EXHIBIT 4.11
$125,000,000
SAFEGUARD SCIENTIFICS, INC.
2.625% CONVERTIBLE SENIOR DEBENTURES DUE 2024
PURCHASE AGREEMENT
February 11, 2004
Wachovia Capital Markets, LLC
000 Xxxxx Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Dear Sirs and Mesdames:
Safeguard Scientifics, Inc., a Pennsylvania corporation (the "COMPANY")
confirms its agreement with respect to the proposed issuance and sale to
Wachovia Capital Markets, LLC (the "INITIAL PURCHASER") of $125,000,000
principal amount of the Company's 2.625% Convertible Senior Debentures Due 2024
(the "FIRM SECURITIES") to be issued pursuant to the provisions of an Indenture
(the "INDENTURE") between the Company and Wachovia Bank, National Association,
as Trustee (the "TRUSTEE"). The Company also proposes to issue and sell to the
Initial Purchaser not more than an additional $25,000,000 principal amount of
its 2.625% Convertible Senior Debentures Due 2024 (the "ADDITIONAL SECURITIES,"
and together with the Firm Securities, the "SECURITIES") if and to the extent
that you shall have determined to exercise the right to purchase such Additional
Securities granted in Section 2 hereof. The Securities will be convertible into
shares of common stock, par value $0.10 per share, of the Company (the
"UNDERLYING SECURITIES"), together with the rights (the "RIGHTS") evidenced by
such common stock to the extent provided in the Shareholder Rights Agreement
dated March 1, 2000, as amended, between the Company and ChaseMellon Shareholder
Services, LLC , as rights agent (the "RIGHTS AGREEMENT").
The Securities and the Underlying Securities will be offered without
being registered under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), to qualified institutional buyers in compliance with the exemption from
registration provided by Rule 144A under the Securities Act.
The Initial Purchaser and its direct and indirect transferees will be
entitled to the benefits of a Registration Rights Agreement dated the Closing
Date (as
defined in Section 4 hereof) between the Company and the Initial Purchaser (the
"REGISTRATION RIGHTS AGREEMENT").
In connection with the sale of the Securities, the Company has prepared
an offering memorandum dated as of the date hereof (the "MEMORANDUM") including
or incorporating by reference a description of the terms of the Securities and
the Underlying Securities, the terms of the offering and a description of the
Company. As used herein, the term "Memorandum" shall include in each case the
documents incorporated by reference therein. The terms "SUPPLEMENT", "AMENDMENT"
and "AMEND" as used herein with respect to the Memorandum shall include all
documents deemed to be incorporated by reference in the Memorandum that are
filed subsequent to the date of the Memorandum with the Securities and Exchange
Commission (the "COMMISSION") pursuant to the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT").
1. Representations and Warranties. The Company jointly represents
and warrants to, and agrees with, you that:
(a) (i) Each document, if any, filed or to be filed
pursuant to the Exchange Act and incorporated by reference in the
Memorandum complied or will comply when so filed in all material
respects with the Exchange Act and the applicable rules and regulations
of the Commission thereunder and (ii) the Memorandum, as if its date
and as of the Closing Date, does not and will not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that the representations
and warranties set forth in this paragraph do not apply to statements
in, or omissions from, the Memorandum made in reliance upon and in
conformity with the information relating to the Initial Purchaser
furnished to the Company in writing by the Initial Purchaser expressly
for use therein, it being understood and agreed that the only such
information is that described as such in Schedule I.
(b) The Company has been duly incorporated, is validly
subsisting as a corporation in good standing under the laws of the
Commonwealth of Pennsylvania, has the corporate power and authority to
own its property and to conduct its business as described in the
Memorandum and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not result in a material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs
or business of the Company, its wholly-owned subsidiaries (the
"SUBSIDIARIES") and the companies listed in Schedule II (each, a
"MATERIAL HOLDING" and collectively, the "MATERIAL HOLDINGS"),
considered together as one enterprise reflecting the
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Company's ownership interests in the Subsidiaries and the Material
Holdings, whether or not arising in the ordinary course of business (a
"MATERIAL ADVERSE EFFECT"); the Company is not required to be duly
qualified to transact business in any U.S. jurisdiction.
(c) Each of the Subsidiaries and each of the Material
Holdings have been duly organized and are validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation; each of the Subsidiaries, and, to the knowledge of the
Company, each of the Material Holdings, have corporate power and
authority to own, lease and operate their properties and to conduct
their business as described in the Memorandum, are duly qualified as a
foreign corporation to transact business and are in good standing in
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; the issued and
outstanding capital stock of each of the Subsidiaries and each of the
Material Holdings held directly or indirectly by the Company has been
duly authorized and validly issued, is fully paid and non-assessable,
and the Company owns its interests in the Subsidiaries and the Material
Holdings, in each case in the percentages (subject to rounding)
disclosed in the Memorandum as of the date stated therein, directly or
indirectly, free and clear of any security interest, mortgage, pledge,
lien, encumbrance or claim (other than any transfer restriction arising
under federal or state securities laws); none of the outstanding shares
of capital stock of any of the Subsidiaries or any of the Material
Holdings held directly or indirectly by the Company was issued in
violation of the preemptive or similar rights of any securityholder of
such Subsidiary or such Material Holding.
(d) This Agreement has been duly authorized, executed and
delivered by the Company.
(e) The authorized capital stock of the Company is as set
forth in the description thereof contained in the Memorandum.
(f) The shares of common stock of the Company outstanding
prior to the issuance of the Securities have been duly authorized and
are validly issued, fully paid and non-assessable.
(g) The Securities have been duly authorized and, when
duly executed, authenticated, issued and delivered in accordance with
the provisions of the Indenture and paid for by the Initial Purchaser
in accordance with the terms of this Agreement, will be valid and
binding obligations of the Company, enforceable in accordance with
their terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and equitable principles of
general applicability
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(the "ENFORCEABILITY EXCEPTIONS"), and will be entitled to the benefits
of the Indenture and the Registration Rights Agreement.
(h) The Underlying Securities issuable upon conversion of
the Securities have been duly authorized and reserved and, when issued
upon conversion of the Securities in accordance with the terms of the
Securities and the Indenture, will be validly issued, fully paid and
non-assessable, and the issuance of the Underlying Securities will not
be subject to any preemptive or similar rights.
(i) The Rights, if any, issuable upon conversion of the
Securities have been duly authorized and, when and if issued upon
conversion of the Securities in accordance with the Rights Agreement,
will have been validly issued.
(j) Except for the registration rights contained in the
Registration Rights Agreement, the Company has not granted or agreed to
grant to any person any rights (including "piggy-back" registration
rights) to have any securities of the Company registered with the
Commission or any other governmental authority that have not been
satisfied.
(k) Except for the agreement dated May 24, 2001 among
Mantas, Inc., SRA International, Inc., System Research and Applications
Corporation, the National Association of Securities Dealers, Inc. and
Safeguard 2001 Capital, L.P., there are no voting agreements, voting
trusts, proxies or other agreements or understandings with respect to
the voting of any capital stock of any of the Company, the Subsidiaries
or, to the knowledge of the Company, the Material Holdings of which any
of the Company, the Subsidiaries or the Material Holdings is a party.
(l) Each of the Indenture and the Registration Rights
Agreement has been duly authorized, and when each agreement is duly
executed and delivered by the Company and each of the parties thereto
in accordance with its terms, each agreement will constitute a valid
and binding agreement of the Company enforceable in accordance with its
terms, subject to the Enforceability Exceptions and except as rights to
indemnification and contribution under the Registration Rights
Agreement may be limited under applicable law.
(m) The execution and delivery by the Company, and the
performance by the Company of its obligations under, this Agreement,
the Indenture, the Registration Rights Agreement and the Securities
will not contravene any provision of (i) applicable law, (ii) the
certificate of incorporation or by-laws of the Company, (iii) any
agreement or other instrument binding upon the Company or (iv) any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company, except in the case of (i), (iii)
and (iv) above as would not
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have a Material Adverse Effect; no consent, approval, authorization or
order of, or qualification with, any governmental body or agency is
required for the performance by the Company of its obligations under
this Agreement, the Indenture, the Registration Rights Agreement or the
Securities, except such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale of
the Securities and by Federal and state securities laws with respect to
the obligations of the Company under the Registration Rights Agreement.
(n) There has not occurred any material adverse change in
the condition, financial or otherwise, or in the earnings, business
affairs or business of the Company, the Subsidiaries and the Material
Holdings, considered together as one enterprise reflecting the
Company's ownership interests in the Subsidiaries and the Material
Holdings, whether or not arising in the ordinary course of business,
since the respective dates as to which information is given in the
Memorandum, except as stated therein (a "MATERIAL ADVERSE CHANGE").
(o) None of the Company, any of the Subsidiaries or, to
the knowledge of the Company, any of the Material Holdings is in
violation of its charter or by-laws or in default in the performance of
any obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to such entity and to which such entity is
a party or by which such entity or its property is bound, except for
such defaults that would not, singly or in the aggregate, have a
Material Adverse Effect.
(p) There are no legal or governmental proceedings
pending or threatened to which the Company, any of the Subsidiaries or,
to the knowledge of the Company, any of the Material Holdings is a
party or to which any of the properties of such entity is subject other
than the proceedings set forth in the Memorandum and proceedings that
would not have a material adverse effect on the power or ability of the
Company to perform its obligations under this Agreement, the Indenture,
the Registration Rights Agreement or the Securities or to consummate
the transactions contemplated by the Memorandum.
(q) Except as described in the Memorandum and except as
would not, singly or in the aggregate, have a Material Adverse Effect,
(A) neither the Company nor any of the Subsidiaries nor, to the
knowledge of the Company, any of the Material Holdings is in violation
of any federal, state, local or foreign statute, law, rule, regulation,
ordinance, code, policy or rule of common law or any judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or wildlife, including,
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without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum or petroleum products
(collectively, "HAZARDOUS MATERIALS") or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials (collectively, "ENVIRONMENTAL
LAWS"), (B) the Company, the Subsidiaries and, to the knowledge of the
Company, the Material Holdings have all permits, authorizations and
approvals required under any applicable Environmental Laws and are each
in compliance with their requirements, (C) there are no pending or
threatened administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental
Law against the Company, any of the Subsidiaries or any of the Material
Holdings and (D) there are no events or circumstances that might
reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company, any of
the Subsidiaries or, to the knowledge of the Company, any of its
Material Holdings relating to Hazardous Materials or any Environmental
Laws.
(r) The Company is not, and after giving effect to the
offering and sale of the Securities and the application of the proceeds
thereof as described in the Memorandum will not be, required to
register as an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
(s) Neither the Company nor any of its affiliates (as
defined in Rule 501(b) of Regulation D under the Securities Act, each
an "AFFILIATE") has directly, or through any agent (other than the
Initial Purchaser, as to which no representation is being made), (i)
sold, offered for sale, solicited offers to buy or otherwise negotiated
in respect of, any security (as defined in the Securities Act) which is
or will be integrated with the sale of the Securities in a manner that
would require the registration under the Securities Act of the
Securities or (ii) offered, solicited offers to buy or sold the
Securities by any form of general solicitation or general advertising
(as those terms are used in Regulation D under the Securities Act) or
in any manner involving a public offering within the meaning of Section
4(2) of the Securities Act.
(t) Assuming the accuracy of the representations and
warranties of the Initial Purchaser contained in Section 7 hereof and
its compliance with its agreements set forth therein, it is not
necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchaser in the manner contemplated by this
Agreement to register the Securities under the Securities Act or to
qualify the Indenture under the Trust Indenture Act of 1939, as
amended.
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(u) The Securities satisfy the requirements set forth in
Rule 144A(d)(3) under the Securities Act.
(v) The Company, each Subsidiary that is an entity
registered pursuant to Section 13 or 15(d) of the Exchange Act (a
"REPORTING ENTITY") and, to the knowledge of the Company, each of the
Material Holdings that is a Reporting Entity have established and
maintained disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) that are adequate and effective and
designed to ensure that material information relating to the Company is
made known to its Chief Executive Officer and Chief Financial Officer
by others within those entities.
(w) The books, records and accounts of the Company, each
of the Subsidiaries and, to the knowledge of the Company, each of the
Material Holdings accurately and fairly reflect, in reasonable detail
and in all material respects, the transactions in, and dispositions of,
the assets of, and the results of operations of, such entity. The
Company, each of the Subsidiaries and, to the knowledge of the Company,
each of the Material Holdings maintain a system of accounting controls
sufficient to provide reasonable assurances that (a) transactions are
executed in accordance with management's general or specific
authorization, (b) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets, (c) access to assets is permitted only in accordance with
management's general or specific authorization and (d) the recorded
accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(x) The Company, each of the Subsidiaries and, to the
knowledge of the Company, each of the Material Holdings own or possess,
or can acquire on reasonable terms, all material patents, patent
rights, licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service
marks and trade names currently employed or required by such entity in
connection with the business currently conducted by such entity, as
described in the Memorandum, except such as the failure to so own or
possess would not have, singly or in the aggregate, a Material Adverse
Effect. To the knowledge of the Company, there are no valid and
enforceable United States patents that are infringed by the business
currently conducted by the Company, each of the Subsidiaries and each
of the Material Holdings, as described in the Memorandum and which
would have a Material Adverse Effect. The Company, each of the
Subsidiaries and, to the knowledge of the Company, each of the Material
Holdings are not subject to any judgment, order, writ, injunction or
decree of any court or any Federal,
7
state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or any
arbitrator, nor have they entered into or are a party to any contract,
which restricts or impairs the use of any of the foregoing which would
have a Material Adverse Effect. None of the Company, any of the
Subsidiaries or, to the knowledge of the Company, any of the Material
Holdings has received any written notice of infringement of or conflict
with asserted rights of any third party with respect to the business
currently conducted by them as described in the Memorandum and which
would have a Material Adverse Effect.
(y) The Company, each of the Subsidiaries and, to the
knowledge of the Company, each of the Material Holdings have such
permits, licenses, consents, exemptions, franchises, authorizations and
other approvals (each, an "AUTHORIZATION") of, and have made all
filings with and notices to, all appropriate federal, state, local or
foreign governmental or regulatory authorities and self regulatory
organizations and all courts and other tribunals, as are necessary to
own, lease, license and operate its respective properties and to
conduct their respective business, except to the extent the failure to
have any such Authorization or to make any such filing or notice would
not, singly or in the aggregate, have a Material Adverse Effect. Each
such Authorization is valid and in full force and effect and such
entity is in compliance with all the terms and conditions thereof and
with the rules and regulations of the authorities and governing bodies
having jurisdiction with respect thereto; and no event has occurred
(including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of
time or both, would allow, revocation, suspension or termination of any
such Authorization or results or, after notice or lapse of time or
both, would result in any other impairment of the rights of the holder
of any such Authorization; except to the extent such failure to be
valid and in full force and effect or to be in compliance, the
occurrence of any such event or the presence of any such restriction
would not, singly or in the aggregate, have a Material Adverse Effect.
(z) Except as listed in Schedule III, as of December 31,
2003, there are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or liens
granted or issued by the Company, any of the Subsidiaries or, to the
knowledge of the Company, any of the Material Holdings relating to or
entitling any person to purchase or otherwise to acquire any shares of
the capital stock of such entity, except for options granted to
directors and employees of such entity in the ordinary course of
business.
(aa) The financial statements included or incorporated by
reference in the Memorandum, together with related schedules and notes,
present fairly, in all material respects, the financial position,
results of
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operations and changes in financial position of the Company on the
basis stated therein at the respective dates or for the respective
periods to which they apply; such statements and related schedules and
notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved; and the other financial and statistical information and data
set forth in the Memorandum are, in all material respects, accurately
presented and prepared on a basis consistent with such financial
statements and the books and records of the Company. The financial
information set forth under the captions "Summary Consolidated
Financial Data" and "Capitalization" in the Memorandum are derived from
the accounting records of the Company and its consolidated subsidiaries
and fairly present, on the basis stated in the Final Memorandum and in
all material respects, the information included therein.
(bb) There are no existing or, to the knowledge of the
Company, threatened labor disputes with the employees of the Company,
any of the Subsidiaries or any of the Material Holdings which would
have a Material Adverse Effect.
(cc) Except as would not result in a Material Adverse
Effect, there are no adverse orders, judgments, writs, injunctions,
decrees, or demands of any court or administrative body, domestic or
foreign, or of any governmental agency or instrumentality, domestic or
foreign, outstanding against the Company, any of the Subsidiaries or,
to the knowledge of the Company, any of the Material Holdings.
(dd) Neither the Company, nor to its knowledge, any of its
officers, directors or affiliates has taken, or will take, directly or
indirectly, any action designed to or which might reasonably be
expected to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation
of the price of the common stock of the Company or any security
convertible into or exchangeable for common stock of the Company to
facilitate the sale or resale of any of the Securities.
(ee) The Company, each of the Subsidiaries and, to the
knowledge of the Company, each of the Material Holdings have filed all
Federal, state, local and foreign tax returns which are required to be
filed through the date hereof (except where the failure to so file
would not be reasonably likely to have a Material Adverse Effect),
which returns are true and correct in all material respects, or have
received extensions thereof, and have paid all taxes shown on such
returns and all assessments received by them to the extent that the
same are material and have become due, other than those being contested
in good faith or for which adequate reserves have been provided. There
are no tax audits or investigations pending (other than a joint
committee review of the Company's 2001 tax
9
refund), which if adversely determined, would have a Material Adverse
Effect.
(ff) The Company, each of the Subsidiaries and, to the
knowledge of the Company, each of the Material Holdings are insured
against such losses and risks and in such amounts as are customary in
the businesses in which they are engaged including but not limited to,
insurance covering real or personal property owned or leased against
theft, damage, destruction, act of vandalism and all other risks
customarily insured against. All policies of insurance and fidelity or
surety bonds insuring the Company, each of the Subsidiaries and, to the
knowledge of the Company, each of the Material Holdings, and such
entity's businesses, assets, employees, officers and directors, are in
full force and effect. The Company, each of the Subsidiaries and, to
the knowledge of the Company, each of the Material Holdings are in
compliance with the terms of such policies and instruments in all
material respects. None of the Company, any of the Subsidiaries or, to
the knowledge of the Company, any of the Material Holdings has 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.
(gg) None of the Company, any of the Subsidiaries or, to
the knowledge of the Company, any of the Material Holdings, or any
other person associated with or acting on behalf of such entity
including, without limitation, any director, officer, agent or employee
of such entity has, directly or indirectly, while acting on behalf of
such entity (i) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political
activity; (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political
parties or campaigns from corporate funds; (iii) violated any provision
of the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made
any other unlawful payment.
(hh) The Company, the Subsidiaries and, to the knowledge
of the Company, the Material Holdings have good and marketable title to
all real property owned by them and good title to all other properties
owned by them, in each case, free and clear of all mortgages, pledges,
liens, security interested, claims, restrictions or encumbrances of any
kind except such as will not, singly or in the aggregate, have a
Material Adverse Effect; and all of the leases and subleases material
to the business of the Company, the Subsidiaries and the Material
Holdings, considered together as one enterprise reflecting the
Company's ownership interests in the Subsidiaries and the Material
Holdings, and under which the Company, any of the Subsidiaries or any
of the Material Holdings holds
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properties described in the Memorandum, are in full force and effect,
except to the extent that such failure to be in full force and effect
would not, singly or in the aggregate, have a Material Adverse Effect;
and, neither the Company nor any Subsidiary nor, to the knowledge of
the Company, and Material Holding has any notice of any material claim
of any sort that has been asserted by anyone adverse to the rights of
the Company, any of the Subsidiaries or any of the Material Holdings
under any of the leases or subleases mentioned above, or affecting or
questioning the rights of the Company, such Subsidiary or such Material
Holding to the continued possession of the leased or subleased premises
under any such lease or sublease, except to the extent that such claim
would not, singly or in the aggregate, have a Material Adverse Effect.
2. Agreements to Sell and Purchase. The Company hereby agrees to
sell to the Initial Purchaser, and the Initial Purchaser, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees to purchase from the Company $125,000,000 aggregate
principal amount of Firm Securities at a purchase price of 97.000% (the
"PURCHASE PRICE") plus accrued interest, if any, to the Closing Date (as defined
below).
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Initial Purchaser the Additional Securities, and the Initial Purchaser
shall have the right to purchase up to $25,000,000 principal amount of
Additional Securities at the Purchase Price plus accrued interest, if any, to
the date of payment and delivery. You may exercise this right in whole or from
time to time in part by giving written notice to the Company not later than 30
days after the Closing Date. Any exercise notice shall specify the principal
amount of Additional Securities to be purchased by the Initial Purchaser and the
date on which such Additional Securities are to be purchased (an "OPTION CLOSING
DATE"). Each purchase date must be at least one business day after the written
notice is given and may not be earlier than the Closing Date for the Firm
Securities nor later than ten business days after the date of such notice.
The Company hereby agrees that, without the prior written consent of
the Initial Purchaser, it will not, during the period ending 90 days after the
date of the Memorandum, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend, or otherwise transfer or dispose
of, directly or indirectly, any shares of common stock of the Company or any
securities convertible into or exercisable or exchangeable for common stock of
the Company or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the common stock of the Company, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of common stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the
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issuance and sale of the Securities under this Agreement, (B) the issuance by
the Company of shares of common stock upon the exercise of an option or warrant
or the conversion of a security outstanding on the date hereof of which the
Initial Purchaser has been advised in writing, (C) grant of options for common
stock pursuant to employee benefit plans existing on the date of this Agreement,
(D) the issuance of shares of common stock that are exempt from registration
under the Securities Act pursuant to Section 3(a)(9) in exchange for all or a
portion of the Company's 5% Convertible Subordinated Notes due June 15, 2006,
(E) the issuance of shares of common stock upon the conversion or repurchase of
the Securities or (F) the issuance of common stock or securities convertible
into common stock in connection with acquisition transactions by the Company.
3. Terms of Offering. The Initial Purchaser has advised the
Company that it will make an offering of the Securities purchased by the Initial
Purchaser hereunder on the terms to be set forth in the Memorandum, as soon as
practicable after this Agreement is entered into as in your judgment is
advisable.
4. Payment and Delivery. Payment for the Firm Securities shall be
made to the Company in Federal or other funds immediately available in New York
City against delivery of such Firm Securities for the account of the Initial
Purchaser at 10:00 a.m., New York City time, on February 18, 2004, or at such
other time on the same or such other date, not later than March 3, 2004, as
shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "CLOSING DATE."
Payment for any Additional Securities shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Securities for the account of the Initial Purchaser at 10:00
a.m., New York City time, on the date specified in the corresponding notice
described in Section 2 or at such other time on the same or on such other date,
in any event not later than April 2, 2004 as shall be designated in writing by
you.
The Securities shall be in definitive form or global form, as specified
by you, and registered in such names and in such denominations as you shall
request in writing not later than one full business day prior to the Closing
Date or the applicable Option Closing Date, as the case may be. The Securities
shall be delivered to you on the Closing Date or an Option Closing Date, as the
case may be, for the account of the Initial Purchaser, with any transfer taxes
payable in connection with the transfer of the Securities to the Initial
Purchaser duly paid, against payment of the Purchase Price therefor plus accrued
interest, if any, to the date of payment and delivery.
5. Conditions to the Initial Purchaser's Obligations. The
obligations of the Initial Purchaser to purchase and pay for the Firm Securities
on the Closing Date is subject to the following conditions:
12
(a) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date, there shall not have occurred
a Material Adverse Change that, in your judgment, makes it, in your
judgment, impracticable to market the Securities on the terms and in
the manner contemplated in the Memorandum.
(b) The Initial Purchaser shall have received on the
Closing Date a certificate, dated the Closing Date and signed by an
executive officer of the Company, to the effect set forth in Section
5(a) and to the effect that the representations and warranties of the
Company contained in this Agreement are true and correct as of the
Closing Date and that the Company has complied with all of the
agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date.
(c) The Initial Purchaser shall have received on the
Closing Date an opinion of Xxxxxx, Xxxxx & Xxxxxxx LLP, outside counsel
for the Company, dated the Closing Date, to the effect set forth in
Exhibit A. Such opinion shall be rendered to the Initial Purchaser at
the request of the Company and shall so state therein.
(d) The Initial Purchaser shall have received on the
Closing Date an opinion of Xxxxx Xxxxxxx, Senior Corporate Counsel to
the Company, dated the Closing Date, to the effect set forth in Exhibit
B. Such opinion shall be rendered to the Initial Purchaser at the
request of the Company and shall so state therein.
(e) The Initial Purchaser shall have received on the
Closing Date an opinion of Xxxxx Xxxx & Xxxxxxxx, counsel for the
Initial Purchaser, dated the Closing Date, to the effect set forth in
Exhibit C.
(f) The Initial Purchaser shall have received on each of
the date hereof and the Closing Date a letter, dated the date hereof or
the Closing Date, as the case may be, in form and substance
satisfactory to the Initial Purchaser, from KPMG LLP, independent
public accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information contained in or incorporated by reference into each
Memorandum; provided that the letter delivered on the Closing Date
shall use a "cut-off date" not earlier than the date hereof.
(g) The "lock-up" agreements, each substantially in the
form of Exhibit D hereto, between you and certain executive officers
and directors of the Company relating to sales and certain other
dispositions of shares of common stock or certain other securities,
delivered to you on or before the date hereof, shall be in full force
and effect on the Closing Date.
13
(h) The Company shall, prior to the Closing Date, obtain
all of the necessary waivers or consents under its Loan Agreement dated
as of May 10, 2002, as amended, among the Company, Safeguard Delaware,
Inc., Safeguard Scientifics (Delaware), Inc. and Comerica
Bank-California (the "CREDIT AGREEMENT") such that the consummation of
the transactions contemplated hereby will not violate any of the terms
and conditions set forth in the Credit Agreement as of the Closing
Date.
The obligation of the Initial Purchaser to purchase Additional
Securities hereunder is subject to satisfaction of the condition set forth in
Section 5(a) during the period from the date of this Agreement to the applicable
Option Closing Date and the delivery to you on the applicable Option Closing
Date of supplemental certificates, opinions and letters confirming as of the
applicable Option Closing Date the certificates, opinions and letters delivered
on the Closing Date under this Section 5.
6. Covenants of the Company. In further consideration of the
agreements of the Initial Purchaser contained in this Agreement, the Company
covenants with the Initial Purchaser as follows:
(a) The Company will furnish to you in New York City,
without charge, prior to 10:00 a.m. New York City time on the business
day next succeeding the date of this Agreement and during the period
mentioned in Section 6(c), as many copies of the Memorandum, any
documents incorporated by reference therein and any supplements and
amendments thereto as you may reasonably request.
(b) Before amending or supplementing the Memorandum, the
Company will furnish to you a copy of each such proposed amendment or
supplement and will not use any such proposed amendment or supplement
to which you reasonably object.
(c) If, during such period after the date hereof and
prior to the date on which all of the Securities shall have been sold
by the Initial Purchaser, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Memorandum
in order to make the statements therein, in the light of the
circumstances when the Memorandum is delivered to a purchaser, not
misleading, or if, in the opinion of counsel for the Initial Purchaser,
it is necessary to amend or supplement the Memorandum to comply with
applicable law, the Company will prepare and furnish, at its own
expense, to the Initial Purchaser, either amendments or supplements to
the Memorandum so that the statements in the Memorandum as so amended
or supplemented will not, in the light of the circumstances when the
Memorandum is delivered to a purchaser, be misleading or so that the
Memorandum, as amended or supplemented, will comply with applicable
law.
14
(d) The Company shall cooperate with the Initial
Purchaser to qualify the Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Initial
Purchaser shall reasonably request and will continue such
qualifications in effect so long as required for the offering and
resale of the Securities; provided that the Company shall not be
required to (i) qualify as a foreign corporation or as a dealer in
securities in any such jurisdiction where it would not otherwise be
required to so qualify, (ii) file any general consent to service of
process in any such jurisdiction or (iii) subject itself to taxation in
any such jurisdiction if it is not otherwise so subject.
(e) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Company
shall pay or cause to be paid all expenses incident to the performance
of its obligations under this Agreement, including: (i) the fees,
disbursements and expenses of the Company's counsel and the Company's
accountants in connection with the issuance and sale of the Securities
and all other fees or expenses in connection with the preparation of
each Memorandum and all amendments and supplements thereto, including
all printing costs associated therewith, and the delivering of copies
thereof to the Initial Purchaser, in the quantities herein above
specified, (ii) all costs and expenses related to the transfer and
delivery of the Securities to the Initial Purchaser, including any
transfer or other taxes payable thereon, (iii) the cost of printing or
producing any Blue Sky or legal investment memorandum in connection
with the offer and sale of the Securities under state securities laws
and all expenses in connection with the qualification of the Securities
for offer and sale under state securities laws as provided in Section
6(d) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Initial Purchaser in connection with
such qualification and in connection with the Blue Sky or legal
investment memorandum, (iv) the fees and expenses, if any, incurred in
connection with the admission of the Securities for trading in PORTAL
or any appropriate market system, (v) the costs and charges of the
Trustee and any transfer agent, registrar or depositary, (vi) the cost
of the preparation, issuance and delivery of the Securities, (vii) the
costs and expenses relating to the charter, lease or use by the Company
of any non-commercial aircraft, (viii) the document production charges
and expenses associated with printing this Agreement and (ix) all other
costs and expenses incident to the performance of the obligations of
the Company hereunder for which provision is not otherwise made in this
Section. It is understood, however, that except as provided in this
Section, Section 8, and the last paragraph of Section 10, the Initial
Purchaser will pay all of its costs and expenses, including fees and
disbursements of its counsel, transfer taxes payable on resale of any
of the Securities by it and any advertising expenses connected with any
offers it may make.
15
(f) Neither the Company nor any Affiliate will sell,
offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in the Securities Act) which could
be integrated with the sale of the Securities in a manner which would
require the registration under the Securities Act of the Securities.
(g) The Company will not solicit any offer to buy or
offer or sell the Securities or the Underlying Securities by means of
any form of general solicitation or general advertising (as those terms
are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the
Securities Act.
(h) While any of the Securities or the Underlying
Securities remain "restricted securities" within the meaning of the
Securities Act, the Company will make available, upon request, to any
seller of such Securities the information specified in Rule 144A(d)(4)
under the Securities Act, unless the Company is then subject to Section
13 or 15(d) of the Exchange Act.
(i) If requested by you, the Company will use its
reasonable best efforts to permit the Securities to be designated
PORTAL securities in accordance with the rules and regulations adopted
by the National Association of Securities Dealers, Inc. relating to
trading in the PORTAL Market.
(j) During the period of two years after the Closing Date
or any Option Closing Date, if later, the Company will not, and will
not permit any of its affiliates (as defined in Rule 144 under the
Securities Act) to resell any of the Securities or the Underlying
Securities which constitute "restricted securities" under Rule 144 that
have been reacquired by any of them.
(k) The Company will not take any action prohibited by
Regulation M under the Exchange Act in connection with the distribution
of the Securities contemplated hereby.
7. Offering of Securities; Restrictions on Transfer. The Initial
Purchaser represents and warrants that the Initial Purchaser is a qualified
institutional buyer as defined in Rule 144A under the Securities Act (a "QIB").
The Initial Purchaser agrees with the Company that (i) it will not solicit
offers for, or offer or sell, such Securities by any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Securities Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act and (ii) it will solicit
offers for such Securities only from, and will offer such Securities only to,
persons that it reasonably believes to be QIBs that in purchasing such
Securities are deemed to have represented and agreed as provided in the
Memorandum under the caption "Transfer Restrictions".
16
8. Indemnity and Contribution. The Company agrees to indemnify
and hold harmless the Initial Purchaser, each person, if any, who controls the
Initial Purchaser within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act, and each affiliate of the Initial Purchaser
within the meaning of Rule 405 under the Securities Act from and against any and
all losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Memorandum (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto, or any preliminary form of the Memorandum), or caused by
any omission or alleged omission to state therein a material fact necessary to
make the statements therein in the light of the circumstances under which they
were made not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to the Initial
Purchaser furnished to the Company in writing by the Initial Purchaser expressly
for use therein; provided, however, that the foregoing indemnity agreement with
respect to any preliminary offering memorandum shall not inure to the benefit of
the Initial Purchaser from whom the person asserting any such losses, claims,
damages or liabilities purchased Securities, or any person controlling the
Initial Purchaser, if a copy of the Memorandum (as then amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) was
not sent or given by or on behalf of the Initial Purchaser to such person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Securities to such person, and if the Memorandum
(as so amended or supplemented) would have cured the defect giving rise to such
losses, claims, damages or liabilities, unless such failure is the result of
noncompliance by the Company with Section 6(c) hereof.
(b) The Initial Purchaser agrees, severally and not
jointly, to indemnify and hold harmless the Company its directors,
officers and each person, if any, who controls the Company within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the
Company to the Initial Purchaser, but only with reference to
information relating to the Initial Purchaser furnished to the Company
in writing by the Initial Purchaser expressly for use in the Memorandum
or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to Section 8(a) or 8(b), such
person (the "INDEMNIFIED PARTY") shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in
writing and the indemnifying party, upon request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified
party to represent the indemnified party and any others the
indemnifying party
17
may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the indemnifying party and
the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the
same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local
counsel) for all such indemnified parties and that all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by the Initial Purchaser, in the case of parties
indemnified pursuant to Section 8(a), and by the Company, in the case
of parties indemnified pursuant to Section 8(b). The indemnifying party
shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party
agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for
fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of
such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in
Section 8(a) or 8(b) is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such paragraph,
in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Initial Purchaser on the other
hand from the offering of the Securities or (ii) if the allocation
provided by clause 8(d)(i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the
18
relative benefits referred to in clause 8(d)(i) above but also the
relative fault of the Company on the one hand and of the Initial
Purchaser on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities,
as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Initial
Purchaser on the other hand in connection with the offering of the
Securities shall be deemed to be in the same respective proportions as
the net proceeds from the offering of the Securities (before deducting
expenses) received by the Company under this Agreement and the total
discounts and commissions received by the Initial Purchaser, bear to
the aggregate offering price of the Securities. The relative fault of
the Company on the one hand and of the Initial Purchaser on the other
hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Initial Purchaser and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) The Company and the Initial Purchaser agree that it
would not be just or equitable if contribution pursuant to this Section
8(d) were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations
referred to in Section 8(d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and
liabilities referred to in Section 8(d) shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 8, the Initial Purchaser shall not be
required to contribute any amount in excess of the amount by which the
total price at which the Securities resold by it in the initial
placement of such Securities were offered to investors exceeds the
amount of any damages that the Initial Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Section 8 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained
in this Section 8 and the representations, warranties and other
statements of the Company contained in this Agreement shall remain
operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on
behalf of the Initial Purchaser, any person controlling the Initial
Purchaser or any affiliate of the Initial Purchaser or by or on behalf
of the Company, its officers, directors or the person controlling the
Company and (iii) acceptance of and payment for any of the Securities.
19
9. Termination. The Initial Purchaser may terminate this
Agreement by written notice given by you to the Company, if after the execution
and delivery of this Agreement and prior to the Closing Date (i) trading
generally shall have been suspended or materially limited on, or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange or the
Nasdaq National Market, (ii) trading of any securities of the Company shall have
been suspended on any exchange or in any over-the-counter market, (iii) a
material disruption in securities settlement, payment or clearance services in
the United States shall have occurred, (iv) any moratorium on commercial banking
activities shall have been declared by Federal or New York State authorities or
(v) there shall have occurred any outbreak or escalation of hostilities, or any
change in financial markets or any calamity or crisis that, in your judgment, is
material and adverse and which, singly or together with any other event
specified in this clause (v), makes it, in your judgment, impracticable or
inadvisable to proceed with the offer, sale or delivery of the Securities on the
terms and in the manner contemplated in the Memorandum.
10. Effectiveness, etc. This Agreement shall become effective upon
the execution and delivery hereof by the parties hereto.
If this Agreement shall be terminated by the Initial Purchaser because
of any failure or refusal on the part of the Company to comply with the terms or
to fulfill any of the conditions of this Agreement, or if for any reason the
Company shall be unable to perform its obligations under this Agreement, the
Company will reimburse the Initial Purchaser for all out-of-pocket expenses
(including the fees and disbursements of its counsel) reasonably incurred by the
Initial Purchaser in connection with this Agreement or the offering contemplated
hereunder.
11. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
13. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
14. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted and confirmed by any standard form of telecommunication. Notices to
the Initial Purchaser shall be given to Wachovia Capital Markets, LLC, 00 Xxxxxx
Xxxxxx, Xxx Xxxxxxxxx, XX 00000; Attention: Convertible Syndicate. Notices to
the Company shall be given to it at 800 The Safeguard Building, 000 Xxxxx Xxxx
Xxxxx, Xxxxx, Xxxxxxxxxxxx 00000; Attention: Xxxxxxxxxxx X. Xxxxx.
20
15. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and any controlling persons referred to herein, and the
affiliates, officers and directors of the Initial Purchaser and the Company
referred to in Section 8 hereof. Nothing in this Agreement is intended or shall
be construed to give any other person any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
No purchaser of Securities from the Initial Purchaser shall be deemed to be
successor merely by reason of such purchase.
16. Amendments or Waivers. No amendment or waiver of any provision
of this Agreement, nor any consent or approval to any departure therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
parties hereto.
21
Very truly yours,
SAFEGUARD SCIENTIFICS, INC.
By: XXXXXXXXXXX X. XXXXX
------------------------------------
Name: Xxxxxxxxxxx X. Xxxxx
Title: Managing Director & Chief
Financial Officer
Accepted as of the date hereof:
WACHOVIA CAPITAL MARKETS, LLC
By: XXXXXXXX XXXXX
---------------------------------
Name: Xxxxxxxx Xxxxx
Title: Director
SCHEDULE I
INFORMATION IN THE MEMORANDUM PROVIDED BY THE INITIAL PURCHASER
a) The third paragraph under the caption "Plan of Distribution" in the
Memorandum concerning the terms of the offering.
b) The tenth paragraph under the caption "Plan of Distribution" in the
Memorandum concerning stabilization activities.
SCHEDULE II
LIST OF MATERIAL HOLDINGS
Compucom Systems, Inc.
Alliance Consulting Group Associates, Inc.
ChromaVision Medical Systems, Inc.
Mantas, Inc.
Pacific Title and Art Studio, Inc.
SCHEDULE III
LIST OF OUTSTANDING RIGHTS TO PURCHASE SECURITIES
COMMON STOCK ISSUABLE
---------------------
SAFEGUARD
SCIENTIFICS,
COMPANY SECURITY TYPE TOTAL INC. OTHER
--------------------------- ------------------------------ ---------- ---------------- -------
Alliance Series A Preferred Stock 49,714,694 49,556,442 158,252
ChromaVision Warrants 1,577,685 1,036,915 540,770
CompuCom Series B Preferred Stock 2,215,657 2,215,657 --
Mantas Series A-1 Preferred Stock 5,982,906 5,982,906 --
Series B-1 Preferred Stock 2,258,031 2,258,031 --
Series B-3 Preferred Stock 10,913,821 10,913,821 --
Series C-1 Preferred Stock 14,767,979 14,767,979 --
Warrants 506,764 -- 506,764
Safeguard Scientifics, Inc. Convertible Subordinated Notes 8,294,109 8,294,109 --
EXHIBIT A
OPINION OF XXXXXX, XXXXX & XXXXXXX LLP
The opinion of Xxxxxx, Xxxxx & Bockius LLP to be delivered pursuant to
Section 5(c) of the Purchase Agreement shall be to the effect that:
1. The Company is a corporation duly incorporated, validly subsisting and
in good standing under the laws of the Commonwealth of Pennsylvania,
with the corporate power and authority to own, lease and operate its
properties, to conduct its business as described in the Memorandum and
to execute and deliver the Purchase Agreement and perform its
obligations thereunder.
2. Each of the Purchase Agreement, the Indenture and the Registration
Rights Agreement have been duly authorized, executed and delivered by
the Company, and each is the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms,
except as enforcement of rights to indemnity and contribution
thereunder may be limited by federal or state securities laws or
principles of public policy, and subject to the qualification that the
enforceability of obligations of the Company thereunder may be limited
by bankruptcy, insolvency, fraudulent conveyance and similar laws
affecting rights and remedies of creditors generally, and by general
principles of equity.
3. The Securities have been duly authorized by the Company and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered by the Company to, and paid for by, the Initial
Purchaser in accordance with the terms of the Purchase Agreement, will
be valid and binding obligations of the Company, enforceable against
the Company in accordance with its terms, subject to the qualification
that the enforceability of obligations of the Company thereunder may be
limited by bankruptcy, insolvency, fraudulent conveyance and similar
laws affecting rights and remedies of creditors generally, and by
general principles of equity.
4. The authorized capital stock of the Company is as set forth in the
Memorandum under the caption entitled "Description of Capital Stock"
and the outstanding shares of Common Stock have been duly authorized
and validly issued and are, to our knowledge, fully paid and
nonassessable.
5. The Underlying Securities issuable upon conversion of the Securities
have been duly authorized and reserved for issuance and, when issued
and
delivered by the Company in accordance with the provisions of the
Securities and the Indenture, will be validly issued, fully paid and
nonassessable.
6. The Rights, if any, issuable upon conversion of the Securities have
been duly authorized and, when and if issued upon conversion of the
Securities in accordance with the Rights Agreement, will have been duly
issued.
7. The issuance and sale by the Company of the Securities and the
compliance by the Company with all of the provisions of the Securities,
the Indenture, the Registration Rights Agreement and the Purchase
Agreement, and the consummation of the transactions therein
contemplated, will not result in any breach of, constitute a default
under (nor constitute any event that, with notice, lapse of time, or
both, would result in any breach of or default under), or conflict with
any of the terms or provisions of any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument filed as an
exhibit to the Company's Annual Report on Form 10-K for the year ended
December 31, 2002 or to any of the Company's Quarterly Reports on Form
10-Q for the quarters ended March 31, 2003, June 30, 2003 and September
30, 2003, nor will such actions conflict with any of the provisions of
the articles of incorporation or by-laws, as amended, of the Company or
any U.S. federal securities law, Pennsylvania Business Corporation Law,
rule or regulation that, in the experience of such counsel, is
generally applicable to transactions in the nature of those
contemplated by the Purchase Agreement, or, to the knowledge of such
counsel, any decree, judgment or order of any court.
8. No consent, approval, authorization, order, registration or
qualification of or with any court or federal or state governmental
agency or body is required to be obtained or made by the Company in
connection with the issuance and sale of the Securities, or the
consummation by the Company of the transactions contemplated by the
Purchase Agreement, the Registration Rights Agreement and the
Indenture, except for (i) such as may be required under the Securities
Act in connection with the resale, by the holders thereof, of the
Securities or the shares of Underlying Securities issuable upon
conversion or repurchase of the Securities, (ii) such as may be
required under the Trust Indenture Act of 1939, as amended, in respect
of qualification of the Indenture, (iii) the approval of the Underlying
Securities issuable upon conversion or repurchase of the Securities for
listing on the New York Stock Exchange, (iii) such as have already been
obtained, or (iv) such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Initial Purchasers or the resale,
by the holders thereof, of the Securities or
the shares of Underlying Securities issuable upon conversion of the
Securities.
9. To our knowledge, there are no actions, suits, claims, investigations
or proceedings pending or threatened to which the Company is subject,
or by which any of its respective properties are bound, before or by
any federal or state governmental or regulatory commission, board,
body, authority or agency which are required to be described or
incorporated by reference in the Memorandum and which are not so
described or incorporated by reference as required.
10. Such counsel has read the statements in the Memorandum under the
captions "Description of the Debentures" and "Description of Capital
Stock" and insofar as such statements constitute summaries of legal
matters, contracts, agreements, documents or proceedings referred to
therein or summaries of certain provisions of the articles of
incorporation and by-laws of the Company, or refer to statements of law
or legal conclusions, such statements are accurate in all material
respects and fairly present the information purported to be shown.
11. The statements in the Memorandum under the caption "Material U.S.
Federal Income Tax Considerations", insofar that they constitute
summaries of matters of U.S. federal income tax law or refer to legal
conclusions with respect thereto, are accurate in all material
respects.
12. The documents incorporated by reference in the Memorandum (other than
the financial statements, financial schedules and other financial
information therein, as to which such counsel expresses no opinion),
when they were filed with the Commission, complied as to form in all
material respects with the requirements of the Exchange Act, and the
rules and regulations of the Commission thereunder.
13. No registration of the Securities under the Securities Act, and no
qualification of an indenture under the Trust Indenture Act of 1939
with respect thereto, is required for the offer and sale by the Company
and the offer and initial resale of the Securities by the Initial
Purchaser in the manner contemplated by, and based upon the
representations, warranties and covenants of the Company and the
Initial Purchaser contained in, the Purchase Agreement.
14. The Company is not, and after giving effect to the offering and sale of
the Securities and the application of the proceeds thereof as described
in the Memorandum will not be, required to register as an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended.
In addition to the foregoing opinions, such counsel advises the Initial
Purchaser that it has participated in conferences with officers and other
representatives of the Company, representatives of the Initial Purchaser and
their counsel, and representatives of the independent public accountants of the
Company, at which conferences the contents of the Memorandum were discussed.
Although such counsel does not generally represent the Company with respect to
intellectual property matters and is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Memorandum (except as and to the extent set forth in paragraphs
5 and 11 above), on the basis of the foregoing and the information disclosed to
such counsel, but without independent check and verification, and relying as to
materiality on representations and statements of officers and other
representatives of the Company, such counsel confirms to the Initial Purchaser
that no fact has come to its attention that has led it to believe that the
Memorandum, as of its date or as of the Closing Date, contained or contains any
untrue statement of a material fact, or omitted or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that such counsel does not express any belief
with respect to the financial statements, schedules, notes, or other financial
and accounting data, or statistical data derived therefrom, included in the
Memorandum, or with respect to the validity, enforceability or non-infringement
of any intellectual property).
EXHIBIT B
OPINION OF XXXXX XXXXXXX
The opinion of Xxxxx Xxxxxxx, Senior Corporate Counsel to the Company, to be
delivered pursuant to Section 5(d) of the Purchase Agreement shall be to the
effect that:
1. To the knowledge of such counsel, none of the Company, the Subsidiaries
or the Material Holdings is in violation of its respective charter or
bylaws.
2. Each of the Subsidiaries and each of the Material Holdings have been
duly organized and are validly existing as a corporation in good
standing under the laws of their respective jurisdiction of
incorporation; each of the Subsidiaries, and, to the knowledge of such
counsel, each of the Material Holdings, have corporate power and
authority to own, lease and operate their properties and to conduct
their business as described in the Memorandum, are duly qualified as a
foreign corporation to transact business and are in good standing in
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; the issued and
outstanding capital stock of each of the Subsidiaries and each of the
Material Holdings held directly or indirectly by the Company has been
duly authorized and validly issued, is fully paid and non-assessable,
and, to the knowledge of such counsel, the Company owns its interests
in the Subsidiaries and the Material Holdings, directly or indirectly,
free and clear of any security interest, mortgage, pledge, lien,
encumbrance or claim; none of the outstanding shares of capital stock
of any of the Subsidiaries or any of the Material Holdings held
directly or indirectly by the Company was issued in violation of any
statutory preemptive or similar rights known to such counsel.
3. The execution, delivery and performance of the Purchase Agreement and
the consummation of the transactions contemplated in the Purchase
Agreement and in the Memorandum (including the issuance and sale of the
Securities and the intended use of the proceeds from the sale of the
Securities as described in the Memorandum under the caption "Use Of
Proceeds") and compliance by the Company with its obligations
thereunder do not and will not, whether with or without the giving of
notice or lapse of time or both, conflict with or constitute a breach
of, or default under, or result in an event or condition which gives
the holder of any note, debenture or other evidence of indebtedness (or
any person acting on such holder's behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such
indebtedness by the
Company, any of the Subsidiaries or any of the Material Holdings, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any Material Holding of
the Company pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or any other agreement or
instrument filed as an exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 2002 or to any of the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2003,
June 30, 2003 and September 30, 2003 to which the Company or any
Material Holding of the Company is a party or by which it or any of
them may be bound, or to which any of the property or assets of the
Company or any Material Holding of the Company is subject (except for
such conflicts, breaches or defaults or liens, charges or encumbrances
that would not have a Material Adverse Effect), nor will such action
result in any violation of the provisions of the charter or by-laws of
the Company or any Material Holding of the Company or any applicable
law, statute, rule regulation, judgment, order, writ or decree, known
to us, of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any Material
Holding of the Company or any of their respective properties, assets or
operations.
4. To the knowledge of such counsel, there are no actions, suits, claims,
investigations or proceedings pending or threatened to which the
Company, any of its subsidiaries or any of the Material Holdings is
subject, or by which any of its respective properties are bound, before
or by any federal or state governmental or regulatory commission,
board, body, authority or agency which are required to be described or
incorporated by reference in the Memorandum and which are not so
described or incorporated by reference as required.
5. Such counsel advises that there are no pending or threatened claims of
infringement of any material patent, trademark, service xxxx or
copyright or of misappropriation of trade secrets, necessary for the
Company to conduct the business currently conducted by it, the
unfavorable outcome of which could reasonably be expected to have a
material adverse effect on the Company and that are required to be
described in the Memorandum but are not described as required.
6. Such counsel advises that it has no knowledge that the Company will be
unable to operate under any current license of a patent, trademark,
service xxxx, copyright or trade secret, which license is necessary for
the Company to conduct the business currently conducted by it.
7. Nothing has come to the attention of such counsel that causes such
counsel to believe that (i) each document incorporated by reference in
the
Memorandum (except for the financial statements, schedules, notes or
other financial and statistical data included therein or statistical
data derived therefrom, as to which such counsel need not express any
belief), did not comply as to form when filed with the Commission in
all material respects with the Exchange Act and the rules and
regulations of the Commission thereunder or (ii) the Memorandum (except
for the financial statements, schedules, notes or other financial and
statistical data included therein or statistical data derived
therefrom, as to which such counsel need not express any belief), as of
its date and as of the Closing Date, contained or contains, any untrue
statement of a material fact or omitted or omits to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
EXHIBIT C
OPINION OF XXXXX XXXX & XXXXXXXX
The opinion of Xxxxx Xxxx & Xxxxxxxx to be delivered pursuant to
Section 5(d) of the Purchase Agreement shall be to the effect that:
1. Assuming that the Securities have been duly authorized by the
Company, the Securities, when executed and authenticated in
accordance with the provisions of the Indenture and delivered
to and paid for by the Initial Purchaser in accordance with
the terms of the Purchase Agreement, will be valid and binding
obligations of the Company, enforceable in accordance with
their terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and
equitable principles of general applicability, and will be
entitled to the benefits of the Indenture and the Registration
Rights Agreement pursuant to which such Securities are to be
issued.
2. Assuming that each of the Indenture and Registration Rights
Agreement has been duly authorized, executed and delivered by
the Company, each of the Indenture and the Registration Rights
Agreement is a valid and binding agreement of the Company,
enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and equitable principles of
general applicability, and except as rights to indemnification
and contribution under the Registration Rights Agreement may
be limited under applicable law.
3. The statements relating to legal matters, documents or
proceedings included in the Memorandum under the captions
"Description of Debentures", "Plan of Distribution" and
"Notice to Investors", fairly summarize in all material
respects such matters, documents or proceedings.
4. Based upon the representations, warranties and agreements of
the Company and of the Initial Purchaser in the Purchase
Agreement, it is not necessary in connection with the offer,
sale and delivery of the Securities to the Initial Purchaser
under the Purchase Agreement or in connection with the initial
resale of such Securities by the Initial Purchaser in
accordance with the Purchase Agreement to register the
Securities under the Securities Act of 1933 or to qualify the
Indenture under the Trust Indenture Act of 1939, it being
understood
that no opinion is expressed as to any subsequent resale of
any Security or Underlying Security.
5. Nothing has come to the attention of such counsel to cause
such counsel to believe that (except for the financial
statements and financial schedules and other financial and
statistical data, as to which such counsel need not express
any belief) the Memorandum when issued contained, or as of the
date such opinion is delivered contains, any untrue statement
of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.
With respect to the matters referred to in the paragraph above, Xxxxx
Xxxx & Xxxxxxxx may state that their beliefs are based upon their participation
in the preparation of the Memorandum (and any amendments or supplements thereto)
and review and discussion of the contents thereof (including the review of, but
not participation in the preparation of, the incorporated documents), but are
without independent check or verification except as specified.
EXHIBIT D
FORM OF LOCKUP AGREEMENT
