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EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of September
29, 2000, by and among Superconductor Technologies Inc., a Delaware corporation
with headquarters located at 000 Xxxx Xxxxx, Xxxxx Xxxxxxx, Xxxxxxxxxx
00000-0000 ("COMPANY"), and each of the purchasers set forth on the signature
pages hereto (the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("REGULATION D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT");
B. The Company has authorized a new series of preferred stock,
designated as Series E Convertible Preferred Stock, having the rights,
preferences and privileges set forth in the Certificate of Designations,
Preferences and Rights attached hereto as EXHIBIT "A" (the "CERTIFICATE OF
DESIGNATION");
C. The Series E Preferred Stock is convertible into shares of common
stock, $0.001 par value per share, of the Company (the "COMMON STOCK"), upon the
terms and subject to the limitations and conditions set forth in the Certificate
of Designation;
D. The Company has authorized the issuance to the Buyers of warrants,
in the form attached hereto as EXHIBIT "B", to purchase Three Hundred Thirteen
Thousand, Three Hundred Seventy (313,370) shares of Common Stock (the "INITIAL
WARRANTS") and warrants, in the form attached hereto as EXHIBIT "C", to purchase
up to Seven Hundred Thirty-One Thousand, One Hundred Ninety-Eight (731,198)
shares of Common Stock (the "INCENTIVE WARRANTS" and, collectively with the
Initial Warrants, the "WARRANTS");
E. The Buyers desire to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement, (i) an
aggregate of Thirty-Seven Thousand Five Hundred (37,500) shares of Series E
Preferred Stock (such shares, together with any shares of Series F Preferred
Stock issued in replacement thereof or as a dividend thereon or otherwise with
respect thereto in accordance with the terms thereof, being hereinafter
collectively referred to as the "PREFERRED SHARES"), (ii) Initial Warrants to
purchase Three Hundred Thirteen Thousand, Three Hundred Seventy (313,370) shares
of Common Stock, and (iii) Incentive Warrants to purchase up to Seven Hundred
Thirty-One Thousand, One Hundred Ninety-Eight (731,198) shares of Common Stock,
for an aggregate purchase price of Thirty-Seven Million, Five Hundred Thousand
Dollars ($37,500,000).
F. Each Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, the number of Preferred Shares and number of Initial Warrants
and Incentive Warrants as is set forth immediately below its name on the
signature pages hereto;
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G. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as EXHIBIT "D" (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws; and
NOW, THEREFORE, the Company and each of the Buyers severally (and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
a. PURCHASE OF PREFERRED SHARES AND WARRANTS. On the
Closing Date (as defined below), the Company shall issue and sell to each Buyer
and each Buyer severally agrees to purchase from the Company such number of
Preferred Shares and number of Initial Warrants and Incentive Warrants as is set
forth immediately below such Buyer's name on the signature pages hereto.
b. FORM OF PAYMENT. On the Closing Date (as defined
below), (i) each Buyer shall pay the purchase price for the Preferred Shares and
the Warrants to be issued and sold to it at the Closing (as defined below) (the
"PURCHASE PRICE") by wire transfer of immediately available funds to the
Company, in accordance with the Company's written wiring instructions, against
delivery of duly executed certificates representing the Preferred Shares and
duly executed Warrants which such Buyer is purchasing and (ii) the Company shall
deliver such certificates and Warrants duly executed on behalf of the Company,
to such Buyer, against delivery of such Purchase Price.
c. CLOSING DATE. Subject to the satisfaction (or
waiver) of the conditions thereto set forth in Section 6 and Section 7 below,
the date and time of the issuance and sale of the Preferred Shares and the
Warrants pursuant to this Agreement (the "CLOSING DATE") shall be 12:00 noon,
Eastern Standard Time, on September 29, 2000 or such other mutually agreed upon
time. The closing of the transactions contemplated by this Agreement (the
"CLOSING") shall occur on the Closing Date at the offices of Xxxxxxx Xxxxx
Xxxxxxx & Ingersoll, LLP, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000, or at such
other location as may be agreed to by the parties.
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer
severally (and not jointly) represents and warrants to the Company solely as to
such Buyer that:
a. INVESTMENT PURPOSE. As of the date hereof, the
Buyer is purchasing the Preferred Shares and the shares of Common Stock issuable
upon conversion of or otherwise pursuant to the Preferred Shares (including,
without limitation, such additional shares of Common Stock as are issuable as a
result of the events described in Articles V, VI.D(b) or
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VI.E of the Certificate of Designation and Section 2(c) of the Registration
Rights Agreement) (such shares of Common Stock being collectively referred to
herein as the "CONVERSION SHARES") and the Warrants and the shares of Common
Stock issuable upon exercise of or otherwise pursuant to the Warrants (the
"WARRANT SHARES" and, collectively with the Preferred Shares, Warrants and
Conversion Shares, the "SECURITIES") for its own account and not with a present
view towards the public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the 1933 Act; provided, however,
that by making the representations herein, the Buyer does not agree to hold any
of the Securities for any minimum or other specific term and reserves the right
to dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. ACCREDITED INVESTOR STATUS. The Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D (an
"ACCREDITED INVESTOR").
c. RELIANCE ON EXEMPTIONS. The Buyer understands that
the Securities are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
d. INFORMATION. The Buyer and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors. The Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall modify, amend
or affect Buyer's right to rely on the Company's representations and warranties
contained in Section 3 below. The Buyer understands that its investment in the
Securities involves a significant degree of risk.
e. GOVERNMENTAL REVIEW. The Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Securities.
f. TRANSFER OR RE-SALE. The Buyer understands that
(i) except as provided in the Registration Rights Agreement, the sale or re-sale
of the Securities has not been and is not being registered under the 1933 Act or
any applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Buyer shall have delivered to the Company
an opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the Securities to be sold or transferred may be sold or transferred pursuant to
an exemption from such registration, (c) the Securities are sold or transferred
to an "affiliate" (as defined in Rule 144 promulgated under the 1933 Act (or a
successor rule) ("RULE 144")) of the Buyer who agrees to sell or otherwise
transfer the Securities
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only in accordance with this Section 2(f) and who is an Accredited Investor or
(d) the Securities are sold pursuant to Rule 144; (ii) any sale of such
Securities made in reliance on Rule 144 may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any re-sale of
such Securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 0000 Xxx) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such Securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder (in each case, other
than pursuant to the Registration Rights Agreement). Notwithstanding the
foregoing or anything else contained herein to the contrary, the Securities may
be pledged as collateral in connection with a bona fide margin account or other
lending arrangement; provided, however, that upon execution on any such pledge,
the pledgee shall be subject to the restrictions on transfer of the Securities
contained in this Agreement.
g. LEGENDS. The Buyer understands that the Preferred
Shares and the Warrants and, until such time as the Conversion Shares and
Warrant Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement or otherwise may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular date
that can then be immediately sold, the Conversion Shares and Warrant Shares, may
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such
Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities may not be sold, transferred or assigned in the
absence of an effective registration statement for the securities
under said Act, or an opinion of counsel, in form, substance and
scope customary for opinions of counsel in comparable
transactions, that registration is not required under said Act or
unless sold pursuant to Rule 144 under said Act."
The legend set forth above shall be removed and the Company
shall issue a certificate without such legend to the holder of any Security upon
which it is stamped, if, unless otherwise required by applicable state
securities laws, (a) such Security is registered for resale under an effective
registration statement filed under the 1933 Act or otherwise may be sold
pursuant to Rule 144(k) without any restriction as to the number of securities
as of a particular date that can then be immediately sold, or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, to the effect that
a public sale or transfer of such Security may be made without registration
under the 1933 Act and such sale or transfer is effected or (c) such holder
provides the Company with reasonable and customary assurances that such Security
can be sold pursuant to Rule 144 and such sale or transfer is effected. The
Buyer agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, in compliance with
applicable prospectus delivery requirements, if any.
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h. AUTHORIZATION; ENFORCEMENT. This Agreement and the
Registration Rights Agreement have been duly and validly authorized. This
Agreement has been duly executed and delivered on behalf of the Buyer, and this
Agreement constitutes, and upon execution and delivery by the Buyer of the
Registration Rights Agreement, such agreement will constitute, valid and binding
agreements of the Buyer enforceable in accordance with their terms, subject to
bankruptcy, insolvency, reorganization, moratorium or other similar rights
affecting or relating to creditors' rights generally and general principles of
equity.
i. RESIDENCY. The Buyer is a resident of the
jurisdiction set forth immediately below such Buyer's name on the signature
pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Buyer that:
a. ORGANIZATION AND QUALIFICATION. The Company and
each of its Subsidiaries (as defined below), if any, is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and conducted.
SCHEDULE 3(a) sets forth a list of all of the Subsidiaries of the Company and
the jurisdiction in which each is incorporated. The Company and each of its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership or use of property or
the nature of the business conducted by it makes such qualification necessary
except where the failure to be so qualified or in good standing would not have a
Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material adverse
effect on (i) the holder's rights relating to the Securities, (ii) the business,
operations, assets, financial condition or prospects of the Company and its
Subsidiaries, if any, taken as a whole, (iii) the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection
herewith or (iv) the authority or the ability of the Company to perform its
obligation under this Agreement, the Registration Rights Agreement, the
Certificate of Designation or the Warrants. "SUBSIDIARIES" means any corporation
or other organization, whether incorporated or unincorporated, in which the
Company owns, directly or indirectly, any equity or other ownership interest.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has
all requisite corporate power and authority to file and perform its obligations
under the Certificate of Designation and to enter into and perform this
Agreement, the Registration Rights Agreement and the Warrants and to consummate
the transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company, the filing of the Certificate of Designation and the consummation by it
of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Preferred Shares and the Warrants and the
issuance and reservation for issuance of the Conversion Shares issuable upon
conversion of or otherwise pursuant to the Preferred Shares and the Warrant
Shares issuable upon exercise of or otherwise pursuant to the Warrants ) have
been
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duly authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its stockholders is
required, (iii) this Agreement has been duly executed and delivered by the
Company, and (iv) this Agreement constitutes, and upon execution and delivery by
the Company of the Registration Rights Agreement and the Warrants and upon
execution and filing of the Certificate of Designation, each of such agreements
and instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium or other similar rights
affecting or relating to creditors' rights generally and general principles of
equity.
c. CAPITALIZATION. As of the date hereof, the
authorized capital stock of the Company consists of (i) 75,000,000 shares of
Common Stock of which 17,782,168 shares are issued and outstanding, 2,779,364
shares are reserved for issuance pursuant to the Company's stock option plans,
1,123,525 shares are reserved for issuance pursuant to securities (other than
the Preferred Shares and the Warrants) exercisable for, or convertible into or
exchangeable for shares of Common Stock and 5,121,508 shares are reserved for
issuance upon conversion of the Preferred Shares and exercise of the Warrants
(subject to adjustment pursuant to the Company's covenant set forth in Section
4(h) below); and (ii) 2,000,000 shares of preferred stock, 37,500 of which are
designated as the Preferred Shares. All of such outstanding shares of capital
stock are, or upon issuance will be, duly authorized, validly issued, fully paid
and nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances imposed through the actions or failure to act of
the Company. Except as disclosed in SCHEDULE 3(c), as of the effective date of
this Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for any shares of
capital stock of the Company or any of its Subsidiaries, or arrangements by
which the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries,
(ii) there are no agreements or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of its or their
securities under the 1933 Act (except the Registration Rights Agreement) and
(iii) there are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to security
holders) that will be triggered by the issuance of the Preferred Shares, the
Warrants, the Conversion Shares or Warrant Shares. The Company has furnished to
the Buyer true and correct copies of the Company's Restated Certificate of
Incorporation as in effect on the date hereof ("CERTIFICATE OF INCORPORATION"),
the Company's Bylaws, as in effect on the date hereof (the "BYLAWS"), and the
terms of all securities convertible into or exercisable for Common Stock of the
Company and the material rights of the holders thereof in respect thereto. The
Company shall provide the Buyer with a written update of this representation
signed by the Company's Chief Executive Officer or Chief Financial Officer on
behalf of the Company as of the Closing Date.
d. ISSUANCE OF SHARES. The Preferred Shares are duly
authorized and, upon issuance in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable, and free from all taxes,
liens, claims and encumbrances with respect to the issue thereof and shall not
be subject to preemptive rights or other similar rights of stockholders
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of the Company and will not impose personal liability upon the holder thereof.
The Conversion Shares and Warrant Shares are duly authorized and reserved for
issuance and, upon conversion of or otherwise pursuant to the Preferred Shares
and exercise of or otherwise pursuant to the Warrants in accordance with the
terms thereof, will be validly issued, fully paid and non-assessable, and free
from all taxes, liens, claims and encumbrances and will not be subject to
preemptive rights or other similar rights of stockholders of the Company and
will not impose personal liability upon the holder thereof.
e. ACKNOWLEDGMENT OF DILUTION. The Company
understands and acknowledges the potentially dilutive effect to the Common Stock
upon the issuance of the Conversion Shares upon conversion of or otherwise
pursuant to the Preferred Shares and upon issuance of the Warrant Shares upon
exercise of or otherwise pursuant to the Warrants. The Company has studied and
fully understands the nature of the Securities being sold hereunder. The Company
further acknowledges that its obligation to issue Conversion Shares and Warrant
Shares upon conversion of or otherwise pursuant to the Preferred Shares or upon
exercise of or otherwise pursuant to the Warrants in accordance with this
Agreement, the Certificate of Designation and the Warrants is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company. Taking the
foregoing into account, the Company's Board of Directors has determined, in its
good faith business judgment, that the issuance of the Securities hereunder and
under the Certificate of Designation and the Warrants and the consummation of
the transactions contemplated hereby and thereby are in the best interest of the
Company and its stockholders.
f. SERIES OF PREFERRED STOCK. The terms,
designations, powers, preferences and relative, participating and optional or
special rights, and the qualifications, limitations and restrictions of each
series of preferred stock of the Company (other than the Preferred Shares) are
as stated in the Certificate of Incorporation, filed on or prior to the date
hereof, and the Bylaws. The terms, designations, powers, preferences and
relative, participating and optional or special rights, and the qualifications,
limitations and restrictions of the Preferred Shares are as stated in the
Certificate of Designation.
g. NO CONFLICTS. The execution, delivery and
performance of this Agreement, the Registration Rights Agreement and the
Warrants by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the filing of
the Certificate of Designation and the issuance and reservation for issuance, as
applicable, of the Preferred Shares, Conversion Shares and Warrant Shares) will
not (i) conflict with or result in a violation of any provision of the
Certificate of Incorporation or Bylaws or (ii) except as set forth on SCHEDULE
3(g), violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture, patent,
patent license or instrument to which the Company or any of its Subsidiaries is
a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and regulations of any self-regulatory organizations to which the Company or its
securities are subject) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected (except for such
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conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation
of its Certificate of Incorporation, Bylaws or other organizational documents
and neither the Company nor any of its Subsidiaries is in default (and no event
has occurred which with notice or lapse of time or both could put the Company or
any of its Subsidiaries in default) under, and neither the Company nor any of
its Subsidiaries has taken any action or failed to take any action that would
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party or by which any property or assets of the
Company or any of its Subsidiaries is bound or affected, except for possible
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect. The businesses of the Company and its Subsidiaries, if any, are not
being conducted, and shall not be conducted so long as a Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any governmental
entity. Except as specifically contemplated by this Agreement, except as set
forth on SCHEDULE 3(g) hereto, and except as required under the 1933 Act and any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court, governmental agency, regulatory agency, self regulatory organization or
stock market or any third party in order for it to execute, deliver or perform
any of its obligations under this Agreement, the Registration Rights Agreement
or the Warrants in accordance with the terms hereof or thereof or to issue and
sell the Preferred Shares and Warrants in accordance with the terms hereof and
to issue the Conversion Shares upon conversion of or otherwise pursuant to the
Preferred Shares and the Warrant Shares upon exercise of or otherwise pursuant
to the Warrants. Except as disclosed in SCHEDULE 3(g), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company is not in violation of the listing
requirements of the Nasdaq National Market (the "NNM") and does not reasonably
anticipate that the Common Stock will be delisted by the NNM in the foreseeable
future. The Company and its Subsidiaries are unaware of any facts or
circumstances which might reasonably be expected to give rise to any of the
foregoing.
h. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since
December 31, 1998, the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "1934 ACT") (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits to such documents) incorporated by reference
therein, being hereinafter referred to herein as the "SEC DOCUMENTS"). The
Company has delivered to each Buyer true and complete copies of any SEC
Documents, specifically requested by Buyer or not filed via the SEC's XXXXX
database, except for exhibits and incorporated documents, and the Company
understands that Buyer has secured copies of the remainder of such SEC Documents
from the SEC's XXXXX database through the world wide web. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, 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
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were made, not misleading. None of the statements made in any such SEC Documents
is, or has been, required to be amended or updated under applicable law (except
for such statements as have been amended or updated in subsequent filings prior
to the date hereof). As of their respective dates, 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 with respect thereto. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles, consistently applied, 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 present
in all material respects the consolidated financial position of the Company and
its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments).
Except as set forth in the financial statements of the Company included in the
SEC Documents, the Company has no liabilities, contingent or otherwise, other
than (i) liabilities incurred in the ordinary course of business subsequent to
December 31, 1999 and (ii) obligations under contracts and commitments incurred
in the ordinary course of business and not required under generally accepted
accounting principles to be reflected in such financial statements, which,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company.
i. ABSENCE OF CERTAIN CHANGES. Since December 31,
1999, there has been no material adverse change and no material adverse
development in the assets, liabilities, business, properties, operations,
financial condition, results of operations or prospects of the Company or any of
its Subsidiaries which has not been disclosed in the SEC Documents filed since
December 31, 1999.
j. ABSENCE OF LITIGATION. There is no action, suit,
claim, proceeding or, to the knowledge of the Company and its Subsidiaries,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company
or any of its Subsidiaries, or their officers or directors in their capacity as
such, that could have a Material Adverse Effect. SCHEDULE 3(j) contains a
complete list and summary description of any pending or threatened proceeding
against or affecting the Company or any of its Subsidiaries, without regard to
whether it would have a Material Adverse Effect. The Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.
K. PATENTS, COPYRIGHTS, ETC.
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(i) Except as set forth in SCHEDULE 3(k) hereof,
the Company and each of its Subsidiaries owns or possesses the requisite
licenses or rights to use all patents, patent applications, patent rights,
inventions, know-how, trade secrets, trademarks, trademark applications, service
marks, service names, trade names and copyrights ("INTELLECTUAL PROPERTY")
necessary to enable it to conduct its business as now operated (and, except as
set forth in SCHEDULE 3(k) hereof, to the best of the Company's knowledge, as
presently contemplated to be operated in the future); except as set forth in
SCHEDULE 3(k) hereof, there is no claim or action by any person pertaining to,
or proceeding pending, or to the Company's knowledge threatened, which
challenges the right of the Company or of a Subsidiary with respect to any
Intellectual Property necessary to enable it to conduct its business as now
operated (and, except as set forth in SCHEDULE 3(k) hereof, to the best of the
Company's knowledge, as presently contemplated to be operated in the future);
except as set forth in SCHEDULE 3(k) hereof, to the best of the Company's
knowledge, the Company's or its Subsidiaries' current and intended products,
services and processes do not infringe on any Intellectual Property or other
rights held by any person; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company and
each of its Subsidiaries have taken reasonable security measures to protect the
secrecy and confidentiality of their Intellectual Property.
(ii) All of the Company's computer software and
computer hardware, and other similar or related items of automated, computerized
or software systems that are used or relied on by the Company in the conduct of
its business or that were, or currently are being, sold or licensed by the
Company to customers (collectively, "INFORMATION TECHNOLOGY"), are Year 2000
Compliant. For purposes of this Agreement, the term "YEAR 2000 COMPLIANT" means,
with respect to the Company's Information Technology, that the Information
Technology is designed to be used prior to, during and after the calendar Year
2000 A.D., and the Information Technology used during each such time period will
accurately receive, provide and process date and time data (including, but not
limited to, calculating, comparing and sequencing) from, into and between the
20th and 21st centuries, including the years 1999 and 2000, and leap-year
calculations, and will not malfunction, cease to function, or provide invalid or
incorrect results as a result of the date or time data, to the extent that other
information technology, used in combination with the Information Technology,
properly exchanges date and time data with it. The Company has delivered to the
Buyer true and correct copies of all analyses, reports, studies and similar
written information, whether prepared by the Company or another party, relating
to whether the Information Technology is Year 2000 Compliant.
l. NO RESTRICTIVE CONTRACTS, ETC. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any noncompetition agreement or similar contract or agreement which
would restrict the Company's ability to conduct its business.
m. TAX STATUS. Except as set forth on SCHEDULE 3(m),
the Company and each of its Subsidiaries has made or filed all federal, state
and foreign income and all other tax returns, reports and declarations required
by any jurisdiction to which it is subject (unless and
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only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the assessment or
collection of any foreign, federal, state or local tax. Except as set forth on
SCHEDULE 3(m), none of the Company's tax returns is presently being audited by
any taxing authority.
n. CERTAIN TRANSACTIONS. Except as set forth on
SCHEDULE 3(n) and except for arm's length transactions pursuant to which the
Company or any of its Subsidiaries makes payments in the ordinary course of
business upon terms no less favorable than the Company or any of its
Subsidiaries could obtain from third parties and other than the grant of stock
options disclosed on SCHEDULE 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
o. DISCLOSURE. All information relating to or
concerning the Company or any of its Subsidiaries set forth in this Agreement
and provided to the Buyers pursuant to Section 2(d) hereof and otherwise in
connection with the transactions contemplated hereby is true and correct in all
material respects and the Company has not omitted to state any material fact
necessary in order to make the statements made herein or therein, in light of
the circumstances under which they were made, not misleading. No event or
circumstance has occurred or exists, nor is the Company in possession of any
information with respect to the Company or any of its Subsidiaries or its or
their business, properties, prospects, operations or financial conditions, which
has not been publicly announced or disclosed but under applicable law, rule or
regulation, requires public disclosure or announcement by the Company (assuming
for this purpose that the Company's reports filed under the 1934 Act are being
incorporated into an effective registration statement filed by the Company under
the 1933 Act).
p. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF
SECURITIES. The Company acknowledges and agrees that the Buyers are acting
solely in the capacity of arm's length purchasers with respect to this Agreement
and the transactions contemplated hereby. The Company further acknowledges that
no Buyer is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement and the transactions
contemplated hereby and that any statement made by any Buyer or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated
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hereby is not advice or a recommendation and is merely incidental to the Buyers'
purchase of the Securities and has not been relied upon by the Company, its
officers or directors in any way. The Company further represents to each Buyer
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation by the Company and its representatives.
q. NO INTEGRATED OFFERING. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited any
offers to buy any security under circumstances that would require registration
under the 1933 Act of the issuance of the Securities to the Buyers. The issuance
of the Securities to the Buyers will not be integrated with any other issuance
of the Company's securities (past, current or future) for purposes of any
stockholder approval provisions applicable to the Company or its securities.
r. NO BROKERS. The Company has taken no action which
would give rise to any claim by any person for brokerage commissions, finder's
fees or similar payments relating to this Agreement or the transactions
contemplated hereby, except for Chase Securities Inc., whose commissions and
fees will be paid for by the Company pursuant to an engagement letter dated May
23, 2000.
s. PERMITS; COMPLIANCE. The Company and each of its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "COMPANY
PERMITS"), and there is no action pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any of its Subsidiaries is in conflict with, or in
default or violation of, any of the Company Permits, except for any such
conflicts, defaults or violations which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. Since December 31,
1999, neither the Company nor any of its Subsidiaries has received any
notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
t. ENVIRONMENTAL MATTERS.
(i) Except as set forth in SCHEDULE 3(t), there
are, to the Company's knowledge, with respect to the Company or any of its
Subsidiaries or any predecessor of the Company, no past or present violations of
Environmental Laws (as defined below), releases of any material into the
environment, actions, activities, circumstances, conditions, events, incidents,
or contractual obligations which may give rise to any common law environmental
liability or any liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 or similar federal, state, local or
foreign laws and neither the Company nor any of its Subsidiaries has received
any notice with respect to any of the foregoing, nor is any action pending or,
to the Company's knowledge, threatened in connection with any of the foregoing.
The term "ENVIRONMENTAL LAWS" means all federal, state,
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local or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, "HAZARDOUS MATERIALS") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored,
used or disposed of in compliance with applicable law, no Hazardous Materials
are contained on or about any real property currently owned, leased or used by
the Company or any of its Subsidiaries, and no Hazardous Materials were released
on or about any real property previously owned, leased or used by the Company or
any of its Subsidiaries during the period the property was owned, leased or used
by the Company or any of its Subsidiaries, except in the normal course of the
Company's or any of its Subsidiaries' business.
(iii) Except as set forth in SCHEDULE 3(t),
there are no underground storage tanks on or under any real property owned,
leased or used by the Company or any of its Subsidiaries that are not in
compliance with applicable law.
u. TITLE TO PROPERTY. The Company and its
Subsidiaries have good and marketable title in fee simple to all real property
owned by them and good and marketable title to all personal property owned by
them which is material to the business of the Company and its Subsidiaries, in
each case free and clear of all liens, encumbrances and defects except such as
are described in SCHEDULE 3(u) or such as would not have a Material Adverse
Effect. Any real property and facilities held under lease by the Company and its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as would not have a Material Adverse Effect.
v. INSURANCE. The Company and each of its
Subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the Company and
its Subsidiaries are engaged, except for earthquake insurance which is difficult
to obtain at a reasonable price, in the area where the Company is located.
Neither the Company nor any such Subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a Material
Adverse Effect.
w. INTERNAL ACCOUNTING CONTROLS. The Company and each
of its Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
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accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
x. FOREIGN CORRUPT PRACTICES. Neither the Company,
nor any of its Subsidiaries, nor any director, officer, agent, employee or other
person acting on behalf of the Company or any Subsidiary has, in the course of
his actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
y. SOLVENCY. The Company (both before and after
giving effect to the transactions contemplated by this Agreement) is solvent
(i.e., its assets currently have a fair market value in excess of the amount
required to pay its probable liabilities on its existing debts as they become
absolute and matured) and, assuming consummation of the transactions
contemplated by this Agreement, the Company has no information that would lead
it to reasonably conclude that the Company would not have the ability to, nor
does it intend to take any action that would impair its ability to, pay its
debts from time to time incurred in connection therewith as such debts mature.
The Company did not receive a qualified opinion from its auditors with respect
to its most recent fiscal year end and, assuming consummation of the
transactions contemplated by this Agreement, does not reasonably anticipate or
have reason to know of any basis upon which its auditors might issue a qualified
opinion in respect of its current fiscal year.
z. NO INVESTMENT COMPANY. The Company is not, and
upon the issuance and sale of the Securities as contemplated by this Agreement,
the Certificate of Designation and the Warrants will not be, an "investment
company" required to be registered under the Investment Company Act of 1940 (an
"INVESTMENT COMPANY"). The Company is not controlled by an Investment Company.
4. COVENANTS.
a. BEST EFFORTS. The parties shall use their best
efforts to satisfy timely each of the conditions described in Section 6 and 7 of
this Agreement.
b. FORM D; BLUE SKY LAWS. The Company agrees to file
a Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to each Buyer promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for sale to the
Buyers at the Closing pursuant to this Agreement under applicable securities or
"blue sky" laws of the states of the United States (or to obtain an exemption
from such qualification),
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and shall provide evidence of any such action so taken to each Buyer on or prior
to the Closing Date.
c. REPORTING STATUS; ELIGIBILITY TO USE FORM S-3. The
Company's Common Stock is registered under Section 12(g) of the 1934 Act. So
long as any Buyer beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not 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. The Company currently
meets, and will take all necessary action to continue to meet, the "registrant
eligibility" requirements set forth in the general instructions to Form S-3. The
Company shall issue a press release describing the materials terms of the
transaction contemplated hereby within one (1) business of the Closing Date and
shall file with the SEC a Current Report on Form 8-K describing the material
terms of the transaction contemplated hereby within three (3) business days of
the Closing Date, which press release and Form 8-K shall be subject to prior
review by the Buyers.
d. USE OF PROCEEDS. The Company shall use the
proceeds from the sale of the Preferred Shares and the Warrants and from the
exercise of the Warrants in the manner set forth in SCHEDULE 4(d) attached
hereto and made a part hereof and shall not, directly or indirectly, use such
proceeds for any loan to or investment in any other corporation, partnership,
enterprise or other person (except in connection with its currently existing
direct or indirect Subsidiaries).
e. ADDITIONAL EQUITY CAPITAL; RIGHT OF FIRST REFUSAL.
Subject to the exceptions described below, the Company will not, without the
prior written consent of Xxxx Xxxx Capital Management, L.P. ("RGC"), negotiate
or contract with any party to obtain additional equity financing (including debt
financing with an equity component) during the period (the "LOCK-UP PERIOD")
beginning on the Closing Date and ending ninety (90) days from the date the
Registration Statement (as defined in the Registration Rights Agreement)
required to be filed pursuant to Section 2(a) of the Registration Rights
Agreement is first declared effective by the SEC (plus any days during the
Lock-up Period following the initial declaration of effectiveness thereof in
which sales cannot be made thereunder). In addition, subject to the exceptions
described below, the Company will not conduct any equity financing (including
debt financing with an equity component) ("FUTURE OFFERINGS") during the period
beginning on the Closing Date and ending ninety (90) days after the end of the
Lock-up Period, unless it shall have first delivered to each Buyer, at least ten
(10) business days prior to the closing of such Future Offering, written notice
describing the proposed Future Offering, including the terms and conditions
thereof and proposed definitive documentation to be entered into in connection
therewith, and providing each Buyer an option during the ten (10) day period
following delivery of such notice to purchase its pro rata share (based on the
ratio that the number of Preferred Shares purchased by it hereunder bears to the
aggregate number of Preferred Shares purchased hereunder) of the securities
being offered in the Future Offering on the same terms as contemplated by such
Future Offering (the limitations referred to in this sentence and the preceding
sentence are collectively referred to as the "CAPITAL RAISING LIMITATIONS"). In
the event the terms and conditions of a proposed Future Offering are amended in
any respect after delivery of the notice to the Buyers concerning the proposed
Future Offering, the Company shall
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deliver a new notice to each Buyer describing the amended terms and conditions
of the proposed Future Offering and each Buyer thereafter shall have an option
during the ten (10) day period following delivery of such new notice to purchase
its pro rata share of the securities being offered on the same terms as
contemplated by such proposed Future Offering, as amended. The foregoing
sentence shall apply to successive amendments to the terms and conditions of any
proposed Future Offering. The Capital Raising Limitations shall not apply to any
transaction involving (i) issuances of securities in a firm commitment
underwritten public offering (excluding a continuous offering pursuant to Rule
415 under the 1933 Act), (ii) issuances of securities as consideration for a
merger, consolidation or purchase of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or in connection with the disposition or acquisition of a
business, product or license by the Company or (iii) issuances of securities in
connection with the renegotiation of the terms of the outstanding warrant held
by U.S. Cellular Corporation, provided there is no increase in the total number
of shares issuable under such warrant and no decrease in the exercise price of
such warrant. The Capital Raising Limitations also shall not apply to the
issuance of securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of the date hereof or to
the grant of additional options or warrants, or the issuance of additional
securities, under any Company stock option or restricted stock plan approved by
the stockholders of the Company.
f. EXPENSES. The Company shall pay to RGC at the
Closing a non-accountable expense allowance equal to Forty-Five Thousand Dollars
($45,000) (of which Ten Thousand Dollars ($10,000) was advanced previously) for
all expenses incurred by it in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements
to be executed in connection herewith, including, without limitation, attorneys'
and consultants' fees and expenses and travel expenses.
g. FINANCIAL INFORMATION. The Company agrees to send
the following reports to each Buyer until such Buyer transfers, assigns, or
sells all of the Securities: (i) within ten (10) days after the filing with the
SEC, a copy of its Annual Report on Form 10-K, its Quarterly Reports on Form
10-Q and any Current Reports on Form 8-K; (ii) within one (1) day after release,
copies of all press releases issued by the Company or any of its Subsidiaries;
and (iii) contemporaneously with the making available or giving to the
stockholders of the Company, copies of any notices or other information the
Company makes available or gives to such stockholders.
h. RESERVATION OF SHARES. The Company shall at all
times have authorized, and reserved for the purpose of issuance, a sufficient
number of shares of Common Stock to provide for (i) the full conversion of the
outstanding Preferred Shares and issuance of the Conversion Shares in connection
therewith and as otherwise required by the Certificate of Designation (based on
the lesser of the Variable Conversion Price in effect from time to time and the
Fixed Conversion Price in effect from time to time (each as defined in the
Certificate of Designation) and taking into consideration the 19.99% Limitation
(as defined in the Certificate of Designation)), (ii) the full exercise of the
Initial Warrants and issuance of the Warrant Shares in connection therewith
(based on the Exercise Price (as defined in the Initial Warrants) of the Initial
Warrants in effect from time to time) and (iii) the full exercise of the
Incentive Warrants
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based on the maximum number of Warrant Shares issuable upon exercise of or
otherwise pursuant to the Incentive Warrants. The Company shall not reduce the
number of shares of Common Stock reserved for issuance upon conversion of or
otherwise pursuant to the Preferred Shares and upon exercise of or otherwise
pursuant to the Warrants without the consent of each Buyer. The Company shall
use its best efforts at all times to maintain the number of shares of Common
Stock so reserved for issuance at no less than 5,121,508. If at any time the
number of shares of Common Stock authorized and reserved for issuance is below
the number of Conversion Shares issued and issuable upon conversion of or
otherwise pursuant to the Preferred Shares (based on the lesser of the Variable
Conversion Price in effect from time to time and the Fixed Conversion Price in
effect from time to time (each as defined in the Certificate of Designation) and
taking into consideration the 19.99% Limitation (as defined in the Certificate
of Designation)) and the aggregate number of Warrant Shares issued and issuable
upon exercise of the Warrants (based on the Exercise Price (as defined in the
Warrants) of the Warrants in effect from time to time), the Company will
promptly take all corporate action necessary to authorize and reserve a
sufficient number of shares, including, without limitation, calling a special
meeting of stockholders to authorize additional shares to meet the Company's
obligations under this Section 4(h), in the case of an insufficient number of
authorized shares, and using its best efforts to obtain stockholder approval of
an increase in such authorized number of shares.
i. LISTING. The Company shall promptly secure the
listing of the Conversion Shares and Warrant Shares upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance) and, so
long as any Buyer owns any of the Securities, shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Conversion
Shares and Warrant Shares from time to time issuable upon conversion of or
otherwise pursuant to the Preferred Shares or exercise of or otherwise pursuant
to the Warrants. The Company will obtain and, so long as any Buyer owns any of
the Securities, maintain the listing and trading of its Common Stock on, the
NNM, the Nasdaq SmallCap Market ("NASDAQ SMALLCAP"), the New York Stock Exchange
("NYSE"), or the American Stock Exchange ("AMEX") and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the National Association of Securities Dealers ("NASD") and
such exchanges, as applicable. The Company shall promptly provide to each Buyer
copies of any notices it receives from the NNM and any other exchanges or
quotation systems on which the Common Stock is then listed regarding the
continued eligibility of the Common Stock for listing on such exchanges and
quotation systems.
j. CORPORATE EXISTENCE. Subject to Article V.B of the
Certificate of Designation and Section 10 of the Warrants, so long as a Buyer
beneficially owns any Preferred Shares or Warrants, the Company shall maintain
its corporate existence and shall not merge, consolidate or sell all or
substantially all of the Company's assets, except in the event of a merger or
consolidation or sale of all or substantially all of the Company's assets, where
(i) the successor or acquiring entity and, if an entity different from the
successor or acquiring entity, the entity whose securities into which the
Preferred Shares and/or Warrants shall become convertible or exercisable, as
applicable, pursuant to Article VI.C(b) of the Certificate of Designation and/or
Section 4(e) of the Warrants, in such transaction assumes the Company's
obligations hereunder and under the agreements and instruments entered into in
connection herewith (including the
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Certificate of Designation and the Warrants) and (ii) the entity whose
securities into which the Preferred Shares and/or Warrants shall become
convertible or exercisable, as applicable, pursuant to Article VI.C(b) of the
Certificate of Designation and/or Section 4(e) of the Warrants, as applicable,
is a publicly traded corporation whose Common Stock is listed for trading on the
NNM, Nasdaq SmallCap, NYSE or AMEX.
k. NO INTEGRATION. The Company shall not make any
offers or sales of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or sold
hereunder under the 1933 Act or cause the offering of Securities to be
integrated with any other offering of securities by the Company for the purpose
of any stockholder approval provision applicable to the Company or its
securities.
l. TRADING LIMITATIONS. Each Buyer agrees that it
will conduct any sales of Common Stock in compliance with all relevant
securities laws and regulations and will not create any daily low trading prices
in the Common Stock. Prior to the Closing Date, no Buyer has engaged in any
purchases or sales of any shares of Common Stock of the Company.
5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue
irrevocable instructions to its transfer agent to issue certificates, registered
in the name of each Buyer or its nominee, for the Conversion Shares and Warrant
Shares in such amounts as specified from time to time by each Buyer to the
Company upon conversion of or otherwise pursuant to the Preferred Shares or
exercise of or otherwise pursuant to the Warrants in accordance with the terms
thereof (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior to registration
of the Conversion Shares and Warrant Shares under the 1933 Act or the date on
which the Conversion Shares or Warrant Shares may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular date
that can then be immediately sold, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares and
Warrant Shares, prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares or Warrant
Shares may be sold pursuant to Rule 144(k) without any restriction as to the
number of securities as of a particular date that can then be immediately sold),
will be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way the Buyer's obligations and
agreement set forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sale of the Securities. If a
Buyer provides the Company with (i) an opinion of counsel, in form, substance
and scope customary for opinions in comparable transactions, to the effect that
a public sale or transfer of such Securities may be made without registration
under the 1933 Act and such sale or transfer is effected or (ii) the Buyer
provides reasonable and customary assurances that the Securities can be sold
pursuant to Rule 144 and such sale or transfer is effected, the Company shall
permit the transfer, and, in the case of the Conversion Shares and Warrant
Shares, promptly instruct its transfer agent to issue one or more certificates
to the purchaser of such shares, free from any restrictive legend, in the name
of the purchaser or its nominee and in such denominations as specified by such
Buyer.
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6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The
obligation of the Company hereunder to issue and sell the Preferred Shares and
Warrants to a Buyer at the Closing is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions thereto, provided that
these conditions are for the Company's sole benefit and may be waived in writing
by the Company at any time in its sole discretion:
a. All of the Buyers shall have executed this
Agreement and the Registration Rights Agreement, and delivered the same to the
Company.
b. All of the Buyers shall have delivered the
Purchase Price in accordance with Section 1(b) above.
c. The Certificate of Designation shall have been
accepted for filing with the Secretary of State of the State of Delaware.
d. The representations and warranties of all of the
Buyers shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date, which
representations and warranties shall be true and correct as of such date), and
all of the Buyers shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Buyers at or prior
to the Closing Date.
e. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The
obligation of each Buyer hereunder to purchase the Preferred Shares and Warrants
at the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for such
Buyer's sole benefit and may be waived in writing by such Buyer at any time in
its sole discretion:
a. The Company shall have executed this Agreement and
the Registration Rights Agreement, and delivered the same to the Buyer.
b. The Company shall have delivered to such Buyer
duly executed certificates (in such denominations as the Buyer shall request)
representing the Preferred Shares and duly executed Warrants in accordance with
Section 1(b) above.
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c. The Certificate of Designation shall have been
accepted for filing with the Secretary of State of the State of Delaware, and a
copy thereof certified by such Secretary of State shall have been delivered to
such Buyer.
d. The Irrevocable Transfer Agent Instructions, in
form and substance satisfactory to a majority-in-interest of the Buyers, shall
have been delivered to and acknowledged in writing by the Company's Transfer
Agent.
e. The representations and warranties of the Company
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at such time (except for representations
and warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate or certificates, executed by the chief executive
officer or chief financial officer of the Company, dated as of the Closing Date,
to the foregoing effect and as to such other matters as may be reasonably
requested by such Buyer including, but not limited to, certificates with respect
to the Company's Certificate of Incorporation, Bylaws and Board of Directors'
resolutions relating to the transactions contemplated hereby.
f. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
g. The Conversion Shares and the Warrant Shares shall
have been authorized for quotation on the NNM and trading in the Common Stock on
the NNM shall not have been suspended by the SEC or the NNM.
h. The Buyer shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the same form as
EXHIBIT "E" attached hereto.
i. The Buyer shall have received an officer's
certificate described in Section 3(c) above, dated as of the Closing Date.
8. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed in the State of Delaware (without regard to
principles of conflict of laws). Both parties irrevocably consent to the
exclusive jurisdiction of the United States federal courts and the state courts
located in Delaware with respect to any suit or proceeding based on or
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arising under this Agreement, the agreements entered into in connection herewith
or the transactions contemplated hereby or thereby and irrevocably agree that
all claims in respect of such suit or proceeding may be determined in such
courts. Both parties irrevocably waive the defense of an inconvenient forum to
the maintenance of such suit or proceeding. Both parties further agree that
service of process upon a party mailed by first class mail shall be deemed in
every respect effective service of process upon the party in any such suit or
proceeding. Nothing herein shall affect either party's right to serve process in
any other manner permitted by law. Both parties agree that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
b. COUNTERPARTS; SIGNATURES BY FACSIMILE. This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
c. HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. SEVERABILITY. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and
the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by each original Buyer hereunder and a
majority-in-interest of the holders of Preferred Shares and Warrants.
f. NOTICES. Any notices required or permitted to be
given under the terms of this Agreement shall be sent by certified or registered
mail (return receipt requested) or delivered personally or by courier (including
a recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
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If to the Company:
Superconductor Technologies Inc.
000 Xxxx Xxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: President and Chief Executive Officer
Facsimile: 000-000-0000
With copy to:
Xxxx Xxxxxxx & Xxxxxxxxxxx, LLP
00000 Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxxx, Esq.
Facsimile: 000-000-0000
If to a Buyer: To the address set forth immediately below such Buyer's
name on the signature pages hereto.
With copy to:
Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: 000-000-0000
Each party shall provide notice to the other party of any change in
address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns. Neither the Company nor any Buyer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to any person that purchases Securities in a private
transaction from a Buyer or to any of its "affiliates," as that term is defined
under the 1934 Act, without the consent of the Company.
h. THIRD PARTY BENEFICIARIES. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
i. SURVIVAL. The representations and warranties of
the Company and the agreements and covenants set forth in Sections 3, 4, 5 and 8
shall survive the closing
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hereunder notwithstanding any due diligence investigation conducted by or on
behalf of the Buyers; provided that the representations and warranties made to
any Buyer set forth in Section 3 shall terminate on the earlier of (i) two (2)
years from the date of discovery by such Buyer of a breach thereof and (ii)
three (3) years from the Closing Date. The Company agrees to indemnify and hold
harmless each of the Buyers and all their officers, directors, employees and
agents for loss or damage arising as a result of or related to any breach or
alleged breach by the Company of any of its representations, warranties and
covenants set forth in Sections 3, 4, 5 and 8 hereof or any of its covenants and
obligations under this Agreement or the Registration Rights Agreement, including
advancement of expenses as they are incurred.
j. PUBLICITY. The Company and each of the Buyers
shall have the right to review a reasonable period of time before issuance of
any press releases, filings with the SEC, NASD or any stock exchange or
interdealer quotation system, or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of each of the Buyers, to make any press
release or public filings with respect to such transactions as is required by
applicable law and regulations (although each of the Buyers shall be consulted
by the Company in connection with any such press release prior to its release
and shall be provided with a copy thereof and be given an opportunity to comment
thereon).
k. FURTHER ASSURANCES. Each party 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 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.
l. NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party. With respect to the Company, "knowledge" shall mean the actual
knowledge of the Company's directors, its Chief Executive Officer, Chief
Financial Officer, Chief Technology Officer or any Vice President.
m. REMEDIES. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to each Buyer by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Agreement will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this
Agreement, that each Buyer shall be entitled, in addition to all other available
remedies in law or in equity, to an injunction or injunctions to prevent or cure
any breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions of this Agreement, without the necessity of showing
economic loss and without any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned Buyers and the Company
have caused this Agreement to be duly executed as of the date first above
written.
SUPERCONDUCTOR TECHNOLOGIES INC.
By: /s/ M. Xxxxx Xxxxxx
-----------------------------
M. Xxxxx Xxxxxx
President and Chief Executive Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Xxxx Xxxx Capital Management, L.P., Investment Manager
By: RGC General Partner Corp., as General Partner
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------
Xxxx X. Xxxxxxxx
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Xxxx Xxxx Capital Management, L.P.
0 Xxxx Xxxxx Xxxx, Xxxxx 000
000 Xx. Xxxxxx Xxxx
Xxxx Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Preferred Shares: 37,500
Number of Initial Warrants: 313,370
Number of Incentive Warrants: 731,198
Aggregate Purchase Price: $37,500,000
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