UNIT PURCHASE AGREEMENT
This Unit Purchase Agreement (the "Agreement") is made and entered into as
of April 16, 1997 by and among Silicon Valley Research, a California
corporation (the "Company"), and those parties listed on the signature page
hereof as "Investors" (who are referred to individually as an "Investor" and
collectively as the "Investors").
In consideration of the above recitals and the mutual covenants made
herein, the parties hereby agree as follows:
1. SALE OF UNITS; CLOSING; DELIVERY
(a) PURCHASE AND SALE OF UNITS. Subject to the terms and conditions
hereof, the Company will issue and sell to each Investor, and each Investor will
purchase from the Company, at the Closing (as defined below) the number of Units
set forth opposite each Investor's name on EXHIBIT A. A "Unit" shall be
composed of a share of common stock ("Shares"), no par value, of the Company
("Common Stock"), and a warrant to purchase a share of Common Stock ("Warrant
Share"). The exercise price per Warrant Share shall be $1.31. A form of the
warrant is attached as EXHIBIT B ("Warrant"). The purchase price per Unit
("Unit Purchase Price") shall be equal to $0.87. Each Warrant to purchase one
(1) Warrant Share shall be valued at $0.10.
(b) CLOSING. The closing of the purchase and sale of the Units shall
take place April 16, 1997 (the "Closing"). The date of the Closing is
hereinafter referred to as the "Closing Date."
(c) DELIVERY. Subject to the terms and conditions of this Agreement,
at the Closing, the Company will deliver to each Investor a stock certificate
representing the Shares to be purchased by such Investor against payment of the
purchase price therefor by a check, payable to the order of the Company, or by
wire transfer of immediately available funds to the bank account of the Company.
In addition, the Company will deliver at the Closing a Warrant or Warrants to
each Investor, registered in the name of such Investor, based on the number of
Units purchased by such Investor.
2. REPRESENTATIONS AND WARRANTIES OF INVESTORS. Each Investor represents
and warrants, severally, to the Company that:
(a) AUTHORIZATION. This Agreement constitutes the valid and legally
binding obligation of such Investor, enforceable in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency and similar
laws affecting the enforcement of creditors' rights generally and equitable
remedies, and except as indemnity provisions in the enforcement of Section 4 of
this Agreement (relating to registration rights) may be limited by law, and such
Investor (if an
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individual) is over eighteen (18) years of age, and such Investor has full legal
capacity, power and authority to enter into and be bound by this Agreement.
(b) PURCHASE FOR OWN ACCOUNT FOR INVESTMENT. Such Investor is
purchasing the Units for investment purposes only and not with a view to, or for
sale in connection with, a distribution of the Units within the meaning of the
Securities Act of 1933, as amended (the "1933 Act"). Such Investor has no
present intention of selling or otherwise disposing of all or any portion of the
Units.
(c) ACCESS TO INFORMATION. Such Investor has had an opportunity to
ask questions of the Company's representatives concerning the Company, its
present and prospective business, assets, liabilities and financial condition
that such Investor reasonably considers important in making the decision to
purchase the Units. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 3 of this Agreement or
the rights of the Investors to rely thereon.
(d) UNDERSTANDING OF RISKS. Such Investor is fully aware of:
(i) the highly speculative nature of the investment in the Units; (ii) the
financial hazards involved; (iii) the lack of liquidity of the Shares and
Warrant Shares and the restrictions on the transferability of the Shares and
Warrant Shares (e.g., that such Investor may not be able to sell or dispose of
the Shares and Warrant Shares or use them as collateral for loans); and (iv) the
tax consequences of investment in the Units. The foregoing, however, does not
limit or modify the representations and warranties of the Company in Section 3
of this Agreement and the rights of the Investors to rely thereon.
(e) INVESTOR'S QUALIFICATIONS. Such Investor is an "accredited"
investor as defined under Regulation D under the 1933 Act. Such Investor is
aware of the general business and financial circumstances of the Company and, by
reason of such Investor's business or financial experience, such Investor is
capable of evaluating the merits and risks of this investment and is financially
capable of bearing a total loss of this investment.
(f) NO GENERAL SOLICITATION. Such Investor was in discussion with
the Company regarding the general terms of this investment prior to the
Company's Press Release on March 24, 1997 announcing the Company's negotiation
of terms regarding this investment.
(g) COMPLIANCE WITH SECURITIES LAWS. Such Investor understands and
acknowledges that, in reliance upon the representations and warranties made by
such Investor herein, the Shares and Warrant Shares are not being registered
with the U.S. Securities and Exchange Commission ("SEC" or "Commission") under
the 1933 Act or being qualified under the California Corporate Securities Law of
1968, as amended (the "Law"), but instead are being issued under an exemption or
exemptions from the registration and qualification requirements of the 1933 Act
or the Law or other
2
applicable state securities laws which impose certain restrictions on such
Investor's ability to transfer the Shares and Warrant Shares.
(h) RESTRICTIONS ON TRANSFER. Such Investor understands that such
Investor may not transfer any of the Shares or Warrant Shares unless such Shares
or Warrant Shares are registered under the 1933 Act unless, in the opinion of
counsel to the Company, exemptions from such registration and qualification
requirements are available. Such Investor understands that only the Company may
file a registration statement with the SEC. Such Investor has also been advised
that exemptions from registration and qualification may not be available or may
not permit such Investor to transfer all or any of the Shares or Warrant Shares
in the amounts or at the times proposed by such Investor.
(i) RULE 144. In addition, such Investor has been advised that SEC
Rule 144 ("Rule 144") promulgated under the 1933 Act, which permits certain
limited sales of unregistered securities, is not presently available with
respect to the Shares and Warrant Shares solely due to the holding periods
required thereunder and, in any event, requires that the Shares and Warrant
Shares be held for a minimum of one year, and in certain cases two years, after
they have been purchased and paid for (within the meaning of Rule 144), before
they may be resold under Rule 144. Such Investor understands that Rule 144 may
indefinitely restrict transfer of the Shares and Warrant Shares if such Investor
is an "affiliate" of the Company and "current public information" about the
Company (as defined in Rule 144) is not publicly available.
(j) LEGENDS AND STOP-TRANSFER ORDERS. Such Investor understands that
certificates or other instruments representing any of the Shares and Warrant
Shares acquired by such Investor may bear legends substantially similar to the
following, in addition to any other legends required by federal or state laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS UNLESS SOLD PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT.
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In order to ensure and enforce compliance with the restrictions imposed by
applicable law and those referred to in the foregoing legend, or elsewhere
herein, the Company may issue appropriate "stop transfer" instructions to its
transfer agent, if any, with respect to any certificate or other instrument
representing the Shares and Warrant Shares, or if the Company transfers its own
securities, it may make appropriate notations to the same effect in the
Company's records. Any legend endorsed on a certificate pursuant to this
Subsection (j) and the related stop transfer instructions with respect to such
securities shall be removed, and the Company shall issue a certificate without
such legend to the holder thereof, if such securities are registered under the
Securities Act and a prospectus meeting the requirements of Section 10 of the
Securities Act is available, if such legend may be properly removed under the
terms of Rule 144 promulgated under the Securities Act or if such holder
provides the Company with an opinion of counsel for such holder, reasonably
satisfactory to legal counsel for the Company, to the effect that a sale,
transfer or assignment of such securities may be made without registration.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Investor, severally, that, except as set forth
in this Section, or on the Schedule of Exceptions attached hereto as EXHIBIT C
(the "Schedule of Exceptions"), with any disclosure thereon being deemed
disclosure for all purposes and all relevant subsections hereof, which
exceptions will be deemed to be representations and warranties as if made
hereunder:
(a) ORGANIZATION AND GOOD STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California. The Company has all necessary corporate power and
authority to own its assets and to carry on its business as now being conducted
and presently proposed to be conducted. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which its ownership or leasing of assets, or the conduct of its business,
makes such qualification necessary.
(b) REQUISITE POWER AND AUTHORIZATION. The Company has all necessary
corporate power and authority under the laws of the State of California and all
other applicable provisions of law to execute and deliver this Agreement, to
issue the Shares, the Warrants and the Warrant Shares and to carry out the
provisions of this Agreement and the Warrants. All corporate action on the part
of the Company required for the lawful execution and delivery of this Agreement,
and issuance and delivery of the Shares, the Warrants and the Warrant Shares has
been duly and effectively taken. Upon execution and delivery, this Agreement
and the Warrants constitute valid and binding obligations of the Company
enforceable in accordance with their respective terms, except as enforcement may
be limited by insolvency and similar laws affecting the enforcement of
creditors' rights generally and equitable remedies, and except as the indemnity
provisions of Section 4 of this Agreement (relating to registration rights) may
be limited by law. The Shares and the Warrants (and the Warrant Shares issuable
upon exercise of the Warrants) when issued in compliance with the provisions of
this Agreement or the Warrants, as the
4
case may be, will be duly authorized and validly issued, fully paid,
non-assessable, and issued in compliance with federal securities laws and the
securities laws of the State of California. No shareholder of the Company or
other person has any preemptive right of subscription or purchase or contractual
right of first refusal or similar right with respect to the Shares, Warrants or
Warrant Shares. The Company has reserved such number of shares of its Common
Stock necessary for issuance of the Warrant Shares.
(c) SEC DOCUMENTS. The Company has furnished to each Investor: the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996
and all documents that the Company was required to file, which it represents and
warrants it did timely file, with the SEC under Sections 13 or 14(a) of the
Securities Exchange Act of 1934, as amended ("EXCHANGE ACT"), since March 31,
1996 (collectively, the "SEC Documents"). As of their respective filing dates,
or such later date on which such reports were amended, the SEC Documents
complied in all material respects with the requirements of the Exchange Act or
the 1933 Act, as applicable. The SEC Documents as of their respective dates, or
such later date on which such reports were amended, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The financial
statements included in the SEC Documents ("Financial Statements") comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto. Except as
may be indicated in the notes to the Financial Statements or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC, the Financial
Statements have been prepared in accordance with generally accepted accounting
principles consistently applied and fairly present the consolidated financial
position of the Company and any subsidiaries at the dates thereof and the
consolidated results of their operations and consolidated cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal,
recurring adjustments).
(d) CAPITAL STOCK. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock, without par value, and 1,000,000
shares of Preferred Stock, without par value. As of April 1, 1997, there were
12,227,355 shares of Common Stock issued and outstanding and there are no issued
and outstanding Preferred Stock. All outstanding shares of Common Stock have
been duly authorized and validly issued and are fully paid and non-assessable.
The Company has no outstanding securities convertible into or exchangeable for
Common Stock and no contracts, rights, options or warrants to purchase or
otherwise acquire Common Stock or securities convertible into or exchangeable
for Common Stock. Since April 1, 1997 the Company has not issued any shares of
capital stock or any options, warrants or other rights with respect thereto
except for shares issued upon exercise of options, warrants or rights, all as
set forth on Schedule 1 to the Schedule of Exceptions.
5
(e) NO PRIOR LIENS. There are no persons or entities with a lien
against, or secured interest in, any of the tangible or intangible assets of the
Company.
(f) COMPLIANCE WITH OTHER AGREEMENTS. Neither the execution and
delivery of, nor the consummation of any transaction or execution of any
instrument contemplated by, this Agreement, nor the issuance of the Shares, the
Warrants and the Warrant Shares, has constituted or resulted in, or will
constitute or result in, a default under or breach or violation of any term or
provision of the Company's Bylaws, Articles of Incorporation, or contracts with
third parties, state or federal laws, rules or regulations, writs, orders or
judgments or decrees which are applicable to the Company or its properties.
(g) CONSENTS. All consents necessary for the Company to perform its
respective obligations hereunder have been obtained.
(h) NO MATERIAL ADVERSE CHANGE. Since December 31, 1996, there has
not been:
(i) any changes in the assets, liabilities, financial condition
or operations of the Company from that reflected in the Financial Statements
except changes in the ordinary course of business which have not been, either in
any individual case or in the aggregate, materially adverse;
(ii) any material change, except in the ordinary course of
business, in the contingent obligations of the Company whether by way of
guarantee, endorsement, indemnity, warranty or otherwise;
(iii) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business of the
Company;
(iv) any declaration or payment of any dividend or other
distribution of the assets of the Company;
(v) any labor organization activity; or
(vi) any other event or condition of any character which has
materially and adversely affected the Company's business, assets, liabilities,
financial condition or operations or prospects.
(i) INTELLECTUAL PROPERTY. The Company has sufficient title and
ownership of all patents, patent applications, copyrights, trade secrets,
trademarks, proprietary information, proprietary rights, and processes necessary
for its business as now conducted and as now proposed to be conducted by the
Company without any conflict with or infringement of the rights of others. The
research, development,
6
manufacture, sale, and use of products presently made, used, or sold by, or
contemplated for future manufacture, sale or use by the Company do not and would
not constitute or involve a significant risk of infringement of any patent or
misappropriation of any trade secret of any third party. There are no
outstanding options, licenses, or agreements of any kind relating to any
material use of the foregoing, nor is the Company bound by or a party to any
options, licenses, encumbrances or liens, or any outstanding orders, judgments,
decrees, stipulations, or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity that
are material to the Company's business as currently conducted or proposed to be
conducted. The Company has not received any communications alleging that the
Company, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights, or trade secrets or
other proprietary rights of any other person or entity. The Company is not
aware that any of its employees or consultants is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that is violated by or would materially interfere with the current or
prospective services provided to the Company by the employee or consultant or
the use of his best efforts to promote the interests of the Company or that
would materially conflict with the Company's business as currently conducted or
as proposed to be conducted. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's business as currently conducted
or proposed to be conducted will, to the Company's knowledge, conflict with or
result in a material breach of the terms, conditions or provisions of, or
constitute a material default under, any contract, covenant or instrument under
which any of such employees is now obligated.
(j) LITIGATION. There is no action, suit, proceeding or
investigation pending or, to the Company's best knowledge, currently threatened
against the Company that questions the validity of this Agreement or the
Warrants, or the right of the Company to enter into such agreements, or to
consummate the transactions contemplated hereby or thereby, or that might
result, either individually or in the aggregate, in any material adverse changes
in the business, assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company. The foregoing includes, without limitation, actions, suits,
proceedings or investigations pending or threatened involving the prior
employment of any of the Company's employees, their use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with prior
employers. The Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company intends to initiate.
7
(k) REGISTRATION RIGHTS. The Company has not granted or agreed to
grant any registration rights, including piggyback rights, to any person or
entity. None of the registration rights disclosed on the Schedule of Exceptions
are senior to the registration rights provided for in this Agreement.
(l) COMPLIANCE WITH LAWS. The Company is in compliance and has
conducted its business and operations so as to comply with all laws, ordinances,
rules and regulations, judgments, decrees or orders of any court, administrative
agency, commission, regulatory authority or other governmental or administrative
body or instrumentality, whether domestic or foreign ("Governmental Entity"),
except to the extent that failure to comply would not have a material adverse
effect on the Company's financial or other condition, business, prospects,
property, results or operations or assets as presently conducted or proposed to
be conducted. There are no judgments or orders, injunctions, decrees,
stipulations or awards (whether rendered by a court or administrative agency or
by arbitration) against the Company or against any of its properties or
businesses, and none are pending or threatened. The Company has not during the
past four (4) years received any governmental notice from any Governmental
Entity for any violation of applicable laws or regulations.
(m) TAXES. The Company has filed all tax returns and reports as
required by law, and there are no waivers of applicable statutes of limitations
with respect to taxes for any year. These returns and reports are true and
correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith. The provision for
taxes of the Company as shown in the Financial Statements is adequate for taxes
due or accrued as of the date hereof. The Company has not elected pursuant to
the Internal Revenue Code of 1986, as amended (the "Code"), to be treated as a
Subchapter S corporation, nor has it made any other elections pursuant to the
Code (other than elections that relate solely to methods of accounting,
depreciation or amortization) that would have a material effect on the Company's
present business, assets, liabilities and financial condition. The Company has
not been subject to a federal or state tax audit of any kind.
(n) NASDAQ REQUIREMENTS. The Company has been designated for
inclusion in the Nasdaq National Market upon prior application and substantially
meets the quantitative maintenance criteria set forth in Rule 4450 (Quantitative
Maintenance Criteria) of the Rules of the National Association of Securities
Dealers, Inc. ("NASD") and Rule 4460 (Quantitative Designation Criteria) of the
NASD. The issuance and sale of the Shares, Warrants and Warrant Shares will
not, when issued and sold in accordance with this Agreement and the Warrants,
violate the non-quantitative designation criteria of the Nasdaq National Market
including, without limitation, Rule 4460(i) of the NASD which requires
shareholder approval prior to the issuance of designated securities. The
Company has not been terminated for inclusion in the Nasdaq National Market and
has not received notification that termination is pending or under
consideration.
8
(o) NO DEFAULT. The Company is not in default under any provision of
its Articles of Incorporation or Bylaws or in material default under any
material contract, commitment or restriction to which the Company is a party or
by which the Company or any of its properties or assets is bound or affected or
in material default under any term or condition of any judgment, decree, order,
injunction or stipulation applicable to the Company. To the best of the
Company's knowledge, no other party is in material default under or in material
breach or violation of any material contract, commitment, or restriction to
which the Company is a party or by which the Company or any of its properties or
assets is bound or affected.
(p) REGISTRATION STATEMENT. To the best of the Company's knowledge,
there exist no facts or circumstances that would inhibit or delay the
preparation and filing of a registration statement on Form S-3 with respect to
the Registrable Securities (as hereinafter defined) in accordance with Section
4(b) hereof.
(q) NO MISREPRESENTATION. No representation or warranty by the
Company in this Agreement and no statements in the SEC Documents, as amended,
nor any other document, statement, certificate or schedule furnished or to be
furnished by or on behalf of the Company pursuant to this Agreement, when taken
together with the foregoing, contains or shall contain any untrue statement of
material fact or omits or shall omit to state a material fact required to be
stated therein or necessary in order to make such statements, in light of the
circumstances under which they were made, not misleading. The Company has
delivered true and complete copies of all documents requested by the Investors.
(r) EMPLOYEE PLANS. No plans, programs, policies, commitments or
other arrangements (each a "Plan") are covered by Title IV of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or Xxxxxxx 000 xx
xxx Xxxxxx Xxxxxx Internal Revenue Code (the "Code"). Neither the Company nor
any officer or director of the Company, nor any trustee or administrator of any
Company Plan is subject to any liability or penalty under Sections 4975 through
4980 of the Code or Title I of ERISA in connection with any Plan. The Company
has not violated any of the health care continuation coverage requirements
required by applicable law applicable to its employees. Each Plan has been
maintained and administered in compliance with its terms and with the
requirements prescribed by all statutes, orders rules and regulations which are
applicable to such Plan, except to the extent noncompliance would not have a
material adverse effect on the operation of such Plan. No suit, administrative
proceeding, action or other litigation has been brought or is threatened,
against or with respect to any such Plan, including any tax or labor authority
audit or inquiry. All contributions, reserves or premium payments required to
be made or accrued as of the date hereof to the Plans have been made or accrued.
(s) NON-EXERCISE OF OPTIONS AND/OR WARRANTS. The Company has
received, or by the Closing Date will have received, fully executed and
enforceable Agreements Not to Exercise Options and/or Warrants (in the form
annexed hereto as
9
EXHIBIT D) from certain directors and officers of the Company and such
agreements cover at least 974,350 shares of Common Stock.
(t) ANTI-DILUTION SHARES. Issuance of the Shares and the Warrants
and the Warrant Shares under this Agreement will not result in the issuance of
any additional shares of Common Stock or other anti-dilution, preemptive or
similar rights contained in any options, warrants or other agreements or
commitments of the Company. All rights of first refusal or other similar
preemptive rights with respect to the issuances of the Shares, the Warrants and
the Warrant Shares, all of which are disclosed on the Schedule of Exceptions,
have been validly waived.
4. REGISTRATION RIGHTS.
(a) DEFINITIONS. For purposes of this Section 4:
(i) "Register", "registered", and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the 1933 Act, and the declaration or ordering of effectiveness
of such registration statement.
(ii) "Registrable Securities" means all shares of Common Stock of
the Company issued under this Agreement, including all shares of Common Stock
issued or issuable pursuant to the exercise of the Warrants, excluding in all
cases, however, all Registrable Securities sold pursuant to Rule 144.
(iii) "Holder" means any person owning of record Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities to whom rights under this Section 4 (and/or, with
respect to the rights of the Investors set forth in Section 5, under such
Section 5) have been assigned in accordance with this Agreement.
(b) SHELF REGISTRATION.
(i) On or before August 14, 1997, the Company will file a
registration statement under the 1933 Act for and all such qualifications and
compliances as may be so required and as would permit the sale and distribution
of all of the Holders' Registrable Securities and thereafter shall use its best
efforts to secure the effectiveness of such registration statement on or about
October 14, 1997.
(ii) The Company will pay all expenses incurred in connection
with any registration qualification and compliance requested hereunder,
(excluding underwriters' or brokers' discounts and commissions), including
without limitation all filing, registration and qualification, printers' and
accounting fees and the reasonable fees and disbursements of one counsel for the
selling Holder or Holders and counsel for the Company.
10
(iii) The Company will use its best efforts to cause the
registration statement to remain effective until the earlier of (A) the date
ending three years after the effective date of the registration statement filed
pursuant to this Section 4(b), or (B) the date on which each Holder of
Registrable Securities is able to sell all of such Holder's Registrable
Securities in any single three (3) month period without registration under the
1933 Act pursuant to Rule 144, PROVIDED that if the Company elects to terminate
the effectiveness of the registration statement under (B), the Company shall
prior to such termination provide each Holder an opinion of counsel, based on
factual representations of the Holders, that such Holder is able to sell all of
the Registrable Securities held by such Holder and its affiliates in any single
three (3) month period without registration under the 1933 Act pursuant to
Rule 144.
(c) PIGGYBACK REGISTRATIONS. At such time(s) as a registration
statement pursuant to Section 4(b) herein is unavailable to the Holders, the
Company will be required to notify all Holders of Registrable Securities in
writing at least thirty (30) days prior to the Company filing any registration
statement made after October 14, 1997 under the 1933 Act for purposes of
effecting a public offering of securities of the Company (including, but not
limited to, registration statements relating to secondary offerings of
securities of the Company, but excluding registration statements relating to any
employee benefit plan or a corporate reorganization, and will afford each such
Holder after October 14, 1997 an opportunity to include in such registration
statement (and any related qualification under or compliance with "blue sky" or
other state securities laws) all or any part of the Registrable Securities then
held by such Holder. Each Holder desiring to include in any such registration
statement all or any part of the Registrable Securities held by such Holder
will, within thirty (30) days after receipt of the above-described notice from
the Company, so notify the Company in writing, and in such notice will inform
the Company of the number of Registrable Securities such Holder wishes to
include in such registration statement. If a Holder decides not to include all
of such Holder's Registrable Securities in any registration statement thereafter
filed by the Company, such Holder will nevertheless continue to have the right
to include any Registrable Securities in any subsequent registration statement
or registration statements as may be filed by the Company with respect to
offerings of its securities, all upon the terms and conditions set forth herein.
(i) If the registration statement under which the Company gives
notice under this Section 4(c) is for an underwritten offering, the Company will
so advise the Holders of Registrable Securities. In such event, the right of
any such Holder's Registrable Securities to be included in a registration
pursuant to this Section 4(c) will be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting will enter into an underwriting agreement in customary form with
the managing underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of this
11
Agreement, if the managing underwriter determines in good faith that marketing
factors require a limitation of the number of shares to be underwritten, the
number of shares that may be included in the underwriting will be allocated
(A) first to the Company, (B) second, to any (1) Holders or (2) other persons
who have piggyback registration rights granted by the Company that are at parity
with the rights of the Holders under this Section 4(c) and, in each case, who
request the inclusion of their securities in the registration statement, and
(C) third, to any persons with piggyback rights subordinate to those of the
Holders who request the inclusion of their securities in the registration
statement; PROVIDED, however, that the number of Registrable Securities proposed
to be registered by the Holders hereunder may not be reduced to less than twenty
percent (20%) of the total value of the securities to be distributed through the
underwriting. If not all securities of Holders or other persons described in
clause (B) above can be included in a registration, the allocation among such
Holders and other persons will be on a pro rata basis according to the relation
that the number of securities which each such Holder or other person owns bears
to the total number of shares outstanding. If any Holder disapproves of the
terms of any such underwriting, such Holder may elect to withdraw therefrom by
written notice to the Company and the underwriter, delivered at least five
business days prior to the effective date of the registration statement. Any
Registrable Securities excluded or withdrawn from such underwriting will be
excluded and withdrawn from the registration. For any Holder which is a
partnership or corporation, the partners, retired partners and shareholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons will be
deemed to be a single "Holder", and any pro rata reduction with respect to such
"Holder" will be based upon the aggregate amount of shares owned by all entities
and individuals included in such "Holder", as defined in this sentence.
(ii) All reasonable expenses incurred in connection with a
piggyback registration pursuant to this Section 4(c) (excluding underwriters'
and brokers' discounts and commissions), including, without limitation, all
federal and "blue sky" or other state securities registration and qualification
fees, printers' and accounting fees, fees and disbursements of one counsel for
the selling Holder or Holders and counsel for the Company will be borne by the
Company.
(d) OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities under this Agreement, the Company
will, as expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and deliver such registration
statement, at the time of such filing, to each Holder.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
12
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(iii) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by them that are included in such registration.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or "blue sky"
laws of such jurisdictions as will be reasonably requested by the Holders,
provided that the Company will not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(v) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting will also enter into and perform its
obligations under such an agreement.
(vi) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and upon
such notice the Company shall use its best efforts to promptly correct such
misstatement or omission and deliver to each Holder copies of such corrected
prospectus. The Company shall have the right, upon such notice, to suspend the
delivery of prospectuses included in such registration statement from the date
of notice until the date of such correction. The period during which the
Company is required to keep any registration statement filed pursuant to Section
4(b) or 4(c) effective shall be extended for the amount of time required to
amend such registration statement and deliver such prospectus relating thereto.
(vii) Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to
13
underwriters in an underwritten public offering and reasonably satisfactory to
each of the Holders requesting registration, addressed to the underwriters, if
any, and to the Holders requesting registration of Registrable Securities and
(ii) a "comfort" letter dated as of such date, from the independent certified
public accountants of the Company, in form and substance as is customarily given
by independent certified public accountants to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
(e) FURNISH INFORMATION. It will be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 4(b) and 4(c)
hereof that the selling Holders will furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as will be required to effect the
registration of their Registrable Securities.
(f) DELAY OF REGISTRATION. No Holder will have any right to obtain
or seek an injunction restraining or otherwise delaying any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 4.
(g) INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 4(b) or 4(c) hereof:
(i) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, shareholders, officers and
directors of each Holder, any underwriter (as defined in the 0000 Xxx) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the 1933 Act or the Exchange Act against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the 1933 Act, the Exchange Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively, a "VIOLATION"):
(A) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto;
(B) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading; or
(C) any violation or alleged violation by the Company of
the 1933 Act, the Exchange Act, any federal or state securities law or any rule
or
14
regulation promulgated under the 1933 Act, the Exchange Act or any federal or
state securities law in connection with the offering covered by such
registration statement;
and the Company will reimburse each such Holder, partner, shareholder, officer
or director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them, as incurred, in connection with investigating or
defending any such loss, claim, damage, liability or action; provided however,
that the indemnity agreement contained in this Section 4(g)(i) will not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
will not be unreasonably withheld), nor will the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, shareholder, officer, director,
underwriter or controlling person of such Holder.
(ii) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each person, if any, who
controls the Company within the meaning of the 1933 Act, any underwriter and any
other Holder selling securities under such registration statement or any of such
other Holder's partners, directors or officers or shareholders or any person who
controls such Holder within the meaning of the 1933 Act or the Exchange Act,
against any losses, claims, damages or liabilities (joint or several) to which
the Company or any such director, officer, controlling person, underwriter or
other such Holder, partner or director, officer, shareholder or controlling
person of such other Holder may become subject under the 1933 Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation that arises solely as a result of written information furnished by
such Holder expressly for use in connection with such registration; and each
such Holder will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer, controlling person, underwriter or
other Holder, partner, officer, director, shareholder or controlling person of
such other Holder in connection with investigating or defending any such loss,
claim, damage, liability or action: provided, however, that the indemnity
agreement contained in this Section 4(g)(ii) will not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent will not
be unreasonably withheld; and provided further, that the total amounts payable
in indemnity by a Holder under this Section 4(g)(ii) in respect of any Violation
will not exceed the lesser of (A) the aggregate proceeds (net of discounts)
received by such Holder upon the sale of the Shares or Warrant Shares and
(B) that proportion of aggregate losses, claims, damages, liabilities or
expenses indemnified against which equals the proportion which the number of
Shares and Warrant Shares being sold by such Holder bears to the total number of
Shares and Warrant Shares being sold by the Company and all Holders.
15
(iii) Promptly after receipt by an indemnified party under this
Section 4(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 4(g), deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party will have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party will
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if the indemnifying party is materially
prejudiced thereby, will relieve such indemnifying party of liability, but only
to the extent that such indemnifying party is prejudiced with respect to a
specific claim.
(iv) The foregoing indemnity agreement with respect to any
preliminary prospectus shall not inure to the benefit of any Holder or
underwriter, or any person controlling such Holder or underwriter, from whom the
person asserting any losses, claims, damages or liabilities purchased shares, if
a copy of the prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) provided by the Company
was not sent or given by or on behalf of such Holder or underwriter to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the purchased shares to such person, and if the
prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage or liability.
(v) If the indemnification provided for in Sections 4(g)(i) or
4(g)(ii) hereof shall be unavailable to hold harmless an indemnified party in
respect of any liability under the 1933 Act, then, and in each such case, the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
statement or omissions that resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided that in no
16
event shall any contribution under this subsection (v) by any Holder exceed the
gross proceeds from the offering received by such indemnifying party. No person
or entity guilty of fraudulent misrepresentation (within the meaning of
Section II(f) of the 0000 Xxx) will be entitled to contribution from any person
or entity who was not guilty of such fraudulent misrepresentation.
(vi) The obligations of the Company and Holders under this
Section 4(g) will survive the completion of any offering of Registrable
Securities in a registration statement, and otherwise.
(h) "MARKET STAND-OFF" AGREEMENT. In connection with a public
offering of securities by the Company pursuant to Section 4(c), each Holder who
participates in the registration statement filed under the 1933 Act for such
offering will not, to the extent requested in good faith by an underwriter of
securities of the Company, sell or otherwise transfer or dispose of any
Registrable Securities included in such registration statement (other than to
donees or partners of the Holder who agree to be similarly bound) for up to that
period of time, not to exceed ninety (90) days (the "Market Stand-Off Period"),
following the effective date of such registration statement of the Company filed
under the 1933 Act as is requested by the managing underwriter(s) of such
offering; provided that the officers and directors of the Company who own stock
of the Company and any shareholder holding more than five percent (5%) of the
outstanding voting securities of the Company also agree to such restrictions.
In order to enforce the foregoing covenant, the Company may impose stop transfer
instructions with respect to the Registrable Securities of each such Holder (and
the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
(i) RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Registrable Securities to the public without registration, while
a public market exists for the Common Stock of the Company, the Company will:
(i) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the 1933 Act, at all times while
the Company is reporting under the 1934 Act;
(ii) Use its best efforts to file with the SEC in a timely manner
all reports and other documents required of the Company under the 1933 Act and
the 1934 Act (at any time it is subject to such reporting requirements); and
(iii) So long as a Holder owns any Registrable Securities, furnish
to the Holder forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of Rule 144, and of the 1933 Act
and the Exchange Act (at any time it is subject to the reporting requirements of
the Exchange Act), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company as a Holder may
reasonably
17
request in availing itself of any rule or regulation of the SEC allowing a
Holder to sell any such securities without registration (at any time the Company
is subject to the reporting requirements of the Exchange Act).
(j) TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company will have
no obligations pursuant to Section 4(c) hereof with respect to: (A) any request
or requests for registration made by any Holder on a date more than six (6)
years after the date of this Agreement; or (B) Registrable Securities held by a
Holder if in the opinion of counsel to the Company at the time of filing a
registration statement such Holder may sell all of such Holder's Registrable
Securities in any single three (3)-month period without registration under the
1933 Act pursuant to Rule 144, PROVIDED that if the Company shall determine that
it may terminate its obligations to any Holder under (B), the Company shall
prior to such termination provide the Holder as to which it shall have
determined to terminate its obligations under (B) an opinion of counsel, based
on factual representations of the Holders that such Holder is able to sell all
of the Registrable Securities held by such Holder and its affiliates in any
single three (3) month period without registration under the 1933 Act pursuant
to Rule 144.
5. COVENANTS.
(a) PROPOSED OR THREATENED CHANGE IN CONTROL: EQUITY PURCHASES. The
Company shall promptly notify the Holders in writing, to the same extent as any
member of the Company's Board of Directors, of any proposed or threatened 20%
Change in Control or 50% Change of Control of which the Company is aware and
which has been communicated to the Company's President or Chief Executive
Officer, or a member of the Company's Board of Directors, verbally or in writing
(or which the Board has, acting as a Board, proposed or authorized), as well as
any purchase of or right to purchase five percent (5%) or more of any class of
capital stock of the Company from the Company, or as reported to the SEC or of
which the Company is aware, by any person, entity, or group. For the Purposes
of this Section 5(a), a "20% Change In Control" means an event in which after
the date hereof any "person" (other than PruTech Research and Development
Limited Partnership II), as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (or persons) becomes the "beneficial owner" or "beneficial owners"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of securities of the Company representing in the aggregate twenty
percent (20%) or more of either (A) the then outstanding shares of capital stock
of the Company, or (B) the combined voting power of all then outstanding
securities of the Company having the right under ordinary circumstances to vote
in an election of the Board of Directors of the Company. For the purposes of
this Section 5(a), a "50% Change In Control" means an event in which after the
date hereof (A) the shareholders of the Company approve (1) any consolidation or
merger of the Company or any subsidiary of the Company where the shareholders of
the Company, immediately after the consolidation or merger, beneficially own,
directly or indirectly, shares representing in the aggregate less than fifty
percent (50%) of all votes to which all shareholders of the corporation
18
issuing cash or securities in the consolidation or merger (or of its ultimate
parent corporation, if any,) would be entitled under ordinary circumstances in
the election of directors and where the aggregate value of such transaction is
not less than $1,000,000.00; (2) any sale, lease, exchange or other transfer (in
one transaction or a series of transactions contemplated or arranged by any
party as a single plan) of all or substantially all of the assets of the
Company, or (3) any plan or proposal for the liquidation or dissolution of the
Company; or (B) any "person", as such term is used in Sections 13(d) and 14(d)
of the Exchange Act, together with all "affiliates" and "associates" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act) of such person, shall become
the "beneficial owner" or "beneficial owners" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act), directly or indirectly, of securities of the
Company representing in the aggregate fifty percent (50%) or more of either
(1) the then outstanding shares of capital stock of the Company or (2) the
combined voting power of all then outstanding securities of the Company having
the right under ordinary circumstances to vote in an election of the Board of
Directors of the Company.
(b) AFFIRMATIVE COVENANTS. The Company covenants and agrees that
unless the Holders of 75% of Registrable Securities shall otherwise give their
prior consent in writing (which consent any such Holder may at its sole
discretion withhold):
(i) FINANCIAL INFORMATION: COMPLIANCE CERTIFICATES. The
Company will furnish to each Holder, for so long as such Holder holds
unregistered Registrable Securities: (a) all regular or periodic reports filed
by the Company with the SEC, including but not limited to the Company's Annual
Report on Form 10-K, the Company's Quarterly reports on Form 10-Q, the Company's
Annual Proxy Statement, and any filings made on Form 8-K; or, if such filings
are no longer required, comparable information which must be filed pursuant to
new SEC reporting requirements; and (b) not more than ninety (90) days after the
end of the Company's fiscal year, audited financial statements as of the end of
each of the Company's fiscal years.
(ii) NOTICE OF ANNUAL MEETING. The Company will provide each of
the Holders with fifteen (15) days prior written notice of the record date of
any annual or special meeting of the shareholders of the Company, and
simultaneously with delivery thereof to the Company's shareholders, a copy of
all materials sent to shareholders with respect to such meeting.
(iii) PRESERVATION OF CORPORATE EXISTENCE, ETC. The Company will
preserve and maintain its corporate existence, rights, franchises and privileges
in the jurisdiction of its incorporation, and qualify and remain qualified as a
foreign corporation in each jurisdiction in which failure to so qualify would
have a material adverse effect on the business, properties, prospects, financial
condition, or results of operations of the Company.
19
(iv) MAINTENANCE OF INSURANCE. Consistent with the Company's
past practices and reasonably sound business practices, the Company will
maintain insurance with responsible and reputable insurance companies.
(v) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company will
keep accurate and complete records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles.
(vi) MAINTENANCE OF PROPERTIES, ETC. The Company will maintain
and preserve all of its properties necessary or useful in the proper conduct of
its business in accordance with sound business practice.
(vii) AUTHORIZED SHARES. The Company's Board of Directors shall
approve and shall use its best efforts to obtain shareholder approval to
increase the Company's authorized shares of Common Stock in a sufficient number
at its next annual shareholder meeting to cover the issuance of shares of Common
Stock upon exercise of the Warrants, any issuances of shares of Common Stock
upon the exercise, conversion or exchange of any options, warrants, securities
or rights convertible or exchangeable for shares of Common Stock, any issuances
of shares of Common Stock pursuant to any other rights, commitments or
agreements of the Company and any shares reserved for issuance under the
Company's stock plans as set forth in Schedule 1 to the Schedule of Exceptions.
The Company shall, from and at all times after the Closing maintain a reserve of
authorized shares sufficient to cover the exercise in full of the outstanding
Warrants until the expiration or earlier exercise of the Warrants.
(viii) NASDAQ REQUIREMENTS. The Company shall use its best effort
to substantially meet the quantitative maintenance criteria set forth in Rule
4450 (Quantitative Maintenance Criteria) of the Rules of the NASD and Rule 4460
(Quantitative Designation Criteria) of the NASD for inclusion in the Nasdaq
National Market.
(ix) EXCHANGE ACT FILINGS. The Company shall continue to file
with the SEC all reports and other filings required under the rules of the SEC
and such documents shall comply in all material respects with the requirements
of the Exchange Act or the 1933 Act, as applicable, as long as the Company
continues to be subject to reporting requirements under Section 13 or 15(d) of
the Exchange Act.
(c) NEGATIVE COVENANTS. The Company covenants and agrees that unless
the Holders of 75% of the Registrable Securities shall otherwise give their
prior consent in writing (which consent any such Holder may at its sole
discretion withhold), the Company will not:
(i) LIQUIDATION, DISSOLUTION, SALES, ETC. OF ASSETS. Liquidate
or dissolve, or sell, assign, lease, lend, or otherwise dispose of (whether in
one transaction or a series of transactions) all or substantially all of its
assets, whether
20
such assets are now owned or hereafter acquired, except sales, leases and other
transactions negotiated at arms' length and in the ordinary course of the
Company's business, as presently conducted.
(ii) AGREEMENT NOT TO EXERCISE OPTIONS AND/OR WARRANTS. The
Company will not issue shares of Common Stock pursuant to the exercise of an
option and/or warrant subject to an Agreement Not to Exercise Options and/or
Warrants (the "Lockup Agreement") so long as such agreement is in effect,
PROVIDED that notwithstanding the foregoing, in the event an exercise of all or
any portion of a warrant or option subject to the Lockup Agreement is proposed,
such exercise shall be permitted, PROVIDED that the number of additional shares
to be issued pursuant to the Settlement Agreement (as defined in the Schedule of
Exceptions) is finally determined pursuant to such Settlement Agreement, and
taking into account the aggregate amount of such additional shares of Common
Stock, and shares of Common Stock reserved for issuance under the Company's
stock plans disclosed in Schedule 1 to the Schedule of Exceptions or subject to
outstanding options, warrants, and other rights to acquire Common Stock, the
Company has sufficient authorized and available shares of Common Stock to permit
the proposed exercise of the option or warrant proposed to be exercised.
(iii) FUTURE ISSUANCES OF COMMON STOCK. The Company shall not
grant or issue any additional shares, options, warrants, securities or rights
exercisable into, convertible or exchangeable for shares of Common Stock or
enter into any other commitments or agreements which call for the issuance of
shares of Common Stock, ("Future Issuances") until the earlier of (i) the
amendment of the Company's Amended and Restated Articles of Incorporation to
increase its authorized shares in sufficient number to cover all existing
Warrant Shares and all outstanding options, warrants or other rights and all
commitments or agreements to issue common stock and all reserves set forth under
any stock option or stock purchase plan, all as set forth in Schedule 1 to the
Schedule of Exceptions, (ii) the expiration of Warrants, or (iii) the exercise
in full of all outstanding Warrants; provided that the Company may make Future
Issuances specifically provided for on Schedule 1 to the Schedule of Exceptions
and Future Issuances out of the reserves set forth on Schedule 1, except for
those shares of Common Stock subject to an Agreement Not to Exercise Options
and/or Warrants.
(iv) TERMINATION OF COVENANTS. The covenants set forth in this
Section 5 will terminate with respect to a Holder upon the earlier of (A) three
years from the effective date of the Registration Statement filed pursuant to
Section 4(b), or (B) the date on which the registration rights under this
Agreement are terminated by the Company because each Holder of Registrable
Securities is able to sell all of such Holder's Registrable Securities in any
single three (3) month period without registration under the 1933 Act pursuant
to Rule 144, PROVIDED that if the Company shall determine it may terminate its
obligations to any Holder for the reasons set forth in (B), the Company shall
provide the Holder as to which it shall have determined to terminate its
obligations prior to such termination an opinion of
21
counsel, based on factual representations of the Holders, that such Holder is
able to sell of the Registrable Securities held by such Holder and its
affiliates in any single three (3) month period without registration under the
1933 Act pursuant to Rule 144.
6. CONDITIONS TO OBLIGATIONS OF THE INVESTORS. The obligation of each
Investor to purchase the Units at the Closing is subject to the fulfillment on
or prior to the Closing Date of the following conditions, any of which may be
waived by such Investor:
(a) REPRESENTATIONS AND WARRANTIES CORRECT; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section
3 hereof shall be true and correct when made, and shall be true and correct on
the Closing Date with the same force and effect as if they had been made on and
as of said date, except for representations and warranties made as of a specific
date which shall be true and correct as of such date; the Company's business and
assets shall not have been adversely affected in any material way prior to the
Closing Date; and the Company shall have performed all obligations and
conditions herein required to be performed or observed by it under this
Agreement on or prior to the Closing Date.
(b) CONSENTS AND WAIVERS. The Company shall have obtained any and
all consents (including all governmental or regulatory consents, approvals or
authorizations required in connection with the valid execution and delivery of
this Agreement), permits and waivers necessary or appropriate for consummation
of the transactions contemplated by this Agreement. The Company shall have
obtained valid waivers of rights of first refusal or other similar preemptive
rights with respect to the issuance of the Shares, the Warrants and the Warrant
Shares.
(c) COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Investors a certificate, executed by the Chairman of the Board and Chief
Executive Officer of the Company, dated the Closing Date, certifying to the
fulfillment of the conditions specified in subsection (a) of this Section 6.
(d) OPINION OF COMPANY'S COUNSEL. Investors shall have received from
Xxxx Xxxx Xxxx & Freidenrich, counsel to the Company, an opinion addressed to
the Investors, dated the Closing Date and in substantially the form attached
hereto as EXHIBIT E.
(e) AGREEMENT NOT TO EXERCISE OPTIONS AND/OR WARRANTS. Certain
directors and officers of the Company shall have executed the Agreement Not to
Exercise Options and/or Warrants, in the form attached hereto as EXHIBIT D, and
such agreements shall cover at least 974,350 shares of Common Stock.
(f) AUTHORIZATIONS. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body that are required in
connection
22
with the lawful issuance and sale of the Units shall have been duly obtained and
effective on and as of the Closing.
7. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the
Company to sell and issue the Shares to each Investor at the Closing is subject
to the fulfillment on or prior to the Closing Date of the following conditions,
any of which may be waived by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by such Investor in Section 2 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date with the same force
and effect as if they had been made on and as of said date.
(b) CONSENTS AND WAIVERS. The condition set forth in subsections
(b), (e) and (f) of Section 6 hereof shall have been fulfilled.
8. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the internal laws of the State of California
applicable to contracts made among residents of, and wholly to be performed
within, the State of California, without regard to principles of conflict of
laws or choice of laws.
(b) FURTHER INSTRUMENTS. From time to time, each party hereto will
execute and deliver such instruments and documents as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
(c) SUCCESSORS; NO OTHER BENEFICIARIES. This Agreement will be
binding upon and will inure to the benefit of the executors, administrators,
legal representatives, heirs, successors, and assigns of the parties hereto;
PROVIDED, HOWEVER, that (i) rights of Investors hereunder may be transferred
only in connection with (and to the transferee of) Common Stock of the Company
purchased by a Investor hereunder, but the Company may prohibit such transfer of
rights (but not the transfer of stock) if the transfer to a particular
transferee would not, in the good faith judgment of the Company's Board of
Directors, be in the Company's best interests, and (ii) any transferee of any
shares of stock of the Company affected by this Agreement to whom rights are so
transferred (a "PERMITTED TRANSFEREE") will be required, as a condition
precedent to acquiring such shares, to agree in writing to be bound by all the
terms and conditions of this Agreement applicable to such Permitted Transferee's
transferor, and (iii) upon and after such transfer the Permitted Transferee will
be deemed to be an Investor for purposes of this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
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(d) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. This Agreement will be
effective following the parties signatory hereto upon such counterpart signature
by all initial parties hereto.
(e) ENTIRE AGREEMENT. This Agreement, including and incorporating
the Schedule of Exceptions and all Exhibits attached hereto and referred to
herein, constitutes and contains the entire agreement and understanding of the
parties regarding the subject matter of this Agreement and supersedes in its
entirety any and all prior negotiations, correspondence, understandings and
agreements among the parties respecting the subject matter hereof.
(f) NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be addressed to the Chief
Financial Officer of the Company at its principal corporate offices. Any notice
required to be given or delivered to an Investor shall be addressed to the
Investor at the address indicated below or to such other address as such party
may designate in writing from time to time to the Company. Unless otherwise
provided, notice required or permitted to be given to a party pursuant to the
provisions of this Agreement will be in writing and will be effective and deemed
given under this Agreement on the earliest of (i) the date of personal delivery,
or (ii) the date of delivery by facsimile, or (iii) the business day after
deposit with a nationally-recognized courier or overnight service, including
Federal Express or Express Mail, for United States deliveries or three
(3) business days after such deposit for deliveries outside of the United
States, or (iv) three (3) business days after deposit in the United States mail
by registered or certified mail for United States deliveries. All notices not
delivered personally or by facsimile will be sent with postage and other charges
prepaid and properly addressed to the party to be notified at the address set
forth on Exhibit A hereto, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties hereto. All
notices for delivery outside the United States will be sent by facsimile, or by
nationally recognized courier or overnight service, including Express Mail. Any
notice given hereunder to more than one person will be deemed to have been
given, for purposes of counting time periods hereunder, on the date given to the
last party required to be given such notice.
(g) FINDERS' FEE. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction other than described in this section. Each party agrees to
indemnify and to hold the other parties hereto harmless from any liability for
any commission or compensation in the nature of a finders' fee (and the costs
and expenses of defending against such liability or asserted liability) for
which such party or any of its officers, partners, employees or representatives
is responsible.
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(h) AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of the Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and by Investors
holding at least seventy-five percent (75%) of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 8(h) will be
binding upon the Company, each Investor, and their permitted transferees and
assignees.
(i) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provisions will be excluded
from this Agreement to the extent unenforceable and the balance of such
provisions, and of this Agreement, will be interpreted as if such provision or
part and hereof were so excluded and will be enforceable in accordance with its
terms.
(j) AGGREGATION OF STOCK. All shares of Common Stock held or
acquired by affiliated entities or persons will be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
(k) EXPENSES. The Company will pay all of the costs and expenses
that it incurs, and will pay the reasonable fees and expenses, together, of
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, counsel to X.X. Xxxx
Co., Inc., as agreed upon between the Company and Xxxxxxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, with respect to the negotiation, execution,
delivery and performance of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
COMPANY
SILICON VALLEY RESEARCH
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
INVESTOR:
-------------------------------------
(signature)
Address:
Tax ID:
---------------------------
25
