EXHIBIT 10.30
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AMENDED AND RESTATED
EQUITY LINE FINANCING AGREEMENT
BETWEEN
GADZOOX NETWORKS, INC.
AND
SOCIETE GENERALE
DATED AS OF
OCTOBER 26, 2001
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EQUITY LINE FINANCING AGREEMENT
AMENDED AND RESTATED EQUITY LINE FINANCING AGREEMENT (this
"Agreement"), dated as of October 26, 2001, between GADZOOX NETWORKS, INC., a
Delaware corporation (the "Company"), and SOCIETE GENERALE, a bank organized
under the laws of France (the "Investor"), which amends and restates the Equity
Line Financing Agreement originally entered into between the Company and the
Investor as of June 28, 2001, as amended by the First Amendment to the Equity
Line Financing Agreement entered into between the Company and the Investor dated
July 20, 2001 (the "Predecessor Agreement").
W I T N E S S E T H:
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company may issue and sell to the Investor from
time to time as provided herein, and the Investor shall purchase from the
Company, shares of Common Stock for an aggregate purchase price up to
$20,000,000 on a private placement basis pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933; and
WHEREAS, the Investor shall be entitled to resell shares of Common
Stock acquired hereunder pursuant to a resale registration statement established
by the Company pursuant to the terms of the Registration Rights Agreement
between the Company and the Investor which shall be declared effective by the
Commission prior to the delivery of a Draw Down Notice hereunder; and
WHEREAS, the parties originally entered into the Predecessor Agreement
on June 28, 2001 and have agreed to amend and restate the predecessor Agreement
solely for the purpose of modifying various provisions relating to the
transactions contemplated by the Agreement but not for purposes of changing the
date as of which the representations, warranties, covenants or other agreements
of the parties were made or otherwise modifying the occurrence of the Closing on
the Closing Date of June 28, 2001 or similar matters.
NOW THEREFORE, in consideration of the premises, representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINITIONS. For purposes of this Agreement,
capitalized terms used herein and not otherwise defined shall have the following
respective meanings:
"Affiliate" of a Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first- mentioned Person. The term "control"
(including the terms "controlling," "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
"Average Daily Trading Volume" with respect to any Draw Down effected
by the Company shall mean the average daily volume of shares of Common Stock
traded on the Principal Market as reported by Bloomberg Financial during the
thirty (30) consecutive Trading Day period ending on the Trading Day immediately
preceding the date on which a Draw Down Notice is delivered pursuant to Section
2.03(b) hereof.
"Bloomberg Financial" shall mean Bloomberg Financial Markets or an
equivalent reliable reporting service acceptable to the Company and hereafter
designated by the Investor.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock, including each class of common stock and preferred stock, of such Person.
"Closing" shall have the meaning set forth in Section 2.02.
"Closing Date" shall mean June 28, 2001.
"Comfort Letter" shall mean a letter from Xxxxxx Xxxxxxxx LLP or
another "Big Five" independent public accounting firm, in form and substance
reasonably satisfactory to the Investor, addressed to the Investor and dated as
of the Effective Date or the filing date of any Current Report on Form 8-K, if
such report contains substantial financial information, (i) confirming that they
are independent public accountants within the meaning of the Securities Act and
are in compliance with the applicable requirements relating to the qualification
of accountants under Rule 2-01 of Regulation S-X of the Commission and (ii)
stating, as of the Effective Date or filing date, as applicable, the conclusions
and findings of such firm with respect to the financial information and other
matters ordinarily covered by accountants' "comfort letters" to underwriters in
connection with registered public offerings.
"Commission" means the United States Securities and Exchange
Commission.
"Commitment Period" shall mean the period commencing on the Effective
Date and expiring on the earliest to occur of (x) the date on which the Investor
shall have purchased Draw Down Shares pursuant to this Agreement for an
aggregate Purchase Price of $20,000,000, (y) the date this Agreement is
terminated pursuant to Article X and (z) the date occurring twenty-four (24)
months from June 28, 2001.
"Common Stock" shall mean the Company's common stock, $0.005 par value
per share.
"Common Shares" shall mean shares of the Company's Common Stock issued
or issuable pursuant to this Agreement.
"Draw Down" shall mean each occasion the Company elects to exercise its
right to deliver a Draw Down Notice requiring the Investor to purchase the
Common Shares as specified in such Draw Down Notice, subject to the terms and
conditions of this Agreement.
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"Draw Down Cancellation" shall have the meaning set forth in Section
6.04(a).
"Draw Down Cancellation Date" shall have the meaning set forth in
Section 6.04(a).
"Draw Down Cancellation Notice" shall have the meaning set forth in
Section 6.04(a).
"Draw Down Date" shall mean any Trading Day during the Commitment
Period that a Draw Down Notice to sell Common Stock to the Investor is deemed
delivered pursuant to Section 2.03(b) hereof.
"Draw Down Notice" shall mean a written notice to the Investor
delivered in accordance with this Agreement in the form attached hereto as
Exhibit A setting forth the Investment Amount that the Company intends to sell
to the Investor pursuant to such Draw Down and the Floor Price applicable to
such Draw Down.
"Draw Down Shares" shall mean all shares of Common Stock issued or
issuable pursuant to a Draw Down that has occurred or may occur in accordance
with the terms and conditions of this Agreement.
"DWAC Transfer" shall have the meaning set forth in Section 2.04.
"Effective Date" shall mean the date on which the Commission first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 6.02(a).
"Exchange Act" means the Securities Exchange Act of 1934.
"Floor Price" shall mean the lowest VWAP (before taking into account
any discount used to calculate the Purchase Price hereunder) at which the
Company will sell its Common Stock as specified in the Draw Down Notice
delivered in connection with any Draw Down effected pursuant to this Agreement,
but in no event shall the Floor Price be less than $1.00.
"Governmental Authority" means any federal or state government or
political subdivision thereof and any agency or other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Investment Amount" shall mean the aggregate dollar amount (within the
range specified in Section 2.03) of any Draw Down Shares to be purchased by the
Investor with respect to any Draw Down effected by the Company in accordance
with Section 2.03 hereof.
"Irrevocable Transfer Agent Instructions" shall have the meaning set
forth in Article IX.
"Material Adverse Effect" has the meaning set forth in Section 3.01.
"Maximum Draw Down Amount" with respect to any Draw Down effected by
the Company in accordance with Section 2.03 hereof shall mean the lesser of (i)
$3,000,000 (subject to increase to $4,000,000 in the event the average VWAP for
the Common Stock for the five Trading Days immediately preceding the applicable
Draw Down Date, multiplied by the
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Average Daily Trading Volume of the Common Stock applicable with respect to such
Draw Down Date shall exceed $8,000,000 and (ii) 10% of the product of (x) the
average VWAP for the Common Stock for the five Trading Days immediately
preceding the applicable Draw Down Date, multiplied by (y) the Average Daily
Trading Volume of the Common Stock applicable with respect to such Draw Down
Date, multiplied by (z) 5.
"Maximum Share Amount" shall have the meaning set forth in Section
2.01(c).
"Minimum Draw Down Amount" shall mean $200,000.
"Periodic Accountant's Report" shall mean a review report from Xxxxxx
Xxxxxxxx LLP or another "Big Five" independent public accounting firm, delivered
to the Investor within 45 days of the end of each of the Company's fiscal
quarters (other than the fourth fiscal quarter) in conjunction with such
accounting firm's issuance to the Company of a SAS No. 71 review report with
respect to each of the Company's quarterly financial statements.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
Governmental Authority or other entity of any kind.
"Principal Market" shall mean the Nasdaq National Market, the American
Stock Exchange or the New York Stock Exchange, whichever is at the time the
principal trading exchange or market for the Common Stock.
"Prospectus Supplement" shall have the meaning set forth in Section
6.02(o).
"Purchase Price" with respect to each Trading Day during a Valuation
Period shall mean 94% of the VWAP for such Trading Day.
"Registrable Securities" shall mean the Draw Down Shares, and any other
shares of capital stock issued or issuable as a dividend or distribution with
respect to the Draw Down Shares, until (i) the Registration Statement has been
declared effective by the Commission and all such shares have been disposed of
pursuant to the Registration Statement, (ii) all such shares have been sold
under circumstances under which all of the applicable conditions of Rule 144 (or
any similar provision then in force) are met, (iii) all such shares have been
otherwise transferred and the Company shall have delivered a new certificate or
other evidence of ownership for such securities not bearing a restrictive
legend, (iv) such time as, in the opinion of counsel to the Company, all such
shares may be sold without any time, volume or manner limitations pursuant to
Rule 144(k) (or any similar provision then in effect) under the Securities Act
or (v) any combination of the foregoing relating to all such shares.
"Registration Rights Agreement" shall mean the agreement regarding the
filing of the Registration Statement for the resale of the Registrable
Securities entered into between the Company and the Investor as of the Closing
Date.
"Registration Statement" shall mean a registration statement on such
form promulgated by the Commission for which the Company then qualifies and
which counsel for the Company shall deem appropriate and which form shall be
available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement and the Registration Rights Agreement, and in accordance with the
intended method of distribution of such securities, for the registration of the
resale by the Investor of the Registrable Securities under the Securities Act.
"SEC Reports" means, the Company's Annual Report on Form 10-K for the
year ended March 31, 2000, the Company's Reports on Form 10-Q for each of the
quarters ended June 30, 2000, September 30, 2000 and December 31, 2000, and each
of the Company's Current Reports on Form 8-K filed since March 31, 2000.
"Securities Act" means the Securities Act of 1933.
"Settlement Date" shall mean the sixth Trading Day following the Draw
Down Date.
"Trading Day" shall mean any day during which the Principal Market
shall be open for trading.
"Transaction Documents" means, collectively, this Agreement and the
Registration Rights Agreement.
"Valuation Period" shall mean the period of five (5) consecutive
Trading Days following the Trading Day on which a Draw Down Notice is delivered
or deemed to be delivered pursuant to Section 2.03(b) hereof.
"VWAP" for any given Trading Day shall mean the daily volume weighted
average price of the Common Stock on such date on the Principal Market as
reported by Bloomberg Financial using the AQR function.
ARTICLE II
SALE AND PURCHASE OF COMMON STOCK
SECTION 2.01. INVESTMENTS. (a) Purchase and Sale of Common Stock.
Subject to the terms and conditions of this Agreement, the Company, at its sole
and exclusive option, may issue and sell to the Investor, and the Investor shall
purchase from the Company shares of the Company's Common Stock (based upon each
of the five (5) Trading Days occurring during a Valuation Period), based on such
number of Draw Downs (subject to the Maximum Draw Down Amount and the Minimum
Draw Down Amount) as the Company, in its sole discretion, shall choose to
deliver during the Commitment Period until the aggregate Investment Amount with
respect to Common Shares purchased under this Agreement equals $20,000,000 or
this Agreement is otherwise terminated.
(b) Draw Downs. Upon the terms and subject to the conditions set forth
herein, on any Trading Day as provided in Section 2.03(b) hereof during the
Commitment Period on which the conditions set forth in Section 6.02 and 6.03
hereof have been satisfied, the Company may exercise a Draw Down by the delivery
of a Draw Down Notice to the Investor. The aggregate number of Draw Down Shares
that the Investor shall be obligated to purchase pursuant to such
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Draw Down shall be determined in accordance with Section 2.03(c). Each Draw Down
will be settled on the applicable Settlement Date following the Draw Down Date.
(c) Maximum Amount of Draw Down Shares. Unless the Company obtains the
approval of its stockholders in accordance with the applicable rules of the
Principal Market, no more than 6,812,400 shares of Common Stock (the "Maximum
Share Amount") may be issued and sold pursuant to all Draw Downs hereunder.
SECTION 2.02. EFFECTIVENESS. The effectiveness of this Agreement (the
"Closing") shall be deemed to take place concurrently with the execution and
delivery of this Agreement by the parties hereto and the completion of the
closing transactions set forth in the immediately following sentence. At the
Closing, the following closing transactions shall take place, each of which
shall be deemed to occur simultaneously with the Closing: (i) the Company and
the Investor shall execute and deliver the Registration Rights Agreement; (ii)
Company shall deliver to the Investor a certificate executed by the Secretary of
the Company, signing in such capacity, dated the date of the Closing (A)
certifying that attached thereto are true and complete copies of the resolutions
duly adopted by the Board of Directors of the Company authorizing the execution
and delivery of the Transaction Documents and the consummation of the
transactions contemplated thereby (including, without limitation, the
reservation and issuance of the Common Stock pursuant to this Agreement), which
authorization shall be in full force and effect on and as of the date of such
certificate and (B) certifying and attesting to the office, incumbency, due
authority and specimen signatures of each Person who executed any Transaction
Document for or on behalf of the Company; (iii) the Company shall deliver to the
Investor a certificate executed by an executive officer of the Company,
confirming the accuracy of the representations and warranties of the Company
contained in this Agreement; (iv) Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional
Corporation, counsel to the Company, shall deliver to the Investor an opinion,
dated the date of the Closing and addressed to the Investor, covering customary
matters; and (iv) the Company shall pay the expenses set forth in Section 9.02
hereof by wire transfer to the account designated by the Investor in writing
prior to the Closing.
SECTION 2.03. MECHANICS OF DRAW DOWNS. (a) Draw Down Notice. On any
Trading Day during the Commitment Period, the Company may deliver a Draw Down
Notice to the Investor, subject to the satisfaction of the conditions set forth
in Sections 6.02 and 6.03; provided, however, the Investment Amount for each
Draw Down as designated by the Company in the applicable Draw Down Notice shall
be neither less than the Minimum Draw Down Amount nor more than the Maximum Draw
Down Amount (as determined as of the applicable Draw Down Date); provided
further, however, that if the Maximum Draw Down Amount as of the applicable Draw
Down Date is less than the Minimum Draw Down Amount, the Company shall not be
entitled to deliver any such Draw Down Notice.
(b) Delivery of Draw Down Notice. (i) A Draw Down Notice shall be
deemed delivered on a Trading Day if it is received by facsimile or otherwise
(and the Company confirms such delivery by e-mail notice or by telephone
(including voicemail message)) by the Investor prior to 3:00 p.m., New York City
time on such Trading Day, or (ii) in the event it is received by facsimile or
otherwise subsequent to 3:00 p.m., New York City time, on a Trading Day, then it
shall be deemed delivered on the immediately succeeding Trading Day. No Draw
Down Notice may be delivered other than on a Trading Day during the Commitment
Period.
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(c) Determination of Draw Down Shares Issuable. Subject to Section
2.03(d) and (e) hereof, the number of Draw Down Shares to be purchased by the
Investor with respect to any Draw Down shall be determined on a daily basis on
each Trading Day during the applicable Valuation Period and shall equal with
respect to any such Trading Day the quotient of (x) one-fifth (1/5) of the
Investment Amount, divided by (y) the Purchase Price for such Trading Day. The
portion of the Investment Amount for which Draw Down Shares may be issued for
each Trading Day during the Valuation Period may not exceed one-fifth (1/5) of
the Investment Amount.
(d) Floor Price Limitation. If the VWAP on any Trading Day during a
Valuation Period is less than the Floor Price specified in the applicable Draw
Down Notice, the Company shall not sell and the Investor shall not purchase the
Draw Down Shares otherwise to be purchased for such Trading Day. In such case,
the Investment Amount shall be reduced by one-fifth (1/5) of the Investment
Amount for each such Trading Day.
(e) Minimum Trading Hours Limitation. In the event that the Common
Stock is not listed and approved for trading on a Principal Market and free from
any halts or suspensions of trading (whether imposed generally on such Principal
Market or specifically with respect to the Common Stock) for a period of at
least six (6) hours on any Trading Day during a Valuation Period, then the
Company shall not sell and the Investor shall not purchase the Draw Down Shares
otherwise to be purchased in respect of such Trading Day. In such case, the
Investment Amount shall be reduced by one-fifth (1/5) of the Investment Amount
for each such Trading Day.
(f) The Company shall not be subject to any penalty, liability for
damages or any other obligation to the Investor, including its affiliates,
successors and assigns, for any reduction of the Investment Amount or the Draw
Down Shares pursuant to this Section 2.03.
SECTION 2.04. SETTLEMENTS. Subject to the provisions of Section 6.04,
on each Settlement Date the Company shall, unless the Investor otherwise
instructs the Company to transmit shares of Common Stock to the Investor by
other means, cause the Transfer Agent to electronically transmit shares of
Common Stock to the Investor (by crediting the account of the Investor's Prime
Broker, as designated by the Investor, with the Depository Trust Company through
its Deposit Withdrawal Agent Commission system ("DWAC Transfer")) representing
the Draw Down Shares to be purchased by the Investor on such Settlement Date
with respect to the Draw Down Period immediately preceding such Settlement Date
pursuant to Section 2.03(c) hereof against delivery by the Investor of the
portion of the Investment Amount representing the Draw Down Shares to be
purchased on such Settlement Date by wire transfer immediately of available
funds to an account designated by the Company on or before the Settlement Date.
In addition, on or prior to each such Settlement Date, each of the Company and
the Investor shall deliver all documents, instruments and writings required to
be delivered by either of them pursuant to this Agreement in order to implement
and effect the transactions contemplated herein.
The Investor acknowledges that although the Draw Down Shares acquired
from the Company pursuant to a DWAC Transfer do not bear a restrictive legend,
they constitute "restricted securities" within the meaning of the Securities Act
and the Investor agrees it will
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transfer the Draw Down Shares through the facilities of The Depository Trust
Company only pursuant to the Registration Statement or pursuant to Rule 144
under the Securities Act.
SECTION 2.05. DAMAGES FOR LATE DELIVERY OR NON-DELIVERY OF DRAW DOWN
SHARES; INVESTOR RIGHT TO VOID DRAW DOWN NOTICE. (a) In the event the Draw Down
Shares are not delivered by the Company on any Settlement Date (or are not
delivered at all, as contemplated by Section 6.04 or otherwise) other than as a
result of the fault of the Investor, the Company will pay the Investor, the
actual damages, if any, incurred by the Investor as a result of such late
delivery or non-delivery. For purposes of the foregoing, the actual damages of
the Investor shall mean the actual costs, penalties and interest expense
incurred by the Investor resulting from its failure to deliver on the Settlement
Date any Draw Down Shares it was entitled to receive from the Company on any
Settlement Date to any unaffiliated third party to whom it had agreed to deliver
shares of Common Stock. The Investor agrees to act in good faith and use
commercially reasonable efforts to minimize its actual damages in any such event
and shall provide the Company with a detailed calculation of its actual damages
and supporting documentation therefor. Such amount may be offset by the Investor
against the portion of the Investment Amount otherwise payable by the Investor
with respect to such Draw Down Shares or future payment obligations of the
Investor with respect to subsequent Draw Down Notices. No amounts shall be
payable in the event the Investor does not incur any actual damages. In the
event the Company does not deliver Draw Down Shares within five (5) Trading Days
of the Settlement Date, the Investor may, by written notice to the Company
cancel such transaction with respect to the Draw Down Shares not delivered.
(b) The Company may not deliver a Draw Down Notice in the event (1) all
prior required deliveries of Draw Down Shares have not been made and the
Investor has not cancelled the transaction pursuant to Section 2.05(a) or (2)
the Company has not paid any amounts owed to the Investor pursuant to Section
2.05(a) unless, in connection with such notice, the Company shall have advised
the Investor in writing that the Investor may offset the amounts payable by the
Company (which amount shall be set forth in such notice and shall be consistent
with the Investor's calculation thereof) against the portion of the Investment
Amount otherwise payable by the Investor with respect to such Draw Down Notice.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to the Investor to enter into this Agreement,
the Company hereby represents and warrants to the Investor that, except as set
forth in the Disclosure Schedules delivered by the Company to the Investor and
attached hereto, on and as of June 28, 2001:
SECTION 3.01. ORGANIZATION AND STANDING. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority necessary for it to own its properties
and assets and to carry on its business as it is now being conducted (and, to
the extent described therein, as described in the SEC Reports) and proposed to
be conducted. The Company and each of its subsidiaries is duly qualified to
transact business
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and is in good standing in each jurisdiction in which the character of the
properties owned or leased by it or the nature of its businesses makes such
qualification necessary, except where the failure to so qualify or be in good
standing would not have a material adverse effect on the business, assets,
operations or financial condition of the Company and its subsidiaries, taken as
a whole, or any adverse effect on the Company's ability to consummate the
transactions contemplated by, or to execute, deliver and perform its obligations
under, each of the Transaction Documents (a "Material Adverse Effect").
SECTION 3.02. SECURITIES OF THE COMPANY. The authorized Capital Stock
of the Company consists of 150,000,000 shares of Common Stock and 10,000,000
shares of preferred stock; as of June 28, 2001, 34,066,027 shares of common
stock and no shares of preferred stock were outstanding and approximately
11,080,507 shares of Common Stock were reserved for issuance upon exercise of
outstanding convertible securities, warrants or pursuant to the Company's
Amended and Restated 1993 Stock Plan, 2000 Nonstatutory Stock Option Plan, 1999
Employee Stock Purchase Plan, 1999 Director Stock Option Plan and SmartSAN 1998
Equity Incentive Plan (collectively, the "Plans"). Except as set forth in the
SEC Reports and the Disclosure Schedules, the Company has no other authorized,
issued or outstanding equity securities or securities containing any equity
features, or any other securities convertible into, exercisable for,
exchangeable for or entitling any person to otherwise acquire any other
securities of the Company containing any equity features. The Company has no
stock option, incentive or similar plan other than the Plans under which the
issuance of approximately 12,783,358 shares of Common Stock may be issued. All
of the outstanding shares of Capital Stock of the Company have been duly and
validly authorized and issued, and are fully paid and nonassessable. The Common
Shares in an amount up to the Maximum Share Amount) have been duly and validly
authorized and have been duly reserved, and will remain available for issuance
pursuant to this Agreement. When issued against payment therefor as provided in
this Agreement, the Common Shares will be validly issued, fully paid and
nonassessable, free and clear of all preemptive rights, claims, liens, charges,
encumbrances and security interests of any nature whatsoever. Except as set
forth in this Section 3.02, the SEC Reports or the Disclosure Schedules, there
are no outstanding options, warrants, conversion rights, subscription rights,
preemptive rights, rights of first refusal or other rights or agreements of any
nature outstanding to subscribe for or to purchase any shares of Capital Stock
of the Company or any other securities of the Company of any kind binding on the
Company. The issuance of the Common Shares pursuant to this Agreement is not
subject to any preemptive rights, rights of first refusal or other similar
limitation. Except as otherwise required by law, there are no restrictions upon
the voting or transfer of any shares of the Company's Capital Stock pursuant to
the Company's Certificate of Incorporation, bylaws or other documents. Except as
provided herein or in the other Transaction Documents, there are no agreements
or other obligations (contingent or otherwise) that may require the Company to
repurchase or otherwise acquire any shares of its Capital Stock.
SECTION 3.03. AUTHORIZATION; ENFORCEABILITY. The Company has the
corporate power and authority to execute, deliver and perform the terms and
provisions of each of the Transaction Documents to be executed, delivered or
performed by it and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of, and the consummation of the
transactions contemplated by, the Transaction Documents. No other corporate
proceeding on the part of the Company is necessary, and no consent of any
shareholder of the Company is required, for the valid execution and delivery by
the Company of the
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Transaction Documents, and except as described in Section 5.06 hereof, the
performance and consummation by the Company of the transactions contemplated by
the Transaction Documents to be performed by the Company. The Company has duly
executed and delivered, or concurrently herewith is executing and delivering,
each of the Transaction Documents. Assuming the due execution of this Agreement
and the Registration Rights Agreement by the Investor, this Agreement and the
Registration Rights Agreement constitute the valid and binding obligations of
the Company, enforceable against the Company in accordance with each of their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
SECTION 3.04. NO VIOLATION; CONSENTS.
(a) The execution, delivery and performance by the Company of the
Transaction Documents and the consummation of the transactions contemplated
thereby to be performed by the Company do not and will not (i) contravene the
applicable provisions of any law, statute, rule, regulation, order, writ,
injunction, judgment or decree of any court or Governmental Authority to or by
which the Company or any of its subsidiaries or any of its respective property
or assets is bound, (ii) violate, result in a breach of or constitute (with due
notice or lapse of time or both) a default or give rise to an event of
acceleration under any material contract, lease, loan or credit agreement,
mortgage, security agreement, trust indenture or other agreement or instrument
to which the Company is a party or by which it or any of its subsidiaries is
bound or to which any of its respective properties or assets is subject, nor
result in the creation or imposition of any lien, security interest, charge or
encumbrance of any kind upon any of the properties, assets or Capital Stock of
the Company or any of its subsidiaries, or (iii) violate any provision of the
organizational and other governing documents of the Company or any of its
subsidiaries.
(b) No consent, approval, authorization or order of, or filing or
registration with, any court or Governmental Authority or other Person is
required to be obtained or made by the Company for the execution, delivery and
performance of the Transaction Documents or the consummation of any of the
transactions contemplated thereby (other than (i) the registration of the resale
of the Common Shares with the Commission and pursuant to any state "blue sky"
laws as contemplated by the Registration Rights Agreement, (ii) the stockholder
approval required by the rules applicable to companies whose common stock is
quoted on NASDAQ described in Section 5.06 hereof and (iii) the filing of a Form
D with the Commission), except for those consents or authorizations previously
obtained and those filings previously made.
SECTION 3.05. SECURITIES ACT REPRESENTATIONS. The Company has not
offered or sold and will not offer or sell any shares of its Capital Stock in
this offering other than to the Investor. Assuming the accuracy of the
Investor's representations pursuant to Section 4.02 hereof, the sale of the
Common Shares hereunder will be, exempt from the registration requirements of
the Securities Act. Neither the Company, nor any of its Affiliates, or, to its
knowledge, any Person acting on its or their behalf has engaged in any form of
general solicitation or general advertising (within the meaning of Regulation D
under the Securities Act) in connection with the offer or sale of the Common
Shares hereunder. Neither the Company, nor any of its Affiliates, nor any
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Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security
other than pursuant to this Agreement under circumstances that would require
registration under the Securities Act of the Common Shares to be issued under
this Agreement. As of the date of this Agreement, the Company is eligible to use
Form S-3 under the Securities Act to file the Registration Statement (as defined
in the Registration Rights Agreement).
SECTION 3.06. SOLVENCY; NO DEFAULT. (a) The Company is, and upon giving
effect to the transactions contemplated hereby to be performed by it as of the
Closing will be, Solvent. "Solvent" means that, as of the date of determination,
(i) the then fair saleable value of the assets of the Company (on a consolidated
basis) exceeds the then total amount (on a consolidated basis) of its debts and
other liabilities, (including any guarantees and other contingent, subordinated,
unmatured or unliquidated liabilities whether or not reduced to judgment,
disputed or undisputed, secured or unsecured), (ii) the Company has sufficient
funds and cash flow to pay its liability on its existing debts as they become
absolute and matured, (iii) final judgments against the Company in pending or,
to the Company's knowledge, threatened actions for money damages will not be
rendered at a time when, or in an amount such that, the Company will be unable
to satisfy any such judgments promptly in accordance with their terms (taking
into account (a) the maximum reasonable amount of such judgments in any such
actions (other than amounts that would be remote), (b) the earliest reasonable
time at which such judgments would be rendered and (c) any reasonably expected
insurance recovery with respect thereto), and (iv) the Company does not have
unreasonably small capital with which to engage in its present business.
(b) The Company is not, and immediately after the consummation of the
transactions contemplated hereby to be performed by the Company will not be, in
default of (whether upon the passage of time, the giving of notice or both) its
organizational and other governing documents, or any provision of any security
issued by the Company, or of any agreement, instrument or other undertaking to
which the Company is a party or by which it or any of its property or assets is
bound, or the applicable provisions of any law, statute, rule, regulation,
order, writ, injunction, judgment or decree of any court or Governmental
Authority to or by which the Company or any of its property or assets is bound,
which default or violation, either individually or in the aggregate, is likely
to have a Material Adverse Effect.
SECTION 3.07. NO BROKERS. Other than Shoreline Pacific Institutional
Finance, the Institutional Division of Financial West Group, no broker, finder,
agent or similar intermediary is entitled to any broker's, finder's, placement
or similar fee or other commission in connection with the transactions
contemplated hereby based on any agreement, arrangement or understanding with
the Company.
SECTION 3.08. SEC REPORTS; FINANCIAL CONDITION; NO ADVERSE CHANGES. (a)
The unaudited consolidated financial statements of the Company as of March 31,
2001, copies of which are publicly available, present fairly the financial
condition and results of operations of the Company (on a consolidated basis) at
such date and for the periods set forth therein (such consolidated financial
statements, the "Financial Statements"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles as set
forth in the opinions and pronouncements of the Accounting Principles Board of
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting
11
Standards Board as in effect on the date of filing of such documents with
the Commission, applied on a consistent basis (except for changes concurred in
by the Company's independent public accountants) unless otherwise expressly
stated therein. Except as disclosed in the SEC Reports, during the period from
April 1, 2001 to and including the date hereof, there has been no sale, transfer
or other disposition by the Company of any material part of the business,
property or securities of the Company and no purchase or other acquisition of
any business, property or securities by the Company material in relation to the
financial condition of the Company.
(b) Except as are fully reflected or reserved against in the Financial
Statements, there are no liabilities or obligations with respect to the Company
or any of its subsidiaries of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether or not due) which would have been required
to be disclosed in the balance sheets included in the Financial Statements that,
either individually or in the aggregate, after taking into account (a) the
maximum reasonable amount of any liability that may arise on account of any
litigation or any other contingent liability or obligation (other than amounts
that would be remote), (b) the earliest reasonable time at which any such
liability or obligation may become due and (c) any reasonably expected insurance
recovery with respect thereto, could reasonably be expected to have a Material
Adverse Effect.
(c) Since March 31, 2001, except as set forth in the SEC Reports and
the Disclosure Schedules, there has been no development or event, nor any
prospective development or event known to the Company or any of its
subsidiaries, or any litigation, proceeding or other action seeking an
injunction or other restraining order, damages or other relief from a court or
administrative agency of competent jurisdiction pending, threatened or, to the
knowledge of the Company, contemplated, or any action of any Governmental
Authority, that has had or is likely to have a Material Adverse Effect (provided
that any changes resulting from general economic conditions or the computer
storage industry in general or fluctuations in the market price of the Company's
Common Stock shall not be deemed to constitute a "Material Adverse Effect" for
purposes hereof).
SECTION 3.09. USE OF PROCEEDS; FEDERAL REGULATIONS. No part of the net
proceeds from the sale of the Common Stock issued hereunder will be used in a
manner that would violate the provisions of Regulation T, U or X of the Board of
Governors of the Federal Reserve System. The Company will not use such proceeds
other than for or in connection with general working capital purposes.
SECTION 3.10. SUBSIDIARIES. The Company has no subsidiaries other than
those set forth in the SEC Reports.
SECTION 3.11. NO INTEGRATED OFFERING. Neither the Company, nor any of
its Affiliates, nor to its knowledge any Person acting on its or their behalf,
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security under circumstances that would require
registration under the Securities Act of the offer and sale of the Common Stock
hereunder.
SECTION 3.12. NO LITIGATION. Except as set forth in the SEC Reports or
the Disclosure Schedules, no litigation or claim (including those for unpaid
taxes), or environmental
12
proceeding against the Company or any of its subsidiaries is pending, threatened
or, to the Company's best knowledge, contemplated that, if determined adversely,
would (after taking into consideration any reasonably expected insurance
recovery with respect thereto) have a Material Adverse Effect on the Company.
SECTION 3.13. ENVIRONMENTAL MATTERS. The Company and each of its
subsidiaries is in compliance in all material respects with all applicable state
and federal environmental laws, and no event or condition has occurred that may
interfere in any material respect with the compliance by the Company or any of
its subsidiaries with any environmental law or that may give rise to any
liability under any environmental law that, individually or in the aggregate,
would have a Material Adverse Effect.
SECTION 3.14. INTELLECTUAL PROPERTY. The Company (and/or its
subsidiaries) owns or has licenses to use certain patents, copyrights and
trademarks ("intellectual property") associated with its business. The Company
and its subsidiaries have all intellectual property rights that are needed to
conduct the business of the Company and its subsidiaries as it is now being
conducted as disclosed in the SEC Reports. To the Company's knowledge, the
intellectual property rights that the Company (and/or its subsidiaries) owns are
valid and enforceable. To the Company's knowledge, the use of such intellectual
property by the Company (and/or its subsidiaries') does not infringe upon or
conflict with any right of any third party, and neither the Company nor any of
its subsidiaries has received notice, written or otherwise, of any such
infringement or conflict. Except as set forth in the SEC Reports, the Company
has no knowledge of any infringement of its (and/or its subsidiaries)
intellectual property by any third party.
SECTION 3.15. INSURANCE. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. The Company has no reason to believe that it and its
subsidiaries 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 without a significant increase in
cost.
SECTION 3.16. RELATED PARTY TRANSACTIONS. Except as disclosed in the
SEC Reports and the Disclosure Schedules none of the officers, directors,
employees or 5% or greater shareholders of the Company is presently a party to
any transaction with the Company or any of its subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or the
advances of money or otherwise requiring payments to or from any such officer,
director, employee or shareholder or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such officer,
director, employee or shareholder has a substantial interest or is an officer,
director, trustee or partner.
SECTION 3.17. PERMITS. The Company and each of its subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "Company Permits"), and
13
there is no action pending or, to the knowledge of the Company, threatened
regarding suspension or cancellation of any of the Company Permits except for
such Company Permits the failure of which to possess, or the cancellation or
suspension of which, would not, individually or in the aggregate, have a
Material Adverse Effect. To the best of its knowledge neither the Company nor
any of its subsidiaries is in material conflict with, or in material default or
material violation of, any of the Company Permits.
SECTION 3.18. INTERNAL ACCOUNTING CONTROLS. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
SECTION 3.19. TAX RETURNS. Except as set forth in the Disclosure
Schedules, the Company has filed or caused to be filed all Federal tax returns
and all material state and local tax returns required to have been filed by it
and has paid or caused to be paid all taxes shown to be due and payable by it on
such returns or on any assessments received by it, except any such tax, the
validity or amount of which is being contested in good faith by appropriate
proceedings and as to which the Company has set aside on its books adequate
reserves with respect thereto in accordance with generally accepted accounting
principles. Neither the Company nor its subsidiaries has received any tax
assessment, notice of audit, notice of proposed adjustment or deficiency notice
from any taxing authority.
SECTION 3.20. DISCLOSURE. The representations and warranties of the
Company in this Agreement and the statements contained in the SEC Reports and
the Disclosure Schedules and the schedules, certificates and exhibits furnished
to the Investor by or on behalf of the Company in connection herewith do not
contain any untrue statement of a material fact and do not omit to state any
material fact necessary to make the statements herein or therein not misleading.
The SEC Reports contain all material information concerning the Company required
to be set forth therein, and no event or circumstance has occurred or exists
since December 31, 2000, that would require the Company to disclose such event
or circumstance in order to make the statements in the SEC Reports not
misleading as of the date of the Closing but that has not been so disclosed. The
Company hereby acknowledges that the Investor is and will be relying on the SEC
Reports and the Company's representations, warranties and covenants contained
herein in making an investment decision with respect to the Common Shares and
will be relying thereon (together with future reports filed with the Commission)
in connection with any transfer of Common Shares.
14
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR
The Investor hereby acknowledges, represents, warrants and covenants,
to the Company as follows:
SECTION 4.01. AUTHORIZATION; ENFORCEABILITY; NO VIOLATIONS.
(a) The Investor is duly organized, validly existing and in good
standing under the laws of its jurisdiction, has all requisite power and
authority to execute, deliver and perform the terms and provisions of this
Agreement and the Registration Rights Agreement and has taken all necessary
action to authorize the execution, delivery and performance by it of this
Agreement and the Registration Rights Agreement and to consummate the
transactions contemplated hereby and thereby to be performed by it.
(b) The execution, delivery and performance by the Investor of this
Agreement and the Registration Rights Agreement and the consummation by the
Investor of the transactions contemplated hereby and thereby to be performed by
it do not and will not violate any provision of (i) the Investor's
organizational documents or (ii) any law, statute, rule, regulation, order,
writ, injunction, judgment or decree to which the Investor is subject. The
Investor has duly executed and delivered this Agreement and has executed and
delivered, or concurrently herewith is executing and delivering, the
Registration Rights Agreement. Assuming the due execution hereof and thereof by
the Company, each of this Agreement and the Registration Rights Agreement
constitutes the legal, valid and binding obligation of the Investor, enforceable
against the Investor in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
SECTION 4.02. SECURITIES ACT REPRESENTATIONS; LEGENDS.
(a) The Investor understands that: (i) the offering and sale of the
Common Shares to be issued and sold hereunder is intended to be exempt from the
registration requirements of the Securities Act; (ii) the initial offer and sale
of the Common Shares issuable hereunder has not been registered under the
Securities Act or any other applicable securities laws and such securities may
be resold only if registered under the Securities Act and any other applicable
securities laws or if an exemption from such registration requirements is
available; and (iii) the Company is required to register any resale of the
Common Shares under the Securities Act and any other applicable securities laws
only to the extent provided in the Registration Rights Agreement.
(b) The Investor represents that the Common Shares to be acquired by
the Investor pursuant to this Agreement are being acquired for its own account
and not with a view to, or for sale in connection with, any distribution thereof
or (other than the resale of such Common Shares pursuant to an effective
registration statement as contemplated by the Registration Rights Agreement) in
violation of the Securities Act or any other securities laws that may be
applicable.
15
(c) The Investor represents that the Investor is not an affiliate (as
such term is defined in the Securities Act) of the Company.
(d) The Investor (i) has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of its investment in the Common Stock and is capable of bearing the
economic risks of such investment, including a complete loss of its investment
in the Common Shares; (ii) believes that its investment in the Common Shares is
suitable for it based upon its objectives and financial needs, and the Investor
has adequate means for providing for its current financial needs and business
contingencies and has no present need for liquidity of investment with respect
to the Common Shares; (iii) has no present plan, intention or understanding and
has made no arrangement to sell the Common Shares at any predetermined time or
for any predetermined price; (iv) has not purchased, sold or entered into any
put option, short position or similar arrangement with respect to the Common
Shares, and will not, for the term of this Agreement purchase, sell or enter
into any such put option, short position or similar arrangement in any manner
that violates the provisions of the Securities Act or the Exchange Act.
(e) The Investor acknowledges that no oral or written statements or
representations have been made to the Investor by or on behalf of the Company in
connection with the offering and sale of the Common Shares hereunder other than
those set forth in the SEC Reports, or as set forth herein or in the other
Transaction Documents, and the Investor represents that it is not subscribing
for the Common Shares as a result of, or in response to, any advertisement,
article, notice or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio, or presented at any seminar
or meeting.
(f) The Investor acknowledges that the Securities Act restricts the
transferability of securities, such as the Common Shares, issued in reliance
upon the exemption from the registration requirements of the Securities Act
provided by Section 4(2) thereunder, and that, unless sold pursuant to the
Registration Statement, the transfer of such Common Shares is restricted.
SECTION 4.03. NO BROKERS. No broker, finder, agent or similar
intermediary is entitled to any broker's, finder's, placement or similar fee or
other commission in connection with the transactions contemplated hereby based
on any agreement, arrangement or understanding with the Investor.
SECTION 4.04. TRADING GUIDELINES. The Investor has the right to sell
shares of Common Stock during the Commitment Period. The Investor agrees,
however, that from June 28, 2001 until the end of the Commitment Period, neither
the Investor nor any of its affiliates will intentionally, directly or
indirectly, offer to sell, contract to sell or otherwise sell, dispose of, loan,
pledge or grant any rights with respect to any shares of Common Stock other than
the shares of Common Stock which the Investor has purchased under this Agreement
(including for this purpose, in the case of a Draw Down Notice that has been
delivered, the number of Draw Down Shares issuable in connection with such Draw
Down Notice (assuming that the number of Draw Down Shares to be issued pursuant
to such Draw Down Notice equals the Investment Amount specified in such Draw
Down Notice divided by ninety-four percent (94%) of the Floor
16
Price set forth in such Draw Down Notice)). The Investor further agrees to
use commercially reasonable efforts to ensure that its affiliates comply with
the foregoing restrictions.
ARTICLE V
COVENANTS
SECTION 5.01. EXEMPTION FROM REGISTRATION; LIMITATION ON ISSUANCE OF
SECURITIES.
The Company will not make any offer to sell, solicit any offer to buy,
agree to sell or sell any security or right to acquire any security, except at
such time and in such manner so as not to cause the loss of any of the
exemptions for the offer and sale of the Common Shares from the registration
requirements under the Securities Act or under the securities or "blue sky" laws
of any jurisdiction in which such offer, sale or issuance is made.
SECTION 5.02. TRANSFER RESTRICTIONS.
The Investor acknowledges that any proposed offer, sale, pledge or
other transfer of Common Shares prior to the date that is two (2) years from the
date of issuance (or such other date as may be required pursuant to Rule 144
under the Securities Act (or similar successor provision) as in effect from time
to time), in the absence of registration under the Securities Act, is limited.
Accordingly, prior to such passage of time or such registration, the Common
Shares may be offered, sold, pledged or otherwise transferred only (i) to the
Company, (ii) in an offshore transaction in accordance with Rule 904 under the
Securities Act, (iii) pursuant to any other exemption from registration provided
by the Securities Act, (iv) pursuant to Rule 144 under the Securities Act or (v)
pursuant to an effective registration statement under the Securities Act; in the
case of any transfer pursuant to clause (ii), (iii) or (iv), the Company shall
be entitled to receive an opinion of the selling Investor's counsel, in form and
substance reasonably satisfactory to the Company, to the effect that
registration is not required in connection with such disposition.
SECTION 5.03. RULE 144; CURRENT INFORMATION. For so long as any Common
Shares constituting Registrable Securities are outstanding, the Company will (i)
cause its Common Stock to continue to be registered under Section 12 of the
Exchange Act, file all reports required to be filed by it under the Securities
Act and the Exchange Act and will take such further actions as the Investor may
reasonably request, all to the extent required from time to time to enable the
Investor to sell Common Shares without registration under the Securities Act
pursuant to the safe harbors and exemptions provided by Rule 144 under the
Securities Act (to the extent applicable), as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the Commission,
and (ii) furnish the Investor with all reports, proxy statements and
registration statements that the Company files with the Commission or
distributes to its securityholders pursuant to the Securities Act and the
Exchange Act at the times of such filings and distributions (unless such
documents are available electronically from the Commission or elsewhere without
charge and within a period reasonably contemporaneous with the filing thereof
with the Commission, in which case such documents need not be provided to the
Investor). Upon the request of the Investor, the Company will deliver to the
Investor a written statement as to whether it has complied with the foregoing
requirements.
17
SECTION 5.04. RESERVATION OF COMMON SHARES. The Company shall at all
times reserve and keep available, free from preemptive rights, out of its
authorized but unissued shares of Common Stock or its issued shares of Common
Stock held in its treasury, or both, sufficient shares of Common Stock to
provide for the issuance of the Common Shares in an amount equal to the balance
of the maximum number of Common Shares issuable under this Agreement (assuming
issuance at the Floor Price) not then yet issued.
SECTION 5.05. STOCK LISTING. The Company shall have the Common Shares
in an amount equal to the maximum number of Common Shares issuable under this
Agreement (assuming issuance at the Floor Price) approved for quotation or
listing, prior to issuance, upon the Principal Market upon which the Common
Stock is listed or traded at the time of issuance of such Common Shares and
shall use its commercially reasonably efforts to maintain such listing.
SECTION 5.06. STOCKHOLDER APPROVAL. The Company shall obtain approval
of its stockholders, in accordance with the applicable rules of the Principal
Market, prior to delivering a Draw Down Notice that, after giving effect all
prior issuances of shares of Common Stock pursuant to this Agreement, could
result in the issuance by the Company of more than 6,812,400 shares of Common
Stock under this Agreement in the aggregate (assuming, for the purpose of
calculating the maximum number of shares issuable pursuant to the Draw Down
Notice, that the VWAP for each Trading Day within the Valuation Period to which
such Draw Down Notice relates is the Floor Price as specified by the Company in
such Draw Down Notice.
SECTION 5.07. REPORTING STATUS. The Company's Common Stock is
registered under Section 12(g) of the Exchange Act. So long as the Investor
beneficially owns any of the Securities, the Company shall timely file all
reports required to be filed with the SEC pursuant to the Exchange Act, and the
Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination.
SECTION 5.08. NO INTEGRATION. The Company shall not make any offers or
sales of any security (other than the Common Shares) under circumstances that
would require registration of the Common Shares being offered or sold hereunder
under the Securities Act or cause the offer and sale of Common Shares to be
integrated with any other offering of securities by the Company for the purpose
of any stockholder approval provision applicable to the Company or its
securities.
SECTION 5.09. REGISTRATION RIGHTS. The Company shall cause the
Registration Rights Agreement to remain in full force and effect during its term
and the Company shall comply in all respects with the terms thereof.
SECTION 5.10. NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION;
SUSPENSION OF RIGHT TO DELIVER A DRAW DOWN NOTICE. The Company will immediately
notify the Investor upon the occurrence of any of the following events in
respect of the Registration Statement or related prospectus in respect of the
resale of the Registrable Securities: (i) receipt of any request for additional
information from the Commission or any other federal or state governmental
authority during the period of effectiveness of the Registration Statement, the
response to which would require any amendments or supplements to the
Registration Statement or related
18
prospectus; (ii) the issuance by the Commission or any other federal or
state governmental authority of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that
purpose; (iii) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Securities for sale
in any jurisdiction or the initiation of any proceeding for such purpose or the
threatening of any proceeding for such purpose which the Company acting in good
faith and based upon consideration of all relevant factors believes will
imminently result in a proceeding for such purpose; (iv) the happening of any
event that makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; (v) a post-effective
amendment or supplement to the Registration to reflect events covered by the
Company's annual report on Form 10-K, quarterly report or Form 10-Q or current
report on Form 8-K is necessary or will be necessary during the subsequent ten
Trading Days, (vi) the withdrawal of any relevant Comfort Letter or Periodic
Accountant's Report; and (vii) the Company's reasonable determination that a
post-effective amendment or supplement to the Registration Statement would
otherwise be appropriate; and the Company will promptly make available to the
Investor any such supplement or amendment to the related prospectus. The Company
shall not deliver to the Investor any Draw Down Notice during the continuation
of any of the foregoing events and shall cancel an existing Draw Down by
delivering a Draw Down Cancellation Notice in the manner required by Section
6.04 of this Agreement.
SECTION 5.11. ISSUANCE OF DRAW DOWN SHARES. The sale and issuance of
the Draw Down Shares shall be made in accordance with the provisions and
requirements of Section 4(2) of the Securities Act and any applicable state law.
ARTICLE VI
CONDITIONS TO DELIVERY OF DRAW DOWN
NOTICES AND CONDITIONS TO SETTLEMENT
SECTION 6.01. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
ISSUE AND SELL COMMON STOCK. The obligation hereunder of the Company to issue
and sell the Draw Down Shares to the Investor incident to each Settlement is
subject to the satisfaction, at or before each such Settlement, of each of the
conditions set forth below.
(a) Accuracy of the Investor's Representation and Warranties. The
representations and warranties of the Investor shall be true and correct in all
material respects as of the date when made and as of the date of each such
Settlement as though made at each such time (except for representations and
warranties specifically made as of a particular date which shall be true and
correct in all material respects as of the date when made).
19
(b) Performance by the Investor. The Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to such Settlement.
SECTION 6.02. CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO
DELIVER A DRAW DOWN
NOTICE. The right of the Company to deliver a Draw Down Notice hereunder is
subject to the satisfaction, on the date of delivery of such Draw Down Notice,
of each of the following conditions:
(a) Effective Registration Statement. (I) As set forth in the
Registration Rights Agreement, the Registration Statement shall have previously
been declared effective and shall remain effective and sales of all of the
Registrable Securities (including all of the Draw Down Shares issued with
respect to all prior Draw Downs and all of the Draw Down Shares expected to be
issued in connection with the Draw Down specified by the current Draw Down
Notice (assuming for such purpose that the Purchase Price applicable to such
Draw Down is the Floor Price)) may be made by the Investor thereunder and (i)
neither the Company nor the Investor shall have received notice that the
Commission has issued or intends to issue a stop order with respect to the
Registration Statement or that the Commission otherwise has suspended or
withdrawn the effectiveness of the Registration Statement either, temporarily or
permanently, or intends to do so, (ii) no other suspension of the use or
withdrawal of the effectiveness of the Registration Statement or related
prospectus shall exist and (iii) no event specified in Section 5.10 shall have
occurred and be continuing.
(II) The Company shall not have failed to obtain effectiveness of the
Registration Statement within 180 days from the Closing Date, and shall not have
failed to obtain the effectiveness of any additional Registration Statement
required to be filed pursuant to the Registration Rights Agreement within ninety
(90) days after the occurrence of the event that requires such filing, and no
such Registration Statement, after its initial effectiveness, and shall have
lapsed in effect such that sales of all of the Registrable Securities otherwise
cannot be made thereunder (whether by reason of the Company's failure to amend
or supplement the prospectus included therein in accordance with the
Registration Rights Agreement, the Company's failure to file and obtain
effectiveness with the Commission of an additional Registration Statement
required pursuant to the Registration Rights Agreement or otherwise) for more
than twenty (20) consecutive Trading Days or more than eighty (80) Trading Days
in any twelve (12) month period after such Registration Statement becomes
effective.
(b) Accuracy of the Company's Representations and Warranties. (I) The
representations and warranties of the Company made in the Transaction Documents
shall be true and correct in all material respects as of the date when made and
as of the applicable Draw Down Date (with such representations and warranties to
be appropriately updated to reflect the passage of time, e.g., the definition of
SEC Reports shall be deemed to include reports filed subsequent to the date of
this Agreement and Section 3.08 shall be deemed to also relate to the most
recent publicly available financial statements of the Company) as though made at
such time (except for representations and warranties specifically made as of a
particular date which shall be true and correct in all material respects as of
the date when made).
20
(II) The Company shall not at any time have breached any material
representation, warranty or covenant contained in this Agreement or the other
Transaction Documents.
(c) Performance by the Company. (I) The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement and the Registration Rights Agreement
to be performed, satisfied or complied with by the Company at or prior to such
date, nor shall there have occurred an Event of Default under this Agreement.
(II) The Company shall not have (i) failed to issue shares of Common
Stock to the Investor on any Settlement Date as provided herein, (ii) failed to
remove any restrictive legend (or to withdraw any stop transfer instructions in
respect thereof) on any certificate or any shares of Common Stock issued to the
Investor on any Settlement Date as and when required by this Agreement or the
Registration Rights Agreement, or (iii) failed to fulfill its obligations
pursuant to this Agreement (or made any announcement, statement or threat that
it does not intend to honor the obligations described in this paragraph), and,
in each of the cases described in clauses (i) through (iii) above, any such
failure shall not have continued uncured (or any announcement, statement or
threat not to honor its obligations shall not have been rescinded in writing)
for five (5) Trading Days after the Company has been notified thereof in writing
by the Investor.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby that prohibits or directly and adversely affects any of the transactions
contemplated by this Agreement, and no proceeding shall have been commenced that
may have the effect of prohibiting or adversely affecting any of the
transactions contemplated by this Agreement.
(e) Material Adverse Changes. For the thirty (30) days preceding the
date of delivery of such Draw Down Notice, no event that had or is reasonably
likely to have a Material Adverse Effect shall have occurred (provided that any
changes resulting from general economic conditions or the computer storage
industry in general or fluctuations in the market price of the Company's Common
Stock shall not be deemed to constitute a "Material Adverse Effect" for purposes
hereof).
(f) No Suspension of Trading In or Delisting of Common Stock. The
trading of the Common Stock (including without limitation the Draw Down Shares)
shall not have been suspended by the Commission, the Principal Market or the
NASD and the Common Stock (including without limitation the Draw Down Shares)
shall have been approved for listing or quotation on and shall not have been
delisted from the Principal Market.
(g) Comfort Letter; Periodic Accountant's Report. The Comfort Letter(s)
in respect of the Registration Statement or any Form 8-K containing substantial
financial information incorporated by reference into the Registration Statement
shall have been delivered prior to the date of delivery of such Draw Down
Notice, reasonably satisfactory in form and substance to the Investors, and
shall not have been rescinded, and a Periodic Accountant's Report covering the
Company's most recently completed fiscal quarter (other than the fourth fiscal
quarter) in respect
21
of which the Company has its results of operations shall have been delivered
prior to the date of delivery of such Draw Down Notice, satisfactory in form and
substance to the Investor, covering customary matters, and shall not have been
rescinded.
(h) No Knowledge. The Company shall have no knowledge of any event that
would reasonably be expected to have the effect of causing such Registration
Statement to be suspended or otherwise ineffective (which event is more likely
than not to occur within the five (5) Trading Days following the Trading Day on
which such Draw Down Notice is deemed delivered).
(i) Trading Cushion. A period of five Trading Days shall have elapsed
since the delivery of the preceding Draw Down Notice.
(j) Maximum Share Amount. Unless the Company has obtained the requisite
approval of its stockholders in accordance with the applicable rules of the
Principal Market, in no event may the Company issue a Draw Down Notice to sell
an Investment Amount to the extent that the sum of (x) the number of shares of
Common Stock represented by the quotient of (i) the requested Investment Amount,
divided by (ii) the Floor Price set forth in such Draw Down Notice, plus (y) the
cumulative total of all Common Shares issued under all previous Draw Downs
effected pursuant to this Agreement, would exceed the Maximum Share Amount.
(k) Investment Amount Limitation. On each Draw Down Date, the
Investment Amount specified in the applicable Draw Down Notice may not exceed
the dollar amount which would result in a number of Draw Down Shares then to be
purchased by the Investor (for purposes of this Section 6.02(k), assuming that
such number of Draw Down Shares to be issued pursuant to such Draw Down Notice
equals the Investment Amount specified in such Draw Down Notice, divided by the
Floor Price) which would cause the Investor not to satisfy the conditions set
forth in the following two sentences. Notwithstanding any other provision of
this Agreement, the aggregate number of Common Shares issuable to the Investor
in respect of a Draw Down, together with the shares of Common Stock then
beneficially owned (as defined in the Exchange Act) by the Investor and its
affiliates, shall not exceed 4.9% of the total outstanding shares of Common
Stock as of such date (the "4.9% Limitation"). The Investor agrees promptly to
notify the Company if its determines, based on its good faith estimate that the
maximum number of Draw Down Shares it may be required to purchase pursuant to a
Draw Down Notice (based upon the then current market price of the Common Stock
and the Investor's good faith estimate of the Maximum Draw Down Amount) would
cause the Investor to exceed the 4.9% Limitation. In addition, notwithstanding
any other provision of this Agreement during any consecutive 61-day period the
Investor (together with its affiliates) may not be issued Common Shares to the
extent such purchase, would in the aggregate exceed a number of shares of Common
Stock exceeding 9.9% of the Company's issued and outstanding shares of Common
Stock as of the first of such 61-day period nor may the Investor sell shares of
Common Stock (whether acquired) pursuant to this Agreement or otherwise) in
excess of 9.9% of the Company's issued and outstanding shares of Common Stock as
of the first day of such 61-day period (the "9.9% Limitation"). The foregoing
limitations may not be waived, amended or modified. The Company shall have no
obligation to monitor compliance with the foregoing limitations. In the event
the issuance of the full number of Common Shares pursuant to a Draw Down Notice
(assuming the Common Shares were to be issued based on the Floor Price specified
in such Draw Down Notice) would cause the Investor to be in violation of the
foregoing limitations, the
22
Investor shall within one Business Day of receiving such Draw Down Notice
notify the Company and on the Settlement Date, the Investor shall only be
required to purchase such number of Common Shares (pro rated over the Valuation
Period) which would not cause the Investor to be in violation of such
limitations.
(l) Prospectus Supplement. To the extent required by rules and
regulations of the Commission, a supplement to the prospectus included in the
Registration Statement (the "Prospectus Supplement"), in form and substance to
be agreed upon by the parties, setting forth information regarding the Draw Down
including, without limitation, the Draw Down Date, the Investment Amount, the
number of shares sold to the Investor in connection with all previous Draw
Downs, if not previously disclosed in an SEC Document, and any additional
information required by rules and regulations of the Commission, including Item
507 of Regulation S-K, shall have been filed with the Commission and sufficient
copies thereof delivered to the Investor on the Trading Day immediately
following the delivery of the Draw Down Notice.
(m) Outside Counsel Letter. A letter of outside counsel with respect to
the Registration Statement, rendered in form and substance in which "10b-5"
letters are typically delivered, shall have been delivered, dated as of the date
of delivery, which date shall not be earlier than the later to occur of (i) the
effective date of the Registration Statement or any post-effective amendment or
any supplement thereto, (ii) the date of any filing of a Form 8-K by the Company
subsequent to the effective date of the Registration Statement, (iii) the date
of any filing of a Form 10-Q by the Company subsequent to the effective date of
the Registration Statement, (iv) the date of filing by the Company subsequent to
the effective date of the Registration Statement of an Annual Report on Form
10-K and (v) the date of delivery of a Draw Down Notice covering an Investment
Amount, when combined with the Investment Amount under all prior Draw Down
Notices since the last 10b-5 letter was rendered, exceeds $2,500,000.
(n) Change of Control. The Company shall not have sold, conveyed or
disposed of all or substantially all of the assets of the Company, nor shall the
Company have effected a transaction or series of related transactions in which
more than 50% of the voting power of the Company is disposed of, nor shall the
Company have engaged in the consolidation, merger or other business combination
of the Company with or into any other Person or Persons when the Company is not
the survivor.
(o) Since June 28, 2001, the Company's Common Stock shall not have
traded below the Minimum Floor Price for a period of 30 consecutive Trading
Days.
SECTION 6.03. DOCUMENTS REQUIRED TO BE DELIVERED ON EACH DRAW DOWN
DATE. The Investor's obligation to purchase Common Shares pursuant to a Draw
Down hereunder shall additionally be conditioned upon the delivery to the
Investor of a certificate in form and substance satisfactory to the Investor,
executed by an executive officer of the Company and to the effect that all the
conditions to such Draw Down Notice shall have been satisfied as at the date of
such certificate.
SECTION 6.04. DRAW DOWN CANCELLATION.
23
(a) Mechanics of Draw Down Cancellation. If at any time during a
Valuation Period, (i) any of the events specified in Section 5.10 of this
Agreement shall occur, (ii) any of the conditions precedent to a Draw Down set
forth in Section 6.02 shall no longer be satisfied as of any date during the
Valuation Period or (iii) the Company discovers that the document referred to in
Section 6.03 or the most recent applicable Comfort Letter(s) or Periodic
Accountant's Report(s) would not be deliverable in the precise form so delivered
if delivered as of such date during the Valuation Period, then the Company shall
cancel the Draw Down (a "Draw Down Cancellation") immediately by delivering
written notice to the Investor specifying the reasons therefor (the "Draw Down
Cancellation Notice"), by facsimile and overnight courier. The Draw Down
Cancellation Notice shall be deemed delivered on (i) the Trading Day it is
received by facsimile or otherwise by the Investor if such notice is received
prior to 5:00 p.m., New York City time, or (ii) the immediately succeeding
Trading Day if it is received by facsimile or otherwise after 5:00 p.m., New
York City time, on a Trading Day, or at any time on a day which is not a Trading
Day. No Draw Down Cancellation Notice may be deemed delivered on a day that is
not a Trading Day. "Draw Down Cancellation Date" shall be the date the Draw Down
Cancellation Notice is deemed delivered pursuant to the preceding sentence;
notwithstanding the foregoing, the Company shall not deliver Draw Down Shares
with respect to the non-canceled portion of the Investment Amount it would
otherwise be required to deliver on the applicable Settlement Date but shall be
required to compensate the Investor for its actual damages in respect of such
non-delivery as provided in Section 2.05(a).
(b) Effect of Draw Down Cancellation. If a Draw Down Cancellation
Notice has been delivered to the Investor after a Draw Down Date, the Valuation
Period for such Draw Down shall end on the Trading Day immediately preceding the
Draw Down Cancellation Date. In such event, the Investment Amount relating to
such Draw Down shall be reduced by one-fifth (1/5) with respect to each Trading
Day during the period beginning on and including the Draw Down Cancellation Date
and ending on the last Trading Day of such Valuation Period. Anytime a Draw Down
Cancellation Notice is delivered to the Investor, such Draw Down shall remain
effective as to the portion of the Investment Amount not canceled pursuant to
the preceding sentence.
ARTICLE VII
TERMINATION
SECTION 7.01. TERM; TERMINATION BY MUTUAL CONSENT. Subject to the
provisions of Section 7.02, the term of this Agreement shall run until the end
of the Commitment Period; provided that the right of the Company to effect any
Draw Downs under this Agreement may be terminated at any time by mutual consent
of the parties. Notwithstanding the foregoing, the Company may terminate this
Agreement at any time provided that, simultaneously with such termination, it
shall make any payment required by Section 9.13.
SECTION 7.02. TERMINATION BY THE INVESTOR. The Investor may terminate
the right of the Company to effect any Draw Downs under this Agreement upon one
(1) Trading Day's notice if any of the following events (each, an "Event of
Default") shall occur:
(a) The Company or any subsidiary shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for all or
24
substantially all of its property or business; or such a receiver or trustee
shall otherwise be appointed;
(b) Bankruptcy, insolvency, reorganization or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company or any
subsidiary of the Company; or
(c) The Company shall fail to maintain the listing of the Common Stock
on a Principal Market or trading in such Common Stock shall otherwise be halted
or suspended for a period of ten (10) consecutive Trading Days.
ARTICLE VIII
NON-DISCLOSURE OF MATERIAL NON-PUBLIC INFORMATION
SECTION 8.01. NON-DISCLOSURE OF MATERIAL NON-PUBLIC INFORMATION.
(a) The Company covenants and agrees that it shall refrain from
disclosing, and shall cause its officers, directors, employees and agents to
refrain from disclosing, any material non-public information to the Investor,
unless prior to disclosure of such information the Company identifies such
information as being material non-public information and provides the Investor
and its advisors and representatives with the opportunity to accept or refuse to
accept such material non-public information for review.
(b) The Company acknowledges and understands that the Investor is
entering into this Agreement and the Registration Rights Agreement at the
request of the Company and in good faith reliance on (i) the Company's
representation set forth in this Agreement that neither it nor its agents have
disclosed to the Investor any material non-public information; and (ii) the
Company's covenant set forth in this Agreement that if the Company comes into
possession of any material non-public information, the Company shall timely make
full and complete public disclosure of such information in accordance with all
applicable securities laws.
(c) Nothing herein shall require the Company to disclose material
non-public information to the Investor or its advisors or representatives, and
the Company represents that it does not disseminate material non-public
information to any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts; provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, immediately notify the Investor and its advisors and
representatives and, if any, underwriters, of the existence of any event or
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting material non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement would cause
such prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements therein, in light
of the circumstances in which they were made, not misleading.
25
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. PRESS RELEASES AND DISCLOSURE. The Company shall as soon
as practicable following the Closing Date but in no event more than five (5)
days following the Closing Date, shall file with the Commission a Current Report
on Form 8-K (or otherwise include in an Annual Report on Form 10-K) describing
the material terms of the transactions contemplated hereby. No party hereto
shall issue any press release or make any other public disclosure related to
this Agreement or any of the transactions contemplated hereby without the prior
written approval of the other party hereto, except as may be necessary or
appropriate in the opinion of the party seeking to make disclosure to comply
with the requirements of applicable law or stock exchange rules. If any such
press release or public disclosure is so required, the party making such
disclosure shall consult with the other party prior to making such disclosure,
and the parties shall use all reasonable efforts, acting in good faith, to agree
upon a text for such disclosure that is satisfactory to all parties.
SECTION 9.02. EXPENSES. The Company will pay all of the Investor's
expenses (including reasonable attorneys' fees and expenses) in connection with
the negotiation of the Transaction Documents subject to a maximum of $35,000,
which shall be payable at the Closing.
SECTION 9.03. NOTICES. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder or
that are given with respect to this Agreement shall be in writing and shall be
personally served or deposited in the mail, registered or certified, return
receipt requested, postage prepaid or delivered by reputable air courier service
with charges prepaid, or transmitted by hand delivery, telegram, telex or
facsimile, addressed as set forth below, or to such other address as such party
shall have specified most recently by written notice: (i) if to the Company, to:
Gadzoox Networks, Inc., 0000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000 Attention: Xxxxx
Xxxxxxx, Facsimile No.: (000) 000-0000, with copies (which shall not constitute
notice) to: Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, XX
00000, Attention: Xxxxx XxXxxxxx, Facsimile No.: (000) 000-0000; and (ii) if to
the Investor, Societe Generale c/o XX Xxxxx Securities Corporation, 0000 Xxxxxx
xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000 Attention: Xxxxxxxxx Xxxxxx, Facsimile No.:
(000) 000-0000, with copies (which shall not constitute notice) to: Xxxxx, Day,
Xxxxxx & Xxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000, Attention: J. Xxxx
Xxxx, Facsimile No.: (000) 000-0000. Notice shall be deemed given on the date of
service or transmission if personally served or transmitted by telegram, telex
or facsimile. Notice otherwise sent as provided herein shall be deemed given on
the third business day following the date mailed or on the next business day
following delivery of such notice to a reputable air courier service.
SECTION 9.04. ENTIRE AGREEMENT. This Agreement (together with the other
Transaction Documents and all other documents delivered pursuant hereto and
thereto) constitutes the entire agreement of the parties with respect to the
subject matter hereof and supersedes all prior and contemporaneous agreements,
representations, understandings, negotiations and discussions between the
parties, whether oral or written, with respect to the subject matter hereof.
26
SECTION 9.05. AMENDMENT AND WAIVER. This Agreement may not be amended,
modified, supplemented, restated or waived except by a writing executed by the
party against which such amendment, modification or waiver is sought to been
enforced. Waivers may be made in advance or after the right waived has arisen or
the breach or default waived has occurred. Any waiver may be conditional. No
waiver of any breach of any agreement or provision herein contained shall be
deemed a waiver of any preceding or succeeding breach thereof nor of any other
agreement or provision herein contained. No waiver or extension of time for
performance of any obligations or acts shall be deemed a waiver or extension of
the time for performance of any other obligations or acts.
SECTION 9.06. ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
and the rights, duties and obligations hereunder may not be assigned or
delegated by the Company or the Investor. Any purported assignment or delegation
of rights, duties or obligations hereunder shall be void and of no effect. This
Agreement and the provisions hereof shall be binding upon and shall inure to the
benefit of each of the parties and their respective successors. This Agreement
is not intended to confer any rights or benefits on any Persons other than as
set forth above.
SECTION 9.07. SEVERABILITY. This Agreement shall be deemed severable,
and the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
SECTION 9.08. FURTHER ASSURANCES. Each party hereto, upon the request
of any other party hereto, shall do all such further acts and execute,
acknowledge and deliver all such further instruments and documents as may be
reasonably necessary or desirable to carry out the transactions contemplated by
this Agreement.
SECTION 9.09. TITLES AND HEADINGS. Titles, captions and headings of the
sections of this Agreement are for convenience of reference only and shall not
affect the construction of any provision of this Agreement.
SECTION 9.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
INTERPRETED UNDER, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WITHIN THE
STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS
THEREOF.
SECTION 9.11. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, all of which taken
together shall constitute one and the same instrument.
SECTION 9.12. REPORTING ENTITY FOR THE COMMON STOCK. The reporting
entity relied upon for the determination of the VWAP, trading price or trading
volume of the Common Stock on any given Trading Day for the purposes of this
Agreement shall be Bloomberg Financial.
27
SECTION 9.13. COMMITMENT FEE PAYMENT. In the event Company shall not
issue Draw Down Shares for an aggregate Investment Amount of at least $5,000,000
prior to the earlier to occur of the termination of this Agreement and such time
as any condition specified in Sections 6.02(a)(II),(b)(II), (c)(II), (n) or (o)
shall not be satisfied, then the Company shall pay the Investor the amount of
$300,000 (pro rated for issuances prior to the termination of this Agreement or
the date on which any such specified condition shall not be satisfied), payable
two business days following either the termination of this Agreement or the date
on which any such specified condition shall not have been satisfied.
Notwithstanding the foregoing, if this Agreement is terminated by the Company
for Cause or if the Company fails to meet any of the conditions specified above
as a result of Cause, the Company shall not be obligated to make any payments to
the Investor. "Cause" for purposes of this Section 9.13 shall mean breach by the
Investor of any representation, warranty, covenant or other obligation of the
Investor set forth in this Agreement or the Registration Rights Agreement.
SECTION 9.14. ADJUSTMENTS FOR STOCK SPLITS, ETC. The Maximum Share
Amount, the minimum Floor Price and calculations of the Average Daily Trading
Volume shall be equitably adjusted to reflect stock splits, stock dividends,
reverse stock splits and similar events.
28
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
GADZOOX NETWORKS, INC.
By: /s/ Xxxxxxx Xxxxxxx
-----------------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: President and Chief Executive Officer
SOCIETE GENERALE
By: /s/ Xxxxxxxx Xxxxxxxxxx
-----------------------------------------------
Name: Xxxxxxxx Xxxxxxxxxx
Title: Authorized Signatory
EXHIBIT A
GADZOOX NETWORKS, INC.
DRAW DOWN NOTICE
[Date]
Societe Generale
c/o XX Xxxxx Securities Corporation
1221 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxxx Xxxxxx/Xxxx Xxx
Reference is made to the Amended and Restated Equity Line Financing
Agreement between Gadzoox Networks, Inc. (the "Company") and Societe Generale
dated as of October 26, 2001. The Company confirms that all conditions to the
delivery of this Draw Down Notice are satisfied as of the date hereof.
Effective Date of Delivery of Draw Down Notice (determined pursuant to Section
2.03(b)): ______________________.
First Date of Valuation Period: ___________________.
Last Date of Valuation Period: ____________________.
Settlement Date: _____________________.
Draw Down Amount (not to exceed Maximum Draw Down Amount): ____________________.
Calculation of Maximum Draw Down Amount: _____________________.
Floor Price Limitation (if none specified, $1.00): _____________________.
GADZOOX NETWORKS, INC.
By:
------------------------------------------
Name:
Title:
