to be issued pursuant
to this Section 5(c) (including shares of Common Stock subsequently reacquired
or retired by the Company) for cash in a bona fide financing transaction or any
other assets or consideration in any transaction. Notwithstanding the foregoing,
Additional Shares of Common Stock shall not include:
(1) shares of Common Stock or Convertible Securities issued to
employees, officers or directors of, or consultants or advisors to the Company
or any subsidiary pursuant to stock purchase or stock option plans or other
arrangements;
(2) shares of Common Stock issued pursuant to the exercise of
Convertible Securities outstanding as of the date hereof;
(3) shares of Common Stock or Convertible Securities issued for
consideration other than cash pursuant to a merger, consolidation, acquisition,
strategic alliance or similar business combination;
(4) shares of Common Stock or Convertible Securities issued to
third-party service providers in exchange for or as partial consideration for
services rendered to the Company; and
(5) any Common Stock or Convertible Securities issued in
connection with strategic transactions involving the Company and other entities,
including (i) joint ventures, manufacturing, marketing or distribution
arrangements or (ii) technology transfer or development arrangements.
References to Common Stock in the subsections of this clause (v) above
shall mean all shares of Common Stock issued by the Company or deemed to be
issued pursuant to this Section 5(c). The "Effective Price" of Additional Shares
of Common Stock shall mean the quotient determined by dividing the total number
of Additional Shares of Common Stock issued or sold, or deemed to have been
issued or sold by the Company under this Section 5(c), into the
B-7
Aggregate Consideration received, or deemed to have been received by the Company
for such issue under this Section 5(c), for such Additional Shares of Common
Stock.
(D) The Exercise Price shall also be subject to downward
adjustment as provided in Section 7.4 of the Securities Purchase Agreement.
6. FRACTIONAL SHARES. No fractional shares shall be issued upon the
exercise of this Warrant as a consequence of any adjustment pursuant hereto. All
Exercise Shares (including fractions) issuable upon exercise of this Warrant may
be aggregated for purposes of determining whether the exercise would result in
the issuance of any fractional share. If, after aggregation, the exercise would
result in the issuance of a fractional share, the Company shall, in lieu of
issuance of any fractional share, pay the Holder otherwise entitled to such
fraction a sum in cash equal to the product resulting from multiplying the then
current fair market value of an Exercise Share by such fraction.
7. NO STOCKHOLDER RIGHTS. This Warrant in and of itself shall not
entitle the Holder to any voting rights or other rights as a stockholder of the
Company.
8. TRANSFER OF WARRANT. Subject to applicable laws and the restriction
on transfer set forth on the first page of this Warrant, this Warrant and all
rights hereunder are transferable, by the Holder in person or by duly authorized
attorney, upon delivery of this Warrant and the form of assignment attached
hereto to any transferee designated by Holder. The transferee shall sign an
investment letter in form and substance satisfactory to the Company.
9. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is
lost, stolen, mutilated or destroyed, the Company may, on such terms as to
indemnity or otherwise as it may reasonably impose (which shall, in the case of
a mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.
Any such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.
10. NOTICES, ETC. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at the address listed on the signature page and to Holder at the address listed
on the signature page or at such other address as the Company or Holder may
designate by 10 days' advance written notice to the other parties hereto.
11. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions contained herein.
B-8
B-9
12. GOVERNING LAW. This Warrant and all rights, obligations and liabilities
hereunder shall be governed by the laws of the State of New York without regard
to conflicts of laws principles.
B-10
The Company has caused this Warrant to be executed by its duly
authorized officer as of June 27, 2003.
SBE, INC.
By:
---------------------------------
Xxxxx Xxxxxxx
Chief Financial Officer
Address:
----------------------------
----------------------------
----------------------------
Holder's address:
------------------------------------
------------------------------------
------------------------------------
NOTICE OF EXERCISE
TO: SBE, INC.
(1) |_| The undersigned hereby elects to purchase ________ shares of
the Common Stock of SBE, INC. (the "Company") pursuant to the terms of the
attached Warrant, and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
|_| The undersigned hereby elects to purchase ________ shares of
Common Stock of the Company pursuant to the terms of the net exercise provisions
set forth in Section 2 of the attached Warrant, and shall tender payment of all
applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares
of Common Stock of the Company in the name of the undersigned or in such other
name as is specified below:
------------------------
(Name)
------------------------
------------------------
(Address)
(3) The undersigned represents that (i) the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares, other than as contemplated by Article 7 of the Securities Purchase
Agreement dated as of June 27, 2003 by and among the Company and the purchasers
named therein (the "Securities Purchase Agreement"); (ii) the undersigned is
aware of the Company's business affairs and financial condition and has acquired
sufficient information about the Company to reach an informed and knowledgeable
decision regarding its investment in the Company; (iii) the undersigned is
experienced in making investments of this type and has such knowledge and
background in financial and business matters that the undersigned is capable of
evaluating the merits and risks of this investment and protecting the
undersigned's own interests; (iv) the undersigned understands that the shares of
Common Stock issuable upon exercise of this Warrant have not been registered
(except to the extent a registration statement pursuant to and as contemplated
by Article 7 of the Securities Purchase Agreement is effective) 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, which
exemption depends upon, among other things, the bona fide nature of the
investment intent as expressed herein, and, because such securities have not
been registered under the Securities Act, they must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available; (v) the undersigned is aware that the aforesaid
shares of Common Stock may not be sold pursuant to Rule 144 adopted under the
Securities Act unless certain conditions are met and until the undersigned has
held the shares for the number of years prescribed by Rule 144, that among the
conditions for use of the Rule is the availability of current information to the
public about the Company; and (vi) the undersigned agrees not to make any
disposition of all or
1
any part of the aforesaid shares of Common Stock unless and until there is then
in effect a registration statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with said
registration statement, or the undersigned has provided the Company with an
opinion of counsel satisfactory to the Company, stating that such registration
is not required.
----------------------------- -------------------------------
(Date) (Signature)
-------------------------------
(Print name)
2
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply
required information. Do not use this form to purchase
shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
Name:
--------------------------------------------------------------------------
(Please Print)
Address:
-----------------------------------------------------------------------
(Please Print)
Dated: __________, 20__
Holder's
Signature:
-----------------------------------------------------------
Holder's
Address:
-------------------------------------------------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
EXHIBIT C
INSTRUCTION SHEET FOR PURCHASER
(TO BE READ IN CONJUNCTION WITH THE ENTIRE
SECURITIES PURCHASE AGREEMENT)
A. Complete the following items in the Securities Purchase Agreement:
1. Provide the information regarding the Purchaser requested on
the signature page. The Agreement must be executed by an
individual authorized to bind the Purchaser.
2. EXHIBIT C-1 - Stock Certificate Questionnaire:
Provide the information requested by the Stock Certificate
Questionnaire.
3. EXHIBIT C-2 - Registration Statement Questionnaire:
Provide the information requested by the Registration
Statement Questionnaire.
4. EXHIBIT C-3 - Purchaser Certificate:
Provide the information requested by the Certificate for
Individual Purchasers or the Certificate for Corporate,
Partnership, Trust, Foundation and Joint Purchasers, as
applicable.
5. Return the signed Securities Purchase Agreement to:
Xxxxxxx Xxxxxx
Xxxxxx Godward LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
B. Instructions regarding the transfer of funds for the purchase of
Securities will be telecopied to the Purchaser at a later date.
C. Upon the resale of the Registrable Shares by the Purchaser after the
Registration Statement covering the Registrable Shares is effective, as
described in the Securities Purchase Agreement, the Purchaser:
(I) must deliver a current prospectus, and annual and quarterly
reports of the Company to the buyer (prospectuses, and annual
and quarterly reports may be obtained from the Company at the
Purchaser's request); and
(II) must send a letter in the form of EXHIBIT E to the Securities
Purchase Agreement to the Company so that the Registrable
Shares may be properly transferred.
C-1
EXHIBIT C-1
SBE, INC.
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 4.3 of the Agreement, please provide us with the following
information:
1. The exact name that the Securities are to be registered in (this is the
name that will appear on the stock certificate(s)). You may use a nominee
name if appropriate: ______________________________
2. The relationship between the Purchaser of the Securities and the Registered
Holder listed in response to item 1 above: ______________________________
3. The mailing address of the Registered Holder listed in response to item 1
above: ______________________________
______________________________
______________________________
4. The Tax Identification Number of the Registered Holder listed in response
to item 1 above: ______________________________
C-1-1
EXHIBIT C-2
SBE, INC.
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement,
please provide us with the following information regarding the Purchaser.
A. GENERAL INFORMATION
1. Please state your organization's name exactly as it should appear in
the Registration Statement:
2. Have you or your organization had any position, office or other
material relationship within the past three years with the Company or its
affiliates other than as disclosed in the Prospectus included in the
Registration Statement?
[ ] Yes [ ] No
If yes, please indicate the nature of any such relationships below:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
B. SECURITIES HOLDINGS
Please fill in all blanks in the following questions related to your
BENEFICIAL OWNERSHIP of the Company's capital stock. Generally, the term
"BENEFICIAL OWNERSHIP" refers to any direct or indirect interest in the
securities which entitles you to any of the rights or benefits of ownership,
even though you may not be the holder of record of the securities. For example,
securities held in "street name" over which you exercise voting or investment
power would be considered BENEFICIALLY OWNED by you. Other examples of indirect
ownership include ownership by a partnership in which you are a partner or by an
estate or trust of which you or any member of your IMMEDIATE FAMILY is a
beneficiary. Ownership of securities held in the names of your spouse, minor
children or other relatives who live in the same household may be attributed to
you.
================================================================================
PLEASE NOTE: IF YOU HAVE ANY REASON TO BELIEVE THAT ANY INTEREST IN
SECURITIES OF THE COMPANY WHICH YOU MAY HAVE, HOWEVER REMOTE, IS A BENEFICIAL
INTEREST, PLEASE DESCRIBE SUCH INTEREST. FOR PURPOSES OF RESPONDING TO THIS
QUESTIONNAIRE, IT IS PREFERABLE TO ERR ON THE SIDE OF INCLUSION RATHER THAN
EXCLUSION. WHERE THE SEC'S INTERPRETATION OF BENEFICIAL OWNERSHIP WOULD REQUIRE
DISCLOSURE OF YOUR INTEREST OR POSSIBLE INTEREST IN CERTAIN SECURITIES OF THE
COMPANY, AND YOU BELIEVE THAT YOU DO NOT ACTUALLY POSSESS THE ATTRIBUTES OF
BENEFICIAL OWNERSHIP, AN APPROPRIATE RESPONSE IS TO DISCLOSE THE INTEREST AND AT
THE SAME TIME DISCLAIM BENEFICIAL OWNERSHIP OF THE SECURITIES.
================================================================================
C-2-1
1. As of JUNE 27, 2003, I owned outright (including shares registered
in my name individually or jointly with others, shares held in the name of a
bank, broker, nominee, depository or in "street name" for my account), the
following number of shares of the Company's capital stock: _________________.
2. In addition to the number of shares I own outright as indicated by
my answer to question B(1), as of JUNE 27, 2003, I had or shared voting power or
investment power, directly or indirectly, through a contract, arrangement,
understanding, relationship or otherwise, over the following number of shares of
the Company's capital stock: _________________.
If the answer to this question B(2) was not "zero," please complete the
following: with whom shared; and the nature of the relationship and any
underlying voting trust agreement, investment arrangement or the like:
SHARED VOTING POWER:
=========================== ========================= =========================
NUMBER OF SHARES WITH WHOM SHARED NATURE OF RELATIONSHIP
=========================== ========================= =========================
=========================== ========================= =========================
SHARED INVESTMENT POWER:
=========================== ========================= =========================
NUMBER OF SHARES WITH WHOM SHARED NATURE OF RELATIONSHIP
=========================== ========================= =========================
=========================== ========================= =========================
As of AUGUST 27, 2003, I will have the right to acquire ________ shares
of the Company's capital stock pursuant to outstanding stock options issued
under the Company's stock option plans and ______ shares pursuant to the
exercise of outstanding warrants (none, indicated by "0" above).
============================================================================
OPTIONS AND WARRANTS
CLASS NUMBER OF SHARES
======================================= ====================================
======================================= ====================================
C-2-2
(4) Please identify the natural person or persons who have voting
and/or investment control over the Company's securities that you own, and state
whether such person(s) disclaims beneficial ownership of the securities. For
example, if you are a general partnership, please identify the general partners
in the partnership.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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C-2-3
C. NASD QUESTIONS
1. Are you (i) a "member"/1/ of the National Association of Securities
Dealers, Inc. (the "NASD"), (ii) an "affiliate"/2/ of a member of the NASD,
(iii) a "person associated with a member" or an "associated person of a
member"/3/ of the NASD or (iv) an immediate family member/4/ of any of the
foregoing persons? IF YES, please identify the member and describe such
relationship (whether direct or indirect), and please respond to Question Number
2 below; IF NO, please proceed directly to Question Number 3.
Yes _____ No _____
Description:
-----------------
/1/ NASD defines a "member" as any broker or dealer admitted to membership in
the NASD, or any officer or partner or branch manager of such a member, or any
person occupying a similar status or performing a similar function for such a
member.
/2/ The term "affiliate" means a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is in common
control with, the person specified. Persons who have acted or are acting on
behalf of or for the benefit of a person include, but are not necessarily
limited to, directors, officers, employees, agents, consultants and sales
representatives. The following should apply for purposes of the foregoing:
(i) a person should be presumed to control a Member if the person
beneficially owns 10 percent or more the outstanding voting securities of a
Member which is a corporation, or beneficially owns a partnership interest in 10
percent or more of the distributable profits or losses of a Member which is a
partnership;
(ii) a Member should be presumed to control a person if the Member and
Persons Associated With a Member beneficially own 10 percent or more of the
outstanding voting securities of a person which is a corporation, or
beneficially own a partnership interest in 10 percent or more of the
distributable profits or losses of a person which is a partnership;
(iii) a person should be presumed to be under common control with a
Member if:
(1) the same person controls both the Member and another
person by beneficially owning 10 percent or more of the outstanding
voting securities of a Member or person which is a corporation, or by
beneficially owning a partnership interest in 10 percent or more of the
distributable profits or losses of a Member or person which is a
partnership; or
(2) a person having the power to direct or cause the direction
of the management or policies of the Member or such person also has the
power to direct or cause the direction of the management or policies of
the other entity in question.
/3/ The NASD defines a "person associated with a member" or an "associated
person of a member" as being every sole proprietor, partner, equity owner,
officer, director or branch manager of any member, or any natural person
occupying a similar status or performing similar functions, or any natural
person engaged in the investment banking or securities business who directly or
indirectly controls or is controlled by such member (for example, any employee),
whether or not any such person is registered or exempt from registration with
the NASD.
/4/ Immediate family includes parents, mother-in-law, father-in-law, husband
or wife, brother or sister, brother-in-law or sister-in-law, son-in-law or
daughter-in-law, and children, or any other person who is supported, directly or
indirectly, to a material extent, by a person associated with a member of the
NASD or any other broker/dealer.
C-2-4
2. If you answered "yes" to Question Number 1, please furnish any
information as to whether any such member intends to participate in any capacity
in the public offering, including the details of such participation:
Description:
3. Are you or have you been an "underwriter or related person"/5/ or a
person associated with an underwriter or related person, including, without
limitation, with respect to the proposed public offering? If yes, please
identify the underwriter or related person and describe such relationship
(whether direct or indirect).
Yes _____ No _____
Description:
4. If known, please describe in detail any underwriting compensations,
arrangements or dealings entered into during the previous twelve months, or
proposed to be consummated in the next twelve months, between (i) any
underwriter or related person, member of the NASD, affiliate of a member of the
NASD, person associated with a member or associated person of a member of the
NASD or any immediate family member thereof, on the one hand, and (ii) the
Company, or any director, officer or stockholder thereof, on the other hand,
which provides for the receipt of any item of value and/or the transfer of any
warrants, options or other securities from the Company to any such person (other
than the information relating to the arrangements with any investment firm or
underwriting organization which may participate in the proposed public
offering).
Description:
5. Have you purchased the securities in the ordinary course of
business?
Yes _____ No _____
----------------
/5/ The term "underwriter or related person" includes underwriters,
underwriters' counsel, financial consultants and advisors, finders, members of
the selling or distribution group, and any and all other persons associated with
or related to any of such persons, including members of the immediate family of
such persons.
C-2-5
The answers to the foregoing questions are correctly stated to the best of my
information and belief. I shall advise Xxxxxxx Xxxxxx at (000) 000-0000, the
Company's outside counsel, promptly of any changes in the foregoing information.
------------------------------------------
(Print name of Selling Security Holder)
------------------------------------------
(Signature)
By:
---------------------------------------
(Name and title of signatory, if
stockholder is an entity)
------------------------------------------
(Date)
C-2-6
EXHIBIT C-3
SBE, INC.
CERTIFICATE FOR INDIVIDUAL PURCHASERS
If the investor is an individual Purchaser (or married couple) the
Purchaser must complete, date and sign this Certificate.
CERTIFICATE
I certify that the representations and responses below are true and
accurate:
In order for the Company to offer and sell the Securities in
conformance with state and federal securities laws, the following information
must be obtained regarding your investor status. Please INITIAL EACH CATEGORY
applicable to you as an investor in the Company.
_____ (1) A natural person whose net worth/1/, either individually or
jointly with such person's spouse exceeds $1,000,000;
_____ (2) A natural person who had an income/2/ in excess of $200,000,
or joint income with the person's spouse in excess of $300,000, in 2001 and
2002, and reasonably expects to have individual income reaching the same level
in 2003;
_____ (3) An executive officer or director of the Company.
Date:
----------------------- --------------------------------
Name(s) of Purchaser
--------------------------------
Signature
--------------------------------
Signature
------------------
/1/ For purposes of this Certificate, "net worth" means the excess of total
assets at fair market value over total liabilities, except that the principal
residence owned by a natural person shall be valued either (a) at cost,
including the cost of improvements, net of current encumbrances upon the
property, or (b) at the appraised value of the residence as determined upon a
written appraisal used by an institutional lender making a loan to the
individual secured by the property, including the cost of subsequent
improvements, net of current encumbrances upon the property. As used in the
preceding sentence, "institutional lender" means a bank, savings and loan
company, industrial loan company, credit union or personal property broker or a
company whose principal business is as a lender of loans secured by real
property and which has such loans receivable in the amount of $2,000,000 or
more.
/2/ For purposes of this Certificate, "income" means adjusted gross income, as
reported for federal income tax purposes, increased by the following amounts:
(a) the amount of any tax exempt interest income received, (b) the amount of
losses claimed as a limited partner in a limited partnership, (c) any deduction
claimed for depletion, (d) amounts contributed to an XXX or Xxxxx retirement
plan, (e) alimony paid, and (f) any amounts by which income from long-term
capital gains has been reduced in arriving at adjusted gross income pursuant to
the provisions of Section 1202 of the Internal Revenue Code.
C-3-1
EXHIBIT C-3
SBE, INC.
CERTIFICATE FOR CORPORATE, PARTNERSHIP,
TRUST, FOUNDATION, AND JOINT PURCHASERS
If the investor is a corporation, partnership, trust, pension plan,
foundation, joint purchaser (other than a married couple) or other entity, an
authorized officer, partner, or trustee must complete, date and sign this
Certificate.
CERTIFICATE
The undersigned certifies that the representations and responses below
are true and accurate:
(A) The investor has been duly formed and is validly existing and has
full power and authority to invest in the Company. The person signing on behalf
of the undersigned has the authority to execute and deliver the Securities
Purchase Agreement on behalf of the Purchaser and to take other actions with
respect thereto.
(B) Indicate the form of entity of the undersigned:
|_| Limited Partnership
|_| General Partnership
|_| Corporation
|_| Revocable Trust (identify each grantor and indicate under
what circumstances the trust is revocable by the grantor:
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(Continue on a separate piece of paper, if necessary.)
|_| Other Type of Trust (indicate type of trust and, for trusts
other than pension trusts, name the grantors and
beneficiaries:
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(Continue on a separate piece of paper, if necessary.)
|_| Other form of organization (indicate form of organization
( ). _______________________________________________________
C-3-2
(C) Indicate the approximate date the undersigned entity was formed: .
(D) In order for the Company to offer and sell the Securities in
conformance with state and federal securities laws, the following information
must be obtained regarding your investor status. Please INITIAL EACH CATEGORY
applicable to you as an investor in the Company.
_______ (1) A bank as defined in Section 3(a)(2) of the Securities
Act, or any savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Securities Act whether acting in its individual
or fiduciary capacity;
_______ (2) A broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934;
_______ (3) An insurance company as defined in Section 2(13) of the
Securities Act;
_______ (4) An investment company registered under the Investment
Company Act of 1940 or a business development company as defined in Section
2(a)(48) of that Act;
_______ (5) A Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958;
_______ (6) A plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has
total assets in excess of $5,000,000;
_______ (7) An employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such act, which
is either a bank, savings and loan association, insurance company, or
registered investment adviser, or if the employee benefit plan has total
assets in excess of $5,000,000 or, if a self-directed plan, with investment
decisions made solely by persons that are accredited investors;
_______ (8) A private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
_______ (9) An organization described in Section 501(c)(3) of the
Internal Revenue Code, a corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of acquiring the
Securities, with total assets in excess of $5,000,000;
_______ (10) A trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the Securities, whose purchase
is directed by a sophisticated person who has such knowledge and experience
in financial and business matters that such person is capable of evaluating
the merits and risks of investing in the Company;
C-3-3
_______ (11) An entity in which all of the equity owners qualify under
any of the above subparagraphs. If the undersigned belongs to this investor
category only, list the equity owners of the undersigned, and the investor
category which each such equity owner satisfies:
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(Continue on a separate piece of paper, if necessary.)
Dated:
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Name of investor
-------------------------------------
Signature and title of authorized
officer, partner or trustee
C-3-4
EXHIBIT D
SBE, INC.
IMPORTANT - DO NOT REMOVE THIS INSTRUCTION SHEET FROM THE ATTACHED SHARE
CERTIFICATE UNLESS AND UNTIL THE SHARES ARE SOLD AS FOLLOWS:
(1) THE SHARES ARE RESOLD PURSUANT TO THE REGISTRATION STATEMENT ON FORM S-3
(NO. [________________]), AND, IN CONNECTION WITH SUCH RESALE, THE HOLDER HAS
DELIVERED TO THE PURCHASER OF THE SHARES A CURRENT PROSPECTUS AND HAS PROVIDED
TO THE COMPANY OR TO THE TRANSFER AGENT FOR THE COMPANY'S STOCK A PURCHASER'S
CERTIFICATE OF SUBSEQUENT SALE; OR
(2) THE SHARES ARE RESOLD IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, PROVIDED THAT, PRIOR TO
SUCH RESALE, THE HOLDER HAS NOTIFIED THE COMPANY OF SUCH DISPOSITION AND
PROVIDED THE COMPANY WITH WRITTEN ASSURANCES, IN FORM AND SUBSTANCE SATISFACTORY
TO THE COMPANY, OF COMPLIANCE WITH THE REQUIREMENTS OF SUCH EXEMPTION.
DO NOT REMOVE THIS INSTRUCTION SHEET FROM
THE ATTACHED SHARE CERTIFICATE
EXCEPT IN ACCORDANCE WITH
THE INSTRUCTIONS SET FORTH ABOVE.
D-1
EXHIBIT E
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
To: [INSERT TRANSFER AGENT]
ATTENTION: [________________]
The undersigned, the Purchaser or an officer of, or other person duly
authorized by the Purchaser, hereby certifies that
_____________________________________ was the
[FILL IN NAME OF INSTITUTION]
Purchaser of the shares evidenced by the attached certificate, and as such,
proposes to transfer such shares on or about _________________ either (i) in
[DATE]
accordance with the registration
statement, file number [_______________] in which case the Purchaser certifies
that the requirement of delivering a current prospectus has been complied with
or will be complied with in connection with such sale, or (ii) in accordance
with Rule 144 under the Securities Act of 1933 ("RULE 144"), in which case the
Purchaser certifies that it has complied with or will comply with the
requirements of Rule 144.
Print or type:
Name of Purchaser:
-------------------------------------
Name of Individual representing
Purchaser (if an Institution):
-------------------------------------
Title of Individual representing
Purchaser (if an Institution):
-------------------------------------
Signature by:
Purchaser or Individual
representing Purchaser:
-------------------------------------
E-1
TABLE OF CONTENTS
PAGE
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ARTICLE 1 AUTHORIZATION AND SALE OF COMMON SHARES AND WARRANTS...........................................1
1.1 Authorization..................................................................................1
1.2 Sale of Common Shares and Warrants.............................................................1
ARTICLE 2 CLOSING; DELIVERY..............................................................................1
2.1 Closing Date...................................................................................1
2.2 Delivery.......................................................................................1
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................2
3.1 Organization and Standing......................................................................2
3.2 Corporate Power; Authorization.................................................................2
3.3 Issuance and Delivery of the Securities; Capitalization........................................2
3.4 SEC Documents..................................................................................3
3.5 Governmental Consents..........................................................................3
3.6 Litigation.....................................................................................3
3.7 Eligibility to Use Form S-3....................................................................3
3.8 Absence of Certain Changes.....................................................................4
3.9 Full Disclosure................................................................................4
3.10 Use of Proceeds................................................................................4
ARTICLE 4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS....................................4
4.1 Authorization..................................................................................4
4.2 Investment Experience..........................................................................4
4.3 Investment Intent..............................................................................4
4.4 Registration or Exemption Requirements.........................................................5
4.5 Dispositions...................................................................................5
4.6 Residency......................................................................................5
4.7 Legend.........................................................................................5
ARTICLE 5 CONDITIONS TO CLOSING OBLIGATIONS OF PURCHASERS................................................6
5.1 Representations and Warranties.................................................................6
5.2 Covenants......................................................................................6
TABLE OF CONTENTS
(CONTINUED)
PAGE
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5.3 Listing........................................................................................6
5.4 Judgments......................................................................................6
ARTICLE 6 CONDITIONS TO CLOSING OBLIGATIONS OF COMPANY...................................................6
6.1 Receipt of Payment.............................................................................6
6.2 Representations and Warranties.................................................................6
6.3 Covenants......................................................................................6
6.4 Delivery of Purchaser Questionnaire............................................................6
ARTICLE 7 COVENANTS......................................................................................7
7.1 Definitions....................................................................................7
7.2 Registration Procedures and Expenses...........................................................7
7.3 Other Registrations............................................................................8
7.4 Delay in Filing................................................................................8
7.5 Indemnification................................................................................9
7.6 Prospectus Delivery...........................................................................10
7.7 Termination of Obligations....................................................................11
7.8 Reporting Requirements........................................................................11
7.9 Assignment of Rights..........................................................................11
7.10 Right of First Refusal........................................................................12
ARTICLE 8 RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; COMPLIANCE WITH SECURITIES ACT.................14
8.1 Restrictions on Transferability...............................................................14
8.2 Instruction Sheet.............................................................................14
8.3 Transfer of Securities........................................................................14
8.4 Purchaser Information.........................................................................14
8.5 Filings.......................................................................................15
8.6 Reporting Status..............................................................................15
ARTICLE 9 MISCELLANEOUS.................................................................................15
9.1 Waivers and Amendments........................................................................15
9.2 Broker's Fee..................................................................................15
9.3 Governing Law.................................................................................15
TABLE OF CONTENTS
(CONTINUED)
PAGE
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9.4 Survival......................................................................................15
9.5 Successors and Assigns........................................................................15
9.6 Entire Agreement..............................................................................15
9.7 Notices, etc..................................................................................16
9.8 Severability of this Agreement................................................................16
9.9 Counterparts..................................................................................16
9.10 Further Assurances............................................................................16
9.11 Expenses......................................................................................16
A. General Information....................................................................................1
B. Securities Holdings....................................................................................1
C. NASD Questions.........................................................................................4
