EXHIBIT 10.2
PUT AND CALL AGREEMENT
PUT AND CALL AGREEMENT ("AGREEMENT") dated as of January 26, 2000,
between SECURE COMPUTING CORPORATION, a Delaware Corporation (the "Company") and
WESTGATE INTERNATIONAL, L.P. (the "INVESTOR").
W I T N E S S E T H
WHEREAS, the Company and the Investor desire that, subject to the
terms and provisions of this Agreement, the Investor may purchase up to 17,500
shares of the Company's Series E Preferred Stock, liquidation preference $1,000
per share (all such shares being referred to as "PREFERRED SHARES"), having the
rights, designations, and preferences set forth in the Certificate of
Designation (the "CERTIFICATE") in the form of Exhibit 1.1A attached hereto and
filed on the date hereof, on the terms and conditions set forth therein, which
Preferred Shares shall be issuable in two tranches (each a "TRANCHE"), for an
aggregate consideration of $1,000 per share, pursuant to either the Company's
options to sell Preferred Shares to the Investor set forth in this Agreement
(each a "PUT") or the Investor's options to purchase Preferred Shares from the
Company set forth in this Agreement (each a "CALL"); and
WHEREAS, the Preferred Shares will be convertible into shares
("COMMON SHARES") of common stock, par value $0.01, of the Company ("COMMON
STOCK"), pursuant to the terms of the Certificate, and the Investor will have
registration rights with respect to such Common Shares, pursuant to the terms of
that certain Registration Rights Agreement to be entered into between the
Company and the Investor substantially in the form of Exhibit 6.2(f) hereto
("REGISTRATION RIGHTS AGREEMENT") which is being executed and delivered
concurrently with this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
COMPANY'S PUT RIGHTS
Section 1.01 Company's First Put.
(a) At any time during the period commencing on the fifth Trading
Day (as defined below) following the effectiveness of the registration statement
(the "SERIES D REGISTRATION STATEMENT") covering the resale by the Investor of
Common Stock issued
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EXHIBIT 10.2
upon conversion of the Company's Series D Preferred Stock ("SERIES D PREFERRED
STOCK") and ending at the close of business on April 1, 2000 (the "First Put
Period"), the Company shall have the option to sell to the Investor all, but not
less than all, of a Tranche consisting of 8,750 Preferred Shares, subject to
reduction set forth in paragraph (d) below ("TRANCHE A"), subject to the
provision of paragraph (b) below, for an aggregate consideration of $1,000 per
Preferred Share (the "FIRST PUT"); provided that the Investor has not exercised
the First Call (as defined below).
(b) The exercise of the First Put by the Company is subject to the
fulfillment, on the date of its exercise, of the following conditions, which
conditions may be waived by the Investor, in whole or in part, at its sole
discretion:
(i) The Company shall be in compliance with its obligations under this
Agreement, the Certificate and the Registration Rights Agreement (the
"TRANSACTION DOCUMENTS");
(ii) The Company shall be in compliance with its obligations under the
Certificate relating to the Series D Preferred Stock and the Investment
Agreement and Registration Rights Agreement, each dated as of December
17, 1999, by and between the Company and the Investor (collectively, the
"SERIES D TRANSACTION DOCUMENTS");
(iii) The Company shall be in compliance with the Common Stock Investment
Agreement (other than Sections 4(d), 4(j) and 4(k) thereof) and
Registration Rights Agreement, each dated October 4, 1999 by and between
the Company and Manchester Securities Corp. ("Manchester") and the
Warrants issued to Manchester on such date (collectively, the "Equity
Line Documents");
(iv) No event which would entitle the Investor to resell to the Company any
Preferred Shares, any shares of Series D Preferred Stock, or any shares
of Common Stock issuable upon conversion thereof shall have occurred and
be continuing;
(v) No event which had or is likely to have, in the reasonable judgment of
the Investor, a Material Adverse Effect (as defined below) on the Company
or any of its subsidiaries shall have occurred since the date hereof;
(vi) The Standard & Poor's 500 Index shall not be 35% or more below its level
on the date hereof;
(vii) The closing bid price of the Company's Common Stock on the Principal
Market (as defined below) where it is traded shall not have dropped below
$5.00 (as may be adjusted for stock splits, stock dividends and stock
consolidation) at any time during the preceding 20 Trading Days;
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EXHIBIT 10.2
(viii) At all times during the period beginning on the date that the Company
delivers the related Put Notice (as defined below), and ending on and
including the date of the Put Notice, the Common Stock shall have been
listed on The American Stock Exchange, Inc. or The New York Stock
Exchange, Inc. or listed on the Nasdaq National Market or The Nasdaq
SmallCap Market (each a "PRINCIPAL MARKET") and shall not have been
suspended from trading thereon;
(ix) During the period beginning on the date of this Agreement and ending on
and including the applicable Put Notice, there shall not have occurred a
Major Transaction (as defined below) or the public announcement of a
pending Major Transaction which has not been abandoned or terminated;
(x) A number of shares of Common Stock equal to at least 200% of the
aggregate number of Common Shares issuable upon conversion of Preferred
Shares included in the Tranche to be purchased shall have been duly
authorized and reserved for issuance; and
(xi) The representations and warranties of the Company set forth in Section
3.1 shall be true and correct on the date of the Put Notice (as defined
below).
(c) The exercise of the First Put shall be effected by delivery of a
written notice by the Company to the Investor (the "FIRST PUT NOTICE"). Upon
delivery of the First Put Notice to the Investor, subject to the applicable
closing conditions set forth in Article VI herein, the Company shall be
obligated to sell to the Investor and the Investor shall be obligated to
purchase from the Company, the Preferred Shares included in Tranche A (the
"TRANCHE A SHARES"). Closing of such purchase and sale (the "FIRST PUT CLOSING")
shall take place at the offices of Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
("KKWC") within 3 business days after delivery of the First Put Notice. The
Company's delivery of the First Put Notice shall constitute its representation
that the conditions set forth in paragraph (b) above (the "PUT CONDITIONS")
shall have been satisfied.
(d) In the event that on the date of receipt of the First Put Notice
or the First Put Closing, the purchase price for the Tranche A Shares shall
exceed 6% of the Company's Market Capitalization (as defined below) on such
date, then the number of Tranche A Shares shall be reduced such that the
aggregate purchase price of the Tranche A shall be equal to 6% of the Company's
Market Capitalization on such date. If Tranche A is so reduced, then the number
of Preferred Shares included in Tranche B (as defined below) shall be
proportionately increased (except to the extent that the First Call shall have
been exercised pursuant to Section 2.01 below) such that the total aggregate
purchase price for such Preferred Shares included in Tranche A and Tranche B
shall equal $17,500,000.
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EXHIBIT 10.2
(e) For purpose of this Agreement, a "MAJOR TRANSACTION" shall be
deemed to include any of the following events: (i) the consolidation, merger or
other business combination of the Company with or into another person (other
than (a) a consolidation, merger or other business combination in which the
holders of the Company's voting power immediately prior to such transaction
continue after the transaction to hold, directly or indirectly, the voting power
(on a fully diluted basis) of the surviving entity or entities necessary to
elect a majority of the members of the board of directors (or their equivalent
if other than a corporation) of such entity or entities, or (B) pursuant to a
"migratory" merger effected solely for the purposes of changing the jurisdiction
of incorporation of the Company); (ii) the sale or transfer of all or
substantially all of the Company's assets in one or a series of transactions;
(iii) the consummation of a purchase, tender or exchange offer made to, and
accepted by, the holders of more than 50% of the outstanding shares of Common
Stock or (iv) any "going private" transaction.
For purpose of this, "MARKET CAPITALIZATION" shall mean the
aggregate market value of the outstanding Common Stock based on the closing bid
price on the prior Trading Day on the market or exchange on which the Common
Stock is then principally traded.
For purposes of this Agreement, "TRADING DAY" shall mean a day
on which there is trading on Principal Market or other market or exchange on
which the Common Stock is then principally traded.
For purpose of this Agreement, "MATERIAL ADVERSE EFFECT" means
any adverse effect on the business, operations, properties, prospects, or
financial condition of the Company and its subsidiaries, if any, which is
(either alone or together with all other adverse effects) material to the
Company and its subsidiaries, if any, taken as a whole, and any material adverse
effect on the transactions contemplated under Transaction Documents, the Series
D Transaction Documents or the Equity Line Documents.
Section 1.02 Company's Second Put.
(a) At any time during the period commencing on the later of the
Trading Date that (i) all Tranche A Shares shall have been issued and
subsequently converted into Common Shares and a registration statement covering
the resale by the Investor of the Common Shares issuable upon conversion of the
Tranche A Shares shall have been declared effective and remained effective for
at least five Trading Days following the delivery of Common Shares issued upon
conversion of the last Tranche A Shares to be converted, or (ii) June 30, 2000
and expiring at the close of business on November 1, 2000 (the "Second Put
Period"), the Company shall have the right to sell to the Investor all, but not
less than all, of a Tranche consisting of 8,750 Preferred Shares (subject to
adjustment as provided in Section 1.1 (d) and paragraph (d) below) ("TRANCHE
B"),
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EXHIBIT 10.2
subject to the conditions in paragraph (b) below (the "SECOND PUT"); provided
that the Investors shall not have exercised the Second Call (as defined below).
(b) The exercise of the Second Put shall be subject to the Put
Conditions, which conditions may be waived, in whole or in part, by the Investor
in its sole discretion.
(c) The exercise of the Second Put shall be effected by delivery of
a written notice by the Company to the Investor (the "SECOND PUT NOTICE"). Upon
delivery of the Second Put Notice to the Investor, subject to the applicable
closing conditions set forth in Article VI herein, the Company shall be
obligated to sell to the Investor and the Investor shall be obligated to
purchase from the Company, the Preferred Shares included in Tranche B (the
"TRANCHE B SHARES"). Closing of such purchase and sale ("SECOND PUT CLOSING")
shall take place at the offices of KKWC within 3 business days after delivery of
the Second Put Notice. The Company's delivery of the Second Put Notice shall
constitute its representation that the Put Conditions shall have been satisfied.
(d) In the event that on the date of receipt of the Second Put
Notice or the Second Put Closing, the purchase price for the Tranche B Shares
shall exceed 6% of the Company's Market Capitalization on such date, then the
number of Tranche B Shares shall be reduced such that the aggregate purchase
price of the Tranche B Shares shall be equal to 6% of the Company's Market
Capitalization on such date.
Section 1.03 Put Closing Not Timely Effected By The Company. In the event
that either the First Put Closing or the Second Put Closing (each a "PUT
CLOSING") shall not have been effected within 10 business days after the receipt
of the First Put Notice or the Second Put Notice (each a "Put Notice"), as the
case may be, for any reason other than the failure of Investor to comply with
the closing conditions applicable to Investor, then , at the sole option of the
Investor, the related Put may be cancelled by the Investor, and such Put shall
thereupon be of no further force or effect.
ARTICLE II
INVESTOR'S CALL RIGHTS
Section 2.01 Investor's First Call.
(a) The Investor has the option, exercisable from and including the
date hereof, until the close of business on April 1, 2000 (subject to extension
as set forth in Section 2.3 (a) below) (the "FIRST CALL EXPIRATION DATE"), to
purchase all, but not less than all, of Tranche A (except as set forth below)
from the Company (subject to the adjustments set forth in Paragraph (c) below),
for an aggregate consideration of $1,000 per Tranche A Share (the "FIRST CALL").
The First Call shall not be exercisable if the First Put shall have been
exercised (provided that the First Put shall not have been cancelled
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EXHIBIT 10.2
pursuant to Section 1.03 above), except that in the event that the First Put
shall have been exercised and the number of Tranche A Shares shall have been
limited pursuant to Section 1.1(d), then the First Call shall remain exercisable
until the First Call Expiration Date, for the balance of the Tranche B Shares
that would have been included but for such limitation, subject to the limitation
in paragraph (c) below.
(b) The First Call shall be exercised by written notice to the
Company (the "FIRST CALL NOTICE"), which notice may be given concurrently with
the execution and delivery of this Agreement. Upon delivery of the First Call
Notice, subject to the applicable closing conditions contained in Article VI,
the Company shall be obligated to sell and deliver to the Investor and the
Investor shall be obligated to purchase from the Company, the Tranche A Shares.
Closing of such purchase and sale ("FIRST CALL CLOSING") shall take place at the
offices of KKWC within three business days after the delivery of the First Call
Notice.
(c) In the event that on the date of the First Call Notice or the
First Call Closing, the aggregate consideration for Tranche A shall be in excess
of 9% of the Company's Market Capitalization, then the number of Tranche A
Shares shall be reduced such that such aggregate consideration shall equal 9% of
the Company's Market Capitalization. If Tranche A is so reduced, the number of
Preferred Shares in Tranche B shall be correspondingly increased so that the
total consideration for the Preferred Shares in Tranche A and Tranche B shall
equal $17,500,000.
Section 2.02 Investor's Second Call.
(a) At any time after June 30, 2000, but no later than November 1,
2000 (subject to extension as set forth in Section 2.3(b) below) (the "SECOND
CALL EXPIRATION DATE"), the Investors may exercise the option to purchase all,
but not less than all, of Tranche B (except as set forth below) from the Company
for an aggregate consideration of $1,000 per Tranche B Share (the "SECOND
CALL"). The Second Call shall not be exercisable if the Second Put shall have
been exercised (provided that the Second Put shall not have been cancelled
pursuant to Section 1.03 above), except that in the event that the Second Put
shall have been exercised and the number of Tranche B Shares shall have been
limited pursuant to Section 1.2(d), then the Second Call shall remain exerciable
until the Second Call Expiration Date, for the balance of the Tranch B Shares
that would have been included but for such limitation, subject to the limitation
in paragraph (c) below.
(b) The Second Call shall be exercised by written notice to the
Company (the "SECOND CALL NOTICE"). Upon delivery of the Second Call Notice,
subject to the applicable closing conditions contained in Article VI, the
Company shall be obligated to sell and deliver to the Investor and the Investor
shall be obligated to purchase from the Company, the Tranche B Shares. Closing
of such purchase and sale ("SECOND CALL
6
EXHIBIT 10.2
CLOSING") shall take place at the offices of KKWC within three business days
after the delivery of the Second Call Notice.
(c) In the event that on the date of the Second Call Notice or the
Second Call Closing, the aggregate purchase price for the Tranche B Shares shall
exceed 9% of the Company's Market Capitalization, then the number of Tranche B
Shares shall be reduced such that such aggregate consideration shall equal 9% of
the Company's Market Capitalization.
Section 2.03 Extension of First Call and Second Call Expiration Dates.
(a) In the event that there is a delay in the registration of shares
of Common Stock pursuant to the registration rights agreement contained in the
Series D Transaction Documents beyond the required time set forth therein (other
than the requirement that the registration statement be filed within 30 days
which requirement is hereby waived by the Investor), then the First Call
Expiration Date shall be extended by one day for each day that such registration
is not effected by the required time set forth in such registration rights
agreement.
(b) In the event that there is a delay in the Registration of Common
Shares, issuable upon conversion of the Tranche A Shares, pursuant to the
Registration Rights Agreement beyond the required time set forth therein, then
the Second Call Expiration Date shall be extended by one day for each day that
the registration is not effected by the required time set forth in the
Registration Rights Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Investor as of
the date hereof, the date of any First Put Notice or Second Put Notice (each a
"Put Notice") and on the date of any Put Closing.
(a) ORGANIZATION AND QUALIFICATION; MATERIAL ADVERSE EFFECT. The
Company is a corporation duly incorporated and existing in good standing under
the laws of the State of Delaware and has the requisite corporate power to own
its properties and to carry on its business as now being conducted. The Company
does not have any subsidiaries other than the subsidiaries listed on Schedule
3.1(a) attached hereto ("SUBSIDIARIES"). Except where specifically indicated to
the contrary, all references in this Agreement to subsidiaries shall be deemed
to refer to all direct and indirect subsidiaries of the Company. The Company is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the
7
EXHIBIT 10.2
business conducted or property owned by it makes such qualification necessary
other than those in which the failure so to qualify would not have a Material
Adverse Effect.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has all requisite
corporate power and authority to enter into and perform the Transaction
Documents and to issue the Preferred Shares in accordance with the terms hereof,
(ii) the execution and delivery of this Agreement and the Registration Rights
Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including the issuance of the Preferred Shares
and the resolutions contained in the Certificate, have been duly authorized by
all necessary corporate action, and no further consent or authorization of the
Company or its Board of Directors (or any committee or subcommittee thereof) or
stockholders is required, (iii) this Agreement and the Registration Rights
Agreement have been duly executed and delivered by the Company, (iv) this
Agreement, the Certificate and the Registration Rights Agreement constitute
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except (A) as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of creditors'
rights and remedies or by other equitable principles of general application, and
(B) to the extent the indemnification provisions contained in this Agreement and
the Registration Rights Agreement may be limited by applicable federal or state
securities laws and (v) the Preferred Shares have been duly authorized and, upon
issuance thereof and payment therefor in accordance with the terms of this
Agreement, the Preferred Shares will be validly issued, fully paid and
non-assessable, free and clear of any and all liens, claims and encumbrances.
(c) CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of (i) 50,000,000 shares of Common Stock, of which
as of the date hereof, 23,629,489 shares are issued and outstanding, 8,444,131
shares are issuable and reserved for issuance pursuant to the Company's stock
option and purchase plans and 1,048,539 shares are issuable and reserved for
issuance pursuant to securities exercisable or exchangeable for, or convertible
into, shares of Common Stock, and (ii) 2,000,000 shares of preferred stock, of
which as of the date hereof, (A) 23,500 shares were designated as Series C
Preferred Stock and all shares of which have been issued, converted and
cancelled, (B) 7,500 shares were designated as Series D Preferred Stock, all
shares of which have been issued, converted and cancelled, and (C) 17,500 shares
designated as Series E Preferred Stock, none of which shares were issued and
outstanding and all of such were reserved for issuance hereunder. All of such
outstanding shares have been, or upon issuance will be, validly issued, fully
paid and nonassessable. As of the date hereof, except as contemplated by the
Series D Transaction Documents or the Equity Line Documents or as disclosed in
Schedule 3.1(c), (i) no shares of the Company's capital stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company, (ii) there are no outstanding debt
8
EXHIBIT 10.2
securities, (iii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, (iv) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the Securities Act of 1933, as amended ("SECURITIES ACT"
or "1933 ACT") (except the Registration Rights Agreement and the registration
rights agreements included in the Series D Transaction Documents and the Equity
Line Documents), (v) there are no outstanding securities of the Company or any
of its Subsidiaries which contain any redemption or similar provisions other
than the Series D Preferred Stock, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Preferred Shares as described in this Agreement and (vii) the Company does
not have any stock appreciation rights or "phantom stock" plans or agreements or
any similar plan or agreement. The Company has furnished to the Investor true
and correct copies of the Company's Certificate of Incorporation, as amended and
as in effect on the date hereof (the "CERTIFICATE OF INCORPORATION"), and the
Company's By-laws, as in effect on the date hereof (the "BY-LAWS"), and the
terms of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
(d) ISSUANCE OF SHARES. Upon issuance in accordance with this
Agreement and the Certificate, the Preferred Shares and Common Shares will be
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.
(e) NO CONFLICTS. Except as disclosed in Schedule 3.1(e), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby will not (i) result in a violation of the Certificate of Incorporation,
any Certificate of Designations, Preferences and Rights of any outstanding
series of preferred stock of the Company or the By-laws; (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including United States federal and state securities laws and regulations and
the rules and
9
EXHIBIT 10.2
regulations of the Nasdaq National Market ("PRINCIPAL MARKET") or principal
securities exchange or trading market on which the Common Stock is traded or
listed) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or
affected. Except as disclosed in Schedule 3.1(e), neither the Company nor its
Subsidiaries is in violation of any term of, or in default under, (x) its
Certificate of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock or By-laws or their
organizational charter or by-laws, respectively, (y) any material contract,
agreement, mortgage, indebtedness, indenture, instrument, or (z) any judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries, the non-compliance with which (in the case of (z) only), would
be material to the Company or interfere with the performance of its obligations
under the Transaction Documents. Except as specifically contemplated by this
Agreement and as required under the 1933 Act, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under, or contemplated by, the Transaction Documents in accordance
with the terms hereof or thereof. Except as disclosed in Schedule 3.1(e), all
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company complies with and is not in
violation of the listing requirements of the Principal Market as in effect on
the date hereof and on each of the Closing Dates and is not aware of any facts
which would reasonably lead to delisting or suspension of the Common Stock by
the Principal Market in the foreseeable future.
(f) SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31, 1997,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being hereinafter
referred to as the "SEC DOCUMENTS"). The Company has delivered to the Investor
or its representatives true and complete copies of any SEC Documents that were
not filed electronically via XXXXX. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting
10
EXHIBIT 10.2
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other written information provided by or on behalf of the
Company to the Investor which is not included in the SEC Documents, including,
without limitation, information referred to in Section 3.2(b) of this Agreement,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading. Neither the
Company nor any of its Subsidiaries or any of their officers, directors,
employees or agents have provided the Investor with any material, nonpublic
information which was not publicly disclosed prior to the date hereof.
(g) ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule
3.1(g) or the SEC Documents filed at least five (5) days prior to the date
hereof, since December 31, 1998 there has been no adverse change or adverse
development in the business, properties, assets, operations, financial
condition, prospects, liabilities or results of operations of the Company or its
Subsidiaries which has had or, to the knowledge of the Company or its
Subsidiaries, is reasonably likely to have a Material Adverse Effect. The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law nor does the Company or
its Subsidiaries have any knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings.
(h) ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as such,
(i) except as set forth in Schedule 3.1(h) and (ii) except which individually
and in the aggregate, respectively, would be reasonably likely to result in
liability to the Company in excess of $50,000 and $100,000, respectively.
(i) ACKNOWLEDGMENT REGARDING INVESTOR'S PURCHASE OF SHARES. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby and thereby. The Company further
acknowledges that the Investor is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice
given by the Investor or any of its respective
11
EXHIBIT 10.2
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to the
Investor's purchase of the Preferred Shares. The Company further represents to
the Investor that the Company's decision to enter into the Transaction Documents
has been based solely on the independent evaluation by the Company and its
representatives.
(j) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. No event, liability, development or circumstance has occurred or
exists with respect to the Company or its Subsidiaries or their respective
business, properties, prospects, operations or financial condition, that would
be required to be disclosed by the Company under applicable securities laws on a
registration statement filed with the SEC relating to an issuance and sale by
the Company of its Common Stock and which has not been publicly disclosed.
(k) NO INSIDE INFORMATION. The Company has not provided and, the
Company shall not provide, any Investor with any material non-public
information.
(l) NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of
Preferred Shares to the Investor to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable shareholder approval
provisions, including, without limitation, under the rules and regulations of
the Principal Market, nor will the Company or any of its Subsidiaries take any
action or steps that would cause the offering of the Shares to be integrated
with other offerings.
(m) EMPLOYEE RELATIONS. Neither the Company nor any of its
Subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened, the effect
of which would be reasonably likely to result in a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement. The Company and its Subsidiaries believe that relations
between the Company and its Subsidiaries and their respective employees are
good. No executive officer (as defined in Rule 501(f) of the 0000 Xxx) whose
departure would be adverse to the Company has notified the Company that such
officer intends to leave the Company or otherwise terminate such officer's
employment with the Company.
(n) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 3.1(n), none of the
Company's trademarks, trade names, service marks, service xxxx registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
12
EXHIBIT 10.2
approvals, government authorizations, trade secrets or other intellectual
property rights have expired or terminated, or are expected to expire or
terminate within two (2) years from the date of this Agreement. The Company and
its Subsidiaries do not have any knowledge of any infringement by the Company or
its Subsidiaries of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service xxxx
registrations, trade secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others and, except as set forth on Schedule 3.1(n), there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its Subsidiaries regarding trademarks, trade
name rights, patents, patent rights, inventions, copyrights, licenses, service
names, service marks, service xxxx registrations, trade secrets or other
infringement. The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties.
(o) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS", (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where such noncompliance or
failure to receive permits, licenses or approvals referred to in clauses (i),
(ii) or (iii) above could have, individually or in the aggregate, a Material
Adverse Effect.
(p) TITLE. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 3.1(p) or such as do not
materially and adversely affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company or any
of its Subsidiaries. Any real property and facilities held under lease by the
Company or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(q) 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. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for
13
EXHIBIT 10.2
and neither the Company nor any such Subsidiary has any reason to believe that
it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries taken as a whole.
(r) REGULATORY PERMITS. The Company and its Subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities, necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
(s) INTERNAL ACCOUNTING CONTROLS. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
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.
(t) FOREIGN CORRUPT PRACTICES ACT. Neither the Company, nor any
director, officer, agent, employee or other person acting on behalf of the
Company or any Subsidiary has, in the course of acting for, or on behalf of, the
Company, directly or indirectly used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; directly or indirectly made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or any similar treaties of
the United States; or directly or indirectly made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government or party official or employee.
(u) TAX STATUS. Except as set forth on Schedule 3.1(u), the Company
and each of its Subsidiaries has made or filed all United States federal and
state income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the
14
EXHIBIT 10.2
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the Company is not aware of any basis for any such claim.
(v) CERTAIN TRANSACTIONS. Except as set forth on Schedule 3.1(v) and
in the SEC Documents filed on XXXXX at least five (5) Trading Days prior to the
date hereof and except for arm's length transactions pursuant to which the
Company makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties and other than the
grant of stock options disclosed on Schedule 3.1(c), none of the officers,
directors or employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any
officer, director or any such employee has a substantial interest or is an
officer, director, trustee or partner.
(w) DILUTIVE EFFECT. The Company understands and acknowledges that
the number of Common Shares issuable upon conversion of Preferred Shares
purchased pursuant to this Agreement will increase in certain circumstances. The
Company further acknowledges that, subject to such limitations as are expressly
set forth in the Transaction Documents, its obligation (x) to issue Preferred
Shares on exercise of the options contained in Articles I and II hereof, and (y)
to issue Common Shares upon conversion of Preferred Shares purchased pursuant to
this Agreement, is absolute and unconditional regardless of the dilutive effect
that such issuances may have on the ownership interests of other shareholders of
the Company.
(x) APPLICATION OF TAKEOVER PROTECTIONS. The Company and its board
of directors have taken all necessary action, if any, in order to render
inapplicable Section 203 of the Delaware General Corporation Law, or any other
similar anti-takeover provision contained in the Company's Certificate of
Incorporation or otherwise which is or could become applicable to the Investor
as a result of the transactions contemplated by this Agreement, including,
without limitation, the Company's issuance of the Preferred Shares and the
Investor's ownership of the Preferred Shares.
(y) RIGHTS PLAN. Except for the Amended and Restated Share Rights
Agreement dated July 24, 1997, as amended through the date of this Agreement,
neither the Company nor any of its Subsidiaries has adopted a shareholder rights
plan or similar arrangement relating to accumulations of beneficial ownership of
Common Stock or a change in control of the Company. The Company confirms that no
provision of such plan or similar or successor plan will, under any present or
future circumstances, delay, prevent or interfere with the performance of any of
the Company's obligations under the Transaction Documents and such plan will not
be "triggered" by such performance,
15
EXHIBIT 10.2
including, without limitation, the exercise of any Put or Call, the sale of any
Preferred Shares, or the conversion of any Preferred Shares.
(z) MARKET CAPITALIZATION. As of the date hereof, the aggregate
market value of the voting common equity of the Company held by non-affiliates
of the Company is greater than $150 million and on the date of the filing of the
Registration Statement, such aggregate market value shall be greater than $150
million as of a date within 60 days prior to such filing.
(aa) OBLIGATIONS ABSOLUTE. Each of the Company and the Investor
agrees that, subject only to the conditions, qualifications and exceptions (if
any) specifically set forth in the Transaction Documents, its obligations under
the Transaction Documents are unconditional and absolute. Except to the extent
(if any) specifically set forth in the Transaction Documents, each party's
obligations thereunder are not subject to any right of set off, counterclaim,
delay or reduction.
(bb) ISSUANCE OF COMMON SHARES. The Common Shares are duly
authorized and reserved for issuance and, upon conversion of Preferred Shares in
accordance with the Certificate (including receipt by the Company of the
Preferred Shares or being converted or a lost stock affidavit), such Common
Shares will be validly issued, fully paid and non-assessable, free and clear of
any and all liens, claims and encumbrances, and entitled to be traded on the
Principal Market or the New York Stock Exchange or the American Stock Exchange,
or the Nasdaq small cap market (collectively with the Principal Market, the
"APPROVED MARKETS"), and the holders of such Common Shares shall be entitled to
all rights and preferences accorded to a holder of Common Stock. As of the date
of this Agreement, the outstanding shares of Common Stock are currently listed
on the Principal Market.
(cc) FORM S-3. The Company is eligible to file the Registration
Statement (as defined in the Registration Rights Agreement) for secondary
offerings on Form S-3 (as in effect on the date of this Agreement) under the
1933 Act and rules promulgated thereunder, and Form S-3 (as in effect on the
date of this Agreement) is permitted to be used for the transactions
contemplated hereby under the 1933 Act and rules promulgated thereunder.
Section 3.02 Representations and Warranties of the Investor. The Investor,
hereby makes the following representations and warranties to the Company as of
the date hereof, on the date of the First Call Notice or the Second Call Notice
(each a "Call Notice") and on the date of any Closing:
(a) ACCREDITED INVESTOR STATUS; SOPHISTICATED INVESTOR. The Investor
is an "accredited investor" as that term is defined in Rule 501(a) of Regulation
D under the 1933 Act. The Investor has such knowledge and experience in
financial and business
16
EXHIBIT 10.2
matters that it is capable of evaluating the merits and risks of investment in
the Preferred Shares and Common Shares.
(b) INFORMATION. The Investor and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company which have been requested and materials relating to the offer and
sale of the Preferred Shares and Common Shares which have been requested by the
Investor. The Investor and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by the Investor or its advisors, if
any, or its representatives shall modify, amend or affect the Investor's right
to rely on the Company's representations and warranties contained in Section 3.1
above. The Investor understands that its investment in the Preferred Shares and
Common Shares involves a high degree of risk. The Investor has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Preferred
Shares and Common Shares.
(c) NO GOVERNMENTAL REVIEW. The Investor understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Preferred Shares
and Common Shares or the fairness or suitability of the investment in the
Preferred Shares and Common Shares nor have such authorities passed upon or
endorsed the merits of the offering of the Preferred Shares and Common Shares.
(d) LEGENDS. The Company shall issue certificates for the Preferred
Shares and Common Shares to the Investor without any legend except as described
in Article VII below. The Investor covenants that, in connection with any
transfer of Common Shares by the Investor pursuant to the registration statement
contemplated by the Registration Rights Agreement, it will comply with the
applicable prospectus delivery requirements of the 1933 Act, provided that
copies of a current prospectus relating to such effective registration statement
are or have been supplied to the Investor.
(e) AUTHORIZATION; ENFORCEMENT. This Agreement, and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of the Investor and is a valid and binding agreement of the Investor
enforceable against the Investor in accordance with their terms, subject as to
enforceability to general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies. The Investor has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement, the
Registration Rights Agreement and each other agreement entered into by the
parties hereto in connection with the transactions contemplated by this
Agreement.
17
EXHIBIT 10.2
(f) RESIDENCY. The Investor is a resident of the Cayman Islands or
such other jurisdiction as the Company shall be advised of in writing by the
Investor.
(g) NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Investor and the
consummation by the Investor of the transactions contemplated hereby and thereby
will not result in a violation of the certificate of incorporation, by-laws or
other documents of organization of the Investor.
(h) INVESTMENT REPRESENTATION. If purchasing Preferred Shares
pursuant to this Agreement, the Investor will be purchasing such Preferred
Shares for its own account and not with a view to distribution in violation of
any securities laws. The Investor has been advised and understands that neither
the Preferred Shares nor the shares of Common Stock issuable upon conversion
thereof have been registered under the 1933 Act or under the "blue sky" laws of
any jurisdiction and may be resold only if registered pursuant to the provisions
of the 1933 Act or if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption is required
by law. The Investor has been advised and understands that the Company in
issuing the Preferred Shares is relying upon, among other things, the
representations and warranties of the Investor contained in this Section 3.2 in
concluding that such issuance is a "private offering" and is exempt from the
registration provisions of the 1933 Act.
(i) RULE 144. The Investor understands that there is no public
trading market for the Preferred Shares that none is expected to develop, and
that the Preferred Shares must be held indefinitely unless and until such
Preferred Shares or Common Shares received upon conversion thereof are
registered under the 1933 Act or an exemption from registration is available.
The Investor has been advised or is aware of the provisions of Rule 144
promulgated under the 1933 Act.
(j) BROKERS. The Investor has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments by the Company or the Investor relating to this Agreement or the
transactions contemplated hereby.
(k) RELIANCE BY THE COMPANY. The Investor understands that the
Preferred Shares are being offered and sold in reliance on a transactional
exemption from the registration requirements of Federal and state securities
laws and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
the Investor set forth herein in order to determine the applicability of such
exemptions and the suitability of the Investor to acquire the Preferred Shares.
18
EXHIBIT 10.2
ARTICLE IV
COVENANTS
Section 4.01 Registration and Listing; Effective Registration. Until such
time as no Preferred Shares or options to sell or acquire Preferred Shares
pursuant to Articles I or II, are outstanding, the Company will cause the Common
Stock to continue at all times to be registered under Sections 12(b) or (g) of
the Exchange Act, will comply in all material respects with its reporting and
filing obligations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and will not take any action or file any document (whether or
not permitted by the Exchange Act or the rules thereunder) to terminate or
suspend such reporting and filing obligations. Until such time as no Preferred
Shares are outstanding, the Company shall continue the listing or trading of the
Common Stock on the Principal or one of the other Approved Markets and comply in
all material respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the Approved Market on which the Common Stock is
listed. The Company shall cause the Common Shares to be listed on the Principal
Market or one of the other Approved Markets no later than the effectiveness of
the registration of the Common Shares under the Act, and shall continue such
listing(s) on one of the Approved Markets, for so long as any Preferred Shares
are outstanding.
Section 4.02 Certificates on Conversion. Upon any conversion by the
Investor (or then holder of Preferred Shares) of the Preferred Shares pursuant
to the Certificate, the Company shall issue and deliver to the Investor (or
holder) within three (3) Trading Days of the conversion date a new certificate
or certificates for the number of Preferred Shares which the Investor (or
holder) has not yet elected to convert but which are evidenced in part by the
certificate(s) submitted to the Company in connection with such conversion (with
the denominations of such new certificate(s) designated by the Investor or
holder).
Section 4.03 Replacement Certificates. The certificate(s) representing the
Preferred Shares held by any Investor (or then holder) may be exchanged by the
Investor (or such holder) at any time and from time to time for certificates
with different denominations representing an equal aggregate number of Preferred
Shares, as requested by the Investor (or such holder) upon surrendering the
same. No service charge will be made for such registration or transfer or
exchange.
Section 4.04 Securities Compliance. The Company shall notify the SEC and
the Principal Market, in accordance with their requirements, of the transactions
contemplated by this Agreement, the Certificate and the Registration Rights
Agreement, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Preferred Shares hereunder and the Common Shares issuable
upon conversion thereof.
19
EXHIBIT 10.2
Section 4.05 Notices. The Company agrees to provide all holders of
Preferred Shares with copies of all notices and information, including without
limitation notices and proxy statements in connection with any meetings, that
are provided to the holders of shares of Common Stock, contemporaneously with
the delivery of such notices or information to such Common Stock holders.
Section 4.06 Use of Proceeds. The Company agrees that the net proceeds
received by the Company from the sale of the Preferred Shares hereunder shall be
used for legally permitted corporate purposes.
Section 4.07 Reservation Preferred Shares; Stock Issuable Upon Conversion.
(a) The Company shall reserve all authorized but unissued Series E
Preferred Stock for issuance to the Investor pursuant to the terms of this
Agreement.
(b) The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the Preferred Shares, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all Preferred Shares, and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all the then Preferred Shares, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including without limitation engaging in best efforts to
obtain the requisite shareholder approval. Without in any way limiting the
foregoing, the Company agrees to reserve and at all times keep available solely
for purposes of conversion of Preferred Shares, such number of authorized but
unissued shares of Common Stock that is at least equal to 200% of the number of
Common Shares issuable upon conversion of all Preferred Shares. If at any time
the number of authorized but unissued shares of Common Stock is not sufficient
to effect the conversion, up to the Maximum Common Stock Issuance (as defined in
Section 4.16 below), of all the then outstanding Preferred Shares, the Investor
shall be entitled to, INTER ALIA, the redemption rights provided in the
Registration Rights Agreement.
Section 4.08 Best Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions described in Article VI of this Agreement.
Section 4.09 Form D; Blue Sky Laws. Upon a sale of Preferred Shares to the
Investor, the Company agrees to file a Form D with respect to the Preferred
Shares and Common Shares, as required under Regulation D and to provide a copy
thereof to the Investor promptly after such filing. The Company shall, on or
before the date of any Closing, take such action as the Company shall have
reasonably determined is necessary to qualify the Preferred Shares and Common
Shares for sale to the Investor under applicable securities or "blue sky" laws
of the states of the United States (or to obtain an
20
EXHIBIT 10.2
exemption from such qualification), and shall provide evidence of any such
action so taken to the Investor on or prior to such Closing; provided, however,
that the Company shall not be required in connection therewith to register or
qualify as a foreign corporation in any jurisdiction where it is not now so
qualified or to take any action that would subject it to service of process in
suits or taxation, in each case, in any jurisdiction where it is not now so
subject.
Section 4.10 Press Release. The Company shall issue a press release on the
form of Exhibit 4.10 hereto (the "PRESS RELEASE") by the close of business on
the date following the date hereof. In addition, the Company shall make such
filings as shall be required to update the registration statements filed
pursuant to the Series D Transaction Documents and the Equity Line Documents to
reflect this Agreement and the transaction contemplated hereby.
Section 4.11 Shareholder Rights Plan. None of the acquisitions of
Preferred Shares or Common Shares nor the deemed beneficial ownership of shares
of Common Stock prior to, or the acquisition of such shares pursuant to, the
conversion of Preferred shares will in any event under any circumstances trigger
the poison pill provisions of any stockholders' rights or similar agreements, or
a substantially similar occurrence under any successor or similar plan.
Section 4.12 Issuances of Preferred Shares. The Company shall not, without
the prior written consent of the Investor, issue any Preferred Shares to any
persons other than the Investor.
Section 4.13 Financial Information. The Company agrees to send the
following to the Investor for so long as any Preferred Shares are outstanding:
(i) on the same day as the release thereof, facsimile or e-mail copies of all
press releases issued by the Company or any of its Subsidiaries; and (ii) copies
of any notices and other information made available or given to the shareholders
of the Company generally, contemporaneously with the making available or giving
thereof to the shareholders.
Section 4.14 Transactions With Affiliates. The Company agrees that any
transaction or arrangement between it or any of its subsidiaries and any
affiliate or employee of the Company shall be effected on an arms' length basis
in accordance with customary commercial practice and, except with respect to
grants of options and stock to service providers, including employees, shall be
approved by a majority of the Company's outside directors.
Section 4.15 Restrictions On Short Sales. So long as the Investor owns
Preferred Shares, the Investor will not sell short the Company's Common Stock if
as a result of such sale the Investor's net short position in the Company's
Common Stock would exceed the Investor's good faith estimate of the amount of
Common Shares that the Investor then has the right to acquire pursuant to
conversion of any Preferred Shares owned by the
21
EXHIBIT 10.2
Investor or issuable to the Investor upon conversion of Preferred Shares
acquired upon exercise of any Put or Call, pursuant to the conversion of any
shares of Series D Preferred Stock owned by the Investor or pursuant to the
exercise of the warrants issued pursuant to the Equity Line Documents held by
the Investor or any affiliate of the Investor.
Section 4.16 Overall Limit on Common Stock Issuable. Notwithstanding
anything contained herein to the contrary, the number of Common Shares issuable
by the Company and acquirable by the Investor hereunder pursuant to conversion
of the Preferred Shares shall not exceed 4,725,892 shares of Common Stock
outstanding as of the date hereof, or such smaller amount as shall apply under
the rules of the National Association of Securities Dealers, Inc. ("NASD") if
the NASD integrates the issuance of the Preferred Shares with the issuance of
other securities by the Company, subject to appropriate adjustment for stock
splits, stock dividends, combinations or other similar recapitalization
affecting the Common Stock (the "MAXIMUM COMMON STOCK ISSUANCE"), unless the
issuance of shares hereunder in excess of the Maximum Common Stock Issuance
shall first be approved by the Company's shareholders in accordance with
applicable law and the By-laws and Articles of Incorporation of the Company.
Without limiting the generality of the foregoing, such shareholders' approval
must duly authorize the issuance by the Company of shares of Common Stock
totaling the Maximum Common Stock Issuance or more of the shares of Common Stock
outstanding on the date hereof. The parties understand and agree that the
Company's failure to seek or obtain such shareholder approval shall in no way
adversely affect the validity and due authorization of the issuance and sale of
Preferred Shares hereunder, and that such approval pertains only to the
applicability of the Maximum Common Stock Issuance limitation provided in this
Section. The Company agrees to provide, upon request by the Investor,
information on the number reserved shares of Common Stock which may be issued
without exceeding the Maximum Common Stock Issuance. In the event that Common
Shares may not be issued without exceeding the Maximum Common Stock Issuance,
then the Company shall thereupon use its best efforts to obtain shareholder
approval to issue the Common Shares in excess of the Common Stock Issuance
within 90 days of such deficiency (the "Approval Period"). In the event that
such approval is not obtained by the end of the Approval Period, the Investor
shall be entitled to the conversion deficiency remedies set forth in Section
2(b)(iv) of the Registration Rights Agreement. If a conversion notice for
Preferred Shares is tendered by the Investor during the Approval Period, then
the Investor shall be entitled to the difference between (A) the closing bid
price of the Common Stock on the date preceding the date of the Conversion
Notice multiplied by the number of Common Shares issued upon such conversion and
(B) the aggregate conversion price of such Common Shares.
Section 4.17 Right of First Refusal. From the date hereof until December
31, 2000, neither the Company nor any Subsidiary shall: offer, sell, contract to
sell or otherwise issue or deliver or dispose of any capital stock of the
Company or any Subsidiary, or securities convertible into, exchangeable for or
exercisable for, or which
22
EXHIBIT 10.2
derive any substantial portion of their value from, capital stock of the Company
or any Subsidiary ("Equity Securities") or engage in a financing involving its
Equity Securities (other than a transaction involving the grant of employee
stock options pursuant to an employee stock option plan (not to exceed 475,668
shares of Common Stock in the aggregate), an employee stock purchase plan (not
to exceed 42,581 shares of Common Stock in the aggregate), a joint venture or
strategic investment entered into with another entity in the same or
complementary line of business or a bona fide public offering other than an
equity line) unless such offer, sale or financing ("FINANCING TRANSACTION") is
first offered to the Investor on the same terms and conditions to be offered to
the non-Investor; provided, however, that in the case of an offer consisting in
whole or in part of consideration other than cash, the Investor shall have the
right to offer the fair market value cash equivalent of such offer. The Company
shall make such offer by providing the Investor with written notice of the
Company's intention to enter into the Financing Transaction together with a term
sheet containing the economic terms and significant provisions of the Financing
Transaction, promptly following receipt of such terms from a third party, and
any other information reasonably requested by the Investor (the "OFFER"). Such
Offer shall be given with respect to each Financing Transaction contemplated by
the Company. The Investor shall have ten (10) days from receipt of the Offer to
deliver a written notice to the Company that the Investor wished to accept the
Offer in whole or in part (subject to reasonable acceptable definitive
documentation) for the Financing Transaction. If the Investor does not accept
the Offer in whole or in part or fails to respond within such ten (10) day
period, then the Company shall be permitted to complete such Financing
Transaction without the Investor on terms and conditions substantially identical
to those contained in the Offer, provided that the transaction is consummated
within ninety (90) days of receipt of the Offer. If the Investor accepts such
Offer in whole or in part, the consummation of such transaction with the
Investor shall occur by the later of: (i) the time originally provided by the
Financing Transaction with the third party or (ii) 30 days from the receipt of
the Investor's notice. If any Financing Transaction is contemplated on terms and
conditions not substantially identical to those contained in the Offer, then
such Financing Transaction shall be deemed a new Financing Transaction and the
Investor shall again be entitled to receive an Offer for such Financing
Transaction on such new terms and conditions (and/or with such new definitive
documentation if applicable.
ARTICLE V
TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of the Investor or its respective nominee(s), for the Common Shares in
such amounts as specified from time to time by the Investor to the Company upon
delivery of a conversion notice (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS").
The Company warrants that no
23
EXHIBIT 10.2
instruction relating to the Common Shares other than the Irrevocable Transfer
Agent Instructions referred to in this Article V will be given by the Company to
its transfer agent and that the Common Shares shall be freely transferable on
the books and records of the Company as contemplated by Article VII below when
the legend referred to therein may be removed. Nothing in this Article V shall
affect in any way the Investor's obligations and agreements set forth in Section
3.2(d) to comply with all applicable prospectus delivery requirements, if any,
upon resale of the Common Shares. The Company shall instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by the Investor and without any restrictive legends. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Investor by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that the Investor shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
ARTICLE VI
CONDITIONS TO CLOSINGS
Section 6.01 Conditions Precedent to the Obligation of the Company to Sell
the Preferred Shares. The obligation hereunder of the Company to issue and/or
sell the Preferred Shares to the Investor at a Put Closing, or the First Call
Closing or Second Call Closing (each a "Closing") is subject to the
satisfaction, at or before such Closing, as the case may be, of each of the
applicable conditions set forth below. These conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) ACCURACY OF THE INVESTOR'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Investor will be true and correct in all
material respects as of the date when made and as of the date of such Closing,
as though made at that time.
(b) PERFORMANCE BY THE INVESTOR. The Investor shall have performed
all agreements and satisfied all conditions required to be performed or
satisfied by the Investor at or prior to the Closing, including payment of the
applicable purchase price.
(c) 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 which
prohibits the
24
EXHIBIT 10.2
consummation of any of the transactions contemplated by this Agreement or the
Registration Rights Agreement or the Certificate.
Section 6.02 Conditions Precedent to the Obligation of the Investor to
Purchase the Preferred Shares. The obligation hereunder of the Investor to
acquire and pay for any Preferred Shares at the first Closing (whether pursuant
to a Put or a Call) and on each subsequent Closing is subject to the
satisfaction, on the date hereof (in the case of paragraphs (e),(f) and (h)
below and at or before such Closing, of each of the applicable conditions set
forth below. These conditions are for the Investor's benefit and may be waived
by the Investor at any time in its sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the date of such Closing as
though made at that time (except for representations and warranties as of an
earlier date, which shall be true and correct in all material respects as of
such date).
(b) PERFORMANCE BY THE COMPANY. The Company shall have performed all
agreements and satisfied all conditions required to be performed or satisfied by
the Company at or prior to the Closing, including, without limitation, delivery
of certificates representing the Preferred Shares issued to Investor.
(c) NASDAQ TRADING. From the date hereof to the date of the Closing,
trading in the Company's Common Stock shall not have been suspended by the SEC
and trading in securities generally as reported by the Principal Market (or
other Approved Market) shall not have been suspended or limited, and the Common
Stock shall be listed on the Principal Market or another Approved Market.
(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 which
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents. The NASD shall not have objected or indicated that it may
object to the consummation of any of the transactions contemplated by this
Agreement.
(e) OPINION OF COUNSEL. On the date of this Agreement, the Investor
shall have received an opinion of counsel to the Company in form and substance
satisfactory to the Investor and at the Closing, the Investor shall have
received an opinion of counsel to the Company in the form attached hereto as
Exhibit 6.2(e) and such other opinions, certificates and documents as the
Investor or their counsel shall reasonably require incident to the Closing.
25
EXHIBIT 10.2
(f) REGISTRATION RIGHTS AGREEMENT. The Company and the Investor
shall have executed and delivered the Registration Rights Agreement in the form
and substance of Exhibit 6.2(f) attached hereto on the date of this Agreement.
(g) OFFICER'S CERTIFICATE. The Company shall have delivered to the
Investor a certificate in form and substance satisfactory to the Investor and
the Investor's Counsel, executed by an officer of the Company, certifying as to
satisfaction of closing conditions, satisfaction of the Put Conditions (if a Put
Closing), incumbency of signing officers, and the true, correct and complete
nature of the Certificate of Incorporation, By-Laws, good standing and
authorizing resolutions of the Company.
(h) CERTIFICATE. The Certificate shall have been accepted for filing
by the Secretary of State of the State of Delaware on or before the date hereof
and a stamped copy thereof shall have been provided to the Investor's Counsel
not later than one business day from the date of this Agreement.
(i) MISCELLANEOUS. The Company shall have delivered to the Investor
such other documents relating to the transactions contemplated by this Agreement
or the Investor or its counsel may reasonable request.
(j) PUT CONDITIONS. If the Closing is a Put Closing, the Put
Conditions shall have been satisfied on the date of receipt of the Put Notice
and on the date of the Closing.
(k) COMPLIANCE WITH DOCUMENTS. The Company shall be in compliance
with all of its obligations under the Transaction Documents, the Series D
Transaction Documents and Equity Line Documents.
Section 6.03 Closing Deliveries.
(a) On the date of the first Closing, the Company shall deliver to
the Investor:
(i) Certificates representing the Tranche A Shares;
(ii) The certificate referred to in Section 6.2(g) above; and
(iii) The opinion of counsel referred to in Section 6.2(e)
above.
(b) On the date of the first Closing, the Investor shall deliver to
the Company:
26
EXHIBIT 10.2
(i) The purchase price for the Tranche A Shares.
Section 6.04 Closing Deliveries at Subsequent Closings.
(a) On the date of each Closing after the first Closing, the Company
shall deliver to the Investor:
(i) certificates representing the Preferred Shares issued to
the Investor;
(ii) the certificate referred to in Section 6.2 (g) above;
(iii) the opinion of counsel referred to in Section 6.2(e).
(b) On the date of each subsequent Closing, the Investor shall
deliver to the Company:
The purchase price for the Preferred Shares purchased.
Section 6.05 Option to Convert Preferred Shares at Time of Exercise of Put
or Call. Concurrently with, or at any time after, the delivery of a Put Notice
or Call Notice, the Investor shall have the right to tender a conversion notice
for any or all of the Preferred Shares to be purchased pursuant to such Put or
Call (regardless of whether the Certificate has been filed), provided that the
Company's obligation to issue Common Stock upon conversion shall be conditioned
upon the consummation of the related Put Closing or Call Closing.
ARTICLE VII
LEGEND AND STOCK
Upon payment therefor as provided in this Agreement, the
Company will issue one or more certificates representing the Preferred Shares in
the name the Investor or its designees and in such denominations to be specified
by the Investor prior to (or from time to time subsequent to) each Closing. Each
certificate representing the Preferred Shares and any Common Shares issued upon
conversion thereof, prior to such Common Shares being registered under the 1933
Act for resale or available for resale under Rule 144 under the 1933 Act, shall
be stamped or otherwise imprinted with a legend substantially in the following
form:
THESE SECURITIES HAVE NOT BEEN REGISTERED FOR OFFER OR SALE
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE
27
EXHIBIT 10.2
REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR
AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
The Company agrees to reissue Preferred Shares without the
legend set forth above at such time as (i) the holder thereof is permitted to
dispose of such Preferred Shares and/or Common Shares issuable upon conversion
thereof pursuant to Rule 144 under the Act, or (ii) such Preferred Shares are
sold to a purchaser or purchasers who (in the opinion of counsel to the seller
or such purchaser(s), in form and substance reasonably satisfactory to the
Company and its counsel) are able to dispose of such shares publicly without
registration under the Act.
Prior to the Registration Statement (as defined in the
Registration Rights Agreement) being declared effective, any Common Shares
issued pursuant to conversion of Preferred Shares shall bear a legend in the
same form as the legend indicated above; provided that such legend shall be
removed from the Common Shares and the Company shall issue new certificates
without such legend if (i) the holder thereof is permitted to dispose of such
Common Shares pursuant to Rule 144 under the 1933 Act, (ii) such Common Shares
are registered for resale under the 1933 Act, or (iii) such Common Shares are
sold to a purchaser or purchasers who (in the opinion of counsel to the seller
or such purchaser(s), in form and substance reasonably satisfactory to the
Company and it counsel) are able to dispose of such shares publicly without
registration under the 1933 Act. Upon such Registration Statement becoming
effective, the Company agrees to promptly, but no later than three (3) business
days thereafter, issue new certificates representing such Common Shares without
such legend. Any Common Shares issued after the Registration Statement has
become effective shall be free and clear of any legends, transfer restrictions
and stop orders. Notwithstanding the removal of such legend, the Investor agrees
to sell the Common Shares represented by the new certificates in accordance with
the applicable prospectus delivery requirements (if copies of a current
prospectus are provided to the Investor by the Company) or in accordance with an
exemption from the registration requirements of the 1933 Act.
Nothing herein shall limit the right of any holder to pledge
these securities pursuant to a bona fide margin account or lending arrangement
entered into in compliance with law, including applicable securities laws.
ARTICLE VIII
TERMINATION
Section 8.01 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing by the mutual written consent of the
Company and the Investor.
28
EXHIBIT 10.2
Section 8.02 Other Termination. In the event that a Closing shall not have
occurred within ten business days of the date of receipt of the relevant Put or
Call Notice due to the failure by one party (the "Defaulting Party") to satisfy
the closing conditions applicable to it, then the other party (the
"Non-Defaulting Party") may at its option, terminate the Defaulting Party's
right to acquire pursuant to a Call or sell (pursuant to a Put), as the case may
be, the Preferred Shares in the relevant Tranche. In the event that the Investor
is the Defaulting Party, then if its right to purchase the relevant Tranche is
terminated, its rights under Section 4.17 shall terminate at the same time.
ARTICLE IX
INDEMNIFICATION
In consideration of the Investor's execution and delivery of the this
Agreement and the Registration Rights Agreement and acquiring the Preferred
Shares hereunder and in addition to all of the Company's other obligations under
the Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless the Investor and all of its partners, officers, directors, employees,
members and direct or indirect investors and any of the foregoing person's
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "INDEMNITEES") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate or document contemplated hereby or thereby, (b) any breach
of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate or document contemplated hereby
or thereby, (c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party and arising out of or resulting from (i) the
execution, delivery, performance, breach by the Company or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Preferred Shares or (iii) the status of the Investor or holder of the
Preferred Shares as an investor in the Company and (d) the enforcement of this
Section. Notwithstanding the foregoing, Indemnified Liabilities shall not
include any liability of any Indemnitee arising solely out of such Indemnitee's
willful misconduct or fraudulent action(s). To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law. Except as
otherwise set forth herein, the mechanics and procedures
29
EXHIBIT 10.2
with respect to the rights and obligations under this Article IX shall be the
same as those set forth in Section 6 (other than Section 6(b)) of the
Registration Rights Agreement, including, without limitation, those procedures
with respect to the settlement of claims and Company's right to assume the
defense of claims.
ARTICLE X
GOVERNING LAW, MISCELLANEOUS.
Section 10.01 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR
DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY
SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT
IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS FOR SUCH NOTICES TO IT UNDER
THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED
TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
IF ANY PROVISION OF THIS AGREEMENT SHALL BE INVALID OR UNENFORCEABLE IN ANY
JURISDICTION, SUCH INVALIDITY OR UNENFORCEABILITY SHALL NOT AFFECT THE VALIDITY
OR ENFORCEABILITY OF THE REMAINDER OF THIS AGREEMENT IN THAT JURISDICTION OR THE
VALIDITY OR ENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT IN ANY OTHER
JURISDICTION. EACH PARTY HERETO IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY.
Section 10.02 Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due
30
EXHIBIT 10.2
execution and shall be binding upon the signatory thereto with the same force
and effect as if the signature were an original, not a facsimile signature.
Section 10.03 Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
Section 10.04 Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
Section 10.05 Entire Agreement; Amendments; Waivers.
(a) This Agreement supersedes all other prior oral or written
agreements between the Investor, the Company, their affiliates and persons
acting on their behalf with respect to the matters discussed herein, and this
Agreement and the instruments referenced herein (including the other Transaction
Documents) contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Investor, and no provision hereof may be waived other than
by an instrument in writing signed by the party against whom enforcement is
sought.
(b) The Investor may at any time elect, by notice to the Company, to
waive (whether permanently or temporarily, and subject to such conditions, if
any, as the Investor may specify in such notice) any of its rights under any of
the Transaction Documents to acquire shares of Common Stock from the Company, in
which event such waiver shall be binding against the Investor in accordance with
its terms; provided, however, that the voluntary waiver contemplated by this
sentence may not reduce the Investor's obligations to the Company under the
Transaction Documents.
Section 10.06 Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing, must be delivered by (i) courier, mail or hand
delivery or (ii) facsimile, and will be deemed to have been delivered upon
receipt. The addresses and facsimile numbers for such communications shall be:
31
EXHIBIT 10.2
If to the Company:
Secure Computing Corporation
000 Xxxxxx Xxxxx Xxxxx, Xxxxx 0
Xxx Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxx Xxxxx
and
Secure Computing Corporation
Xxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxxxx Xxxxxxxx
With a copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx
0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxx
If to the Transfer Agent:
NorWest Shareowner Services
000 Xxxxx Xxxxxxx Xxxxxxxx Xxxxxx
Xxxxx Xx. Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Transfer Agent
If to the Investor:
Westgate International, L.P.
c/o Stonington Management Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000 and (000) 000-0000
Attention: Xxxx Xxxxxxx and Xxxxx Xxxxx
32
EXHIBIT 10.2
With a copy to:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 212-986-8866
Attention: Xxxxxxx X. Xxxxxxx
Each party shall provide five (5) days prior written notice to the other
party of any change in address, telephone number or facsimile number. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender's facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by a
nationally recognized overnight delivery service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from a nationally recognized
overnight delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
Section 10.07 Successors and Assigns. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns, including any Permitted Assignee (as
defined below). The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Investor,
including by merger or consolidation. The Investor may assign some or all of its
rights hereunder to an affiliate or associate of the Investor or an entity or
fund which has the same principal investment adviser as the Investor, without
the consent of the Company, and to others, with the written consent of the
Company (in each case, a "PERMITTED ASSIGNEE"); provided, however, that any such
assignment shall not release the Investor from its obligations hereunder unless
such obligations are assumed by such assignee and the Company has consented to
such assignment and assumption. Notwithstanding anything to the contrary
contained in the Transaction Documents, the Investor shall be entitled to pledge
the Preferred Shares, Additional Preferred Shares or Common Shares in connection
with a bona fide margin account.
Section 10.08 No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 10.09 Survival. The representations, warranties and agreements of
the Company and the Investor contained in the Agreement shall survive each
Closing.
Section 10.10 Publicity. The Company and the Investor shall have the right
to approve before issuance any press releases or any other public statements
with respect
33
EXHIBIT 10.2
to the transactions contemplated hereby; provided, however, that the Company
shall be entitled, without the prior approval of the Investor, to make any press
release or other public disclosure with respect to such transactions as is
required by applicable law and regulations (although the Investor shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
Section 10.11 Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 10.12 Placement Agent. The Investor and the Company each
acknowledges and warrants that it has not engaged any placement agent in
connection with the sale of the Shares other than Xxxxxx Capital, whose fees
will be paid exclusively by the Company. The Company and the Investor shall each
be responsible for the payment of any fees or commissions of placement agents or
brokers engaged, directly or indirectly, by the Company or the Investor,
respectively, in connection with the purchase of the Shares by the Investor. The
Company and the Investor shall pay, and hold the other party harmless against,
any liability, loss or expense (including, without limitation, reasonable
attorneys' fees and out-of-pocket expenses) arising in connection with any such
claim.
Section 10.13 No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
Section 10.14 Remedies. The Investor and each Permitted Assignee shall
have all rights and remedies set forth in this Agreement and the Registration
Rights Agreement and all rights and remedies which such holders have been
granted at any time under any other agreement or contract and all of the rights
which such holders have under any law. Any person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. The Investor and each Permitted Assignee without
prejudice may withdraw, revoke or suspend its pursuit of any remedy at any time
prior to its complete recovery as a result of such remedy.
Section 10.15 Payment Set Aside. To the extent that the Company makes a
payment or payments to the Investor hereunder or the Registration Rights
Agreement or the Investor enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered
34
EXHIBIT 10.2
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
Section 10.16 Days. Unless the context refers to "business days" or
"Trading Days", all references herein to "days" shall mean calendar days.
Section 10.17 Recission and Withdrawal Right. Notwithstanding anything to
the contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, wherever the Investor exercises a right, election, demand
or option under a Transaction Document and the Company does not fully perform
its related obligations within the periods therein provided, then the Investor
in its sole discretion may rescind or withdraw from time to time any relevant
notice, demand or election in whole or in part without prejudice to its future
actions and rights.
* * * * *
[SIGNATURE PAGE FOLLOWS]
35
EXHIBIT 10.2
IN WITNESS WHEREOF, the parties hereto have caused this Common Stock
Investment Agreement to be duly executed as of the date and year first above
written.
COMPANY: INVESTOR:
SECURE COMPUTING CORPORATION WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc.
Attorney-in-Fact
By: /s/ Xxx XxXxxxxx By: /s/ Xxxx Xxxxxx
---------------------------------- ----------------------------------
Name: Xxx XxXxxxxx Name: Xxxx Xxxxxx
Title: S.V.P. Operations and CFO Title: President
36
EXHIBIT 10.2
LIST OF SCHEDULES
-----------------
Schedule 3.1(a) Organization and Qualification
Schedule 3.1(c) Capitalization
Schedule 3.1(e) No Conflicts
Schedule 3.1(g) Absence of Certain Changes
Schedule 3.1(h) Absence of Litigation
Schedule 3.1(n) Intellectual Property Rights
Schedule 3.1(p) Title
Schedule 3.1(u) Tax Status
Schedule 3.1(v) Certain Transactions
LIST OF EXHIBITS
----------------
Exhibit 1.1A Certificate
Exhibit 4.10 Press Release
Exhibit 6.02 Officers' Certificate
Exhibit 6.2(e) Opinion of Counsel
37
