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EXHIBIT 10.32
THE SECURITIES SUBSCRIBED FOR HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR
SOLD IN THE UNITED STATES (AS DEFINED IN REGULATION S UNDER THE ACT) OR TO OR
FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN REGULATION S) EXCEPT
PURSUANT TO REGISTRATION UNDER OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT.
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
This Offshore Securities Subscription Agreement (the "Agreement"), dated July
11, 1996, is entered into by and between Pinnacle Micro, Inc., a company
incorporated in the state of Delaware (the "Company"), and _________________
(the "Buyer").
The Company has offered for sale outside the United States (as that term is
defined in Regulation S ("Regulation S") under the United States Securities Act
of 1933, as amended (the "Act") up to $10,000,000 of 8% Convertible Notes due
July 11, 2001 (the "Securities"), convertible into common stock of the Company.
Buyer has been offered $_______________ in principal amount of the Notes.
Interest on the Securities will be payable as provided in the form of
Convertible Note attached hereto as Annex A. The terms on which the Securities
may be converted into Common Shares (such Common Shares underlying the
Securities being referred to herein as "Shares") and the other terms of the
Securities are set forth in the Form of Convertible Note attached as Annex A.
Capitalized terms used herein and not defined herein shall have the meanings
given to them in Regulation S as the same may be amended from time to time.
The parties hereto agree as follows:
1. Purchase and Sale of Securities. Upon the basis of the representations and
warranties, and subject to the terms and conditions, set forth in this
Agreement, the Company covenants and agrees to sell to the Buyer on the Closing
Date (as hereinafter defined) $__________ of the Securities at a price of 100%
of the original principal amount, and upon the basis of the representations and
warranties, and subject to the terms and conditions, set forth in this
Agreement, the Buyer covenants and agrees to purchase from the Company, on the
Closing Date $________________ of the Securities of the Company at 100% of the
original principal amount.
2. Closing Instructions to Escrow Agent. (a) The closing of the purchase and
sale of the Securities pursuant to Section 1 hereof shall take place on or
before July 15, 1996 (the "Closing Date") after the Company has delivered to the
offices of First Bermuda Securities, Limited (the "Escrow Agent") located at
Jardine House, 3rd Floor, 33/35 Reid Street, Hamilton, HM 12 Bermuda Convertible
Notes (each a "Convertible Note") representing the Securities in denominations
of not less than $50,000 and registered in the names provided by the Buyer
(representing the maximum amount of Securities to be purchased by the Buyer
hereunder).
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(b) The Company and the Buyer agree that they shall instruct the Escrow
Agent as provided in Annex B and as follows:
(i) On the Closing Date, for each Convertible Note subscribed
for and delivered to the Escrow Agent pursuant to paragraph 2(a) above, the
Escrow Agent shall, upon confirmation in the form of a Federal funds wire number
that First Bermuda Securities Limited has wired payment of the Purchase Price
for the Securities (less any fees Company has authorized Escrow Agent to deduct)
in immediately available funds to the Company's account as provided in the
escrow instructions attached as Annex B, release the Securities described in
paragraph 2(a) above. The Escrow Agent shall return to the Company any
Convertible Notes that the Buyer does not purchase on the Closing Date. If the
closing shall not have taken place by July 18, 1996, this Agreement shall
terminate.
(ii) The Escrow Agent will make delivery of the number of
Convertible Notes set forth in clause (2a) above in accordance with the
instructions of the Buyer subject to customary settlement procedures upon
confirmation of the wiring of funds to the Company as described in clause
2(b)(i) above, except that all such Convertible Notes shall be delivered to a
location outside the United States and none of the Convertible Notes shall be
delivered to a U.S. Person (as defined in Regulation S).
3. Representations and Warranties of the Buyer: The Buyer understands and
represents and warrants to, and agrees with the Company that:
(a) The Buyer understands that no federal or state agency has
passed on, or made any recommendation or endorsement of the Securities.
(b) The Buyer acknowledges that, in making the decision to
purchase the Securities, it has relied solely upon independent investigations
made by it and not upon any representations made by the Company with respect to
the Company or the Securities, except for the representations and warranties in
this Agreement, the Convertible Note, the Registration Rights Agreement and the
Officers Certificate, except that the Buyer has received, reviewed and relied
upon the Opinion of Counsel and copies of the report on Form 10-Q for the
quarter ended March 30, 1996, the report Form 10-K for the year ended December
30, 1995, filed by the Company pursuant to the Securities Exchange Act of 1934,
as amended, and all other filings, including filings on Form 8K, under such
Exchange Act since December 30, 1995, which, together with any filings by
Company after the date hereof and prior the Closing, are defined as "Exchange
Act Reports".
(c) The Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from or
non-application of 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 Buyer set forth herein in order to determine the applicability of such
exemptions and the suitability of the Buyer to acquire the Securities.
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(d) The Buyer is not a U.S. Person (as defined in Regulation
S) and is not and will not be an affiliate (as defined in the Exchange Act) of
the Company. To enable the Company to avoid withholding interest paid, the Buyer
certifies under penalty of perjury that it is neither a citizen nor a resident
of the United States and that its address set forth in the Escrow Agreement is
correct.
(e) No offer of the Securities or the common stock issuable on
conversion of the Securities was made to the Buyer while the Buyer was present
in the United States.
(f) At the time the buy order for the Securities was
originated the Buyer was located outside the United States and is outside the
United States on the date of the execution and delivery of this agreement and
will be outside the United States on the Closing Date.
(g) The Buyer is aware that the Securities and the common
stock issuable upon exercise of conversion rights have not been and will not be
registered under the Act (except as may be required under the Registration
Rights Agreement) and may only be offered or sold pursuant to registration under
the Act or an available exemption therefrom.
(h) The Buyer (i) will not, during the period commencing on
the Closing Date and ending 40 days after the Closing Date (the "Restricted
Period"), offer or sell or agree to sell the Securities in the United States, to
a U.S. Person or for the account or benefit of a U.S. Person or other than in
accordance with Rule 903 or 904, as applicable, of Regulation S; and (ii) will,
after the expiration of the Restricted Period, offer, sell, pledge or otherwise
transfer the Securities or the common stock issuable upon the exercise of
conversion rights only pursuant to registration under the Act or an available
exemption therefrom and, in any case, in accordance with applicable federal and
state securities laws.
(i) The Buyer and its affiliates have been advised of and are
familiar with, have complied, and will comply, with the offering restrictions,
and any other requirements, of Regulation S.
(j) The transactions contemplated by this Agreement (i) have
not been pre-arranged by the Buyer with a purchaser located in the United States
which is a U.S. Person, and (ii) are not part of a plan or scheme by the Buyer
to evade the registration provisions of the Act.
(k) The Buyer will be purchasing the Securities for its
account for the purpose of investment and not (i) with a view to, or for sale in
connection with, any distribution thereof; or (ii) for the account or on behalf
of any U.S. Person.
(l) Neither the Buyer nor any of its affiliates has entered,
has the intention of entering, or will during the Restricted Period enter into,
with any U.S. Person, any put option, short position or other similar instrument
or position with respect to the Securities or securities into which the
Securities are convertible.
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4. Registration Rights On or prior to the Closing Date, the Company and Buyer
agree to execute a Registration Rights Agreement in the form substantially set
out in Annex C attached hereto.
5. Conversion of Securities The Securities may be converted into the Shares, as
herein defined, at the option of the holder thereof under the terms set forth in
the Form of Convertible Note, attached hereto as Annex A.
6. Representations and Warranties of the Company. The Company represents and
warrants to, and agrees with, the Buyer that:
(a) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Delaware.
(b) This Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general principles
of equity; and the Company has full corporate power and authority necessary to
enter into this Agreement and to perform its obligations thereunder.
(c) No consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Company
or any of its affiliates is required for execution of this Agreement, including,
without limitation, the issuance and sale of the Securities, or the performance
of its obligations hereunder.
(d) Except as disclosed to the Buyer or its representatives in
writing, neither the sale of Securities pursuant to, nor the performance of its
obligations under this Agreement by the Company will (i) violate , conflict
with, result in a breach of, or constitute a default (or an event which with the
giving of notice or the lapse of time or both would be reasonably likely to
constitute a default) under (A) the articles of incorporation, charter or
by-laws of the Company or any of its affiliates, (B) any decree, judgment,
order, law, treaty, rule, regulation or determination applicable to the Company
or any of its affiliates of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or any of its affiliates or over
the properties or assets of the Company or any of its affiliates, (C) the terms
of any bond, debenture, note or any other evidence of indebtedness, or any
material agreement, stock option or other similar plan, indenture, lease,
mortgage, deed of trust or other material instrument to which the Company or any
of its affiliates is a party, by which the Company or any of its affiliates is
bound, or to which any of the properties of the Company or any of its affiliates
is subject, or (D) the terms of any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company or any of its affiliates
is a party to; or (ii) result in the creation or imposition of any lien, charge
or encumbrance upon the Securities or any of the assets of the Company or any of
its affiliates.
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(e) The Company has an authorized capitalization consisting of
30,000,000 shares of Common Stock, par value $.001 per share, and 5,000,000
shares of Preferred Stock, par value $.001 per share ("Preferred Stock"). The
Company has issued and outstanding 7,916,550 shares of Common Stock and nil
shares of Preferred Stock on the date hereof. All of the issued shares of
capital stock of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable; prior to the Closing Date, the authorized
capitalization shall include the Shares to be issued upon conversion of the
Securities. The shares of Common Stock issuable upon conversion of the
Securities, when issued and delivered in accordance with the terms of the
Securities, will be duly and validly issued, fully paid and non-assessable. The
issuance of the Shares will not be in violation of any preemptive or similar
rights of the holders of any securities of the Company. The Securities (i) are
free and clear of any security interests, liens, claims or other encumbrances;
(ii) have been duly and validly authorized and on the Closing Date will be duly
and validly issued, fully paid and non assessable; (iii) will not have been,
individually and collectively, issued or sold in violation of any preemptive or
other similar rights of the holders of any securities of the Company; (iv) will
not subject the holders thereof to personal liability by reason of being such
holders; and (v) the Shares underlying the Securities are quoted on, and will
be, following the completion of the Restricted Period (if sold in accordance
with the provisions of this Agreement and Regulation S as then in effect),
eligible for trading on, the National Association of Securities Dealers Inc.
National Market System ("NASDAQ").
(f) The Company is a Reporting Issuer (as defined in
Regulation S) because it has a class of securities registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act") and
has filed all the material required to be filed pursuant to Section 13(a) of the
Exchange Act for a period of at least twelve (12) months preceding the date of
this Agreement, provided that, as disclosed in subparagraph (j) below, certain
of the Company's reports contain 1993 financial statements which are not audited
for the reasons stated in such reports. The Company's stock is listed on Nasdaq
and the Company has received no notice, oral or written, with respect to its
continued eligibility for such listing. The Company hereby agrees, promptly
following the Closing of the transactions contemplated by this Agreement, to
take such action as is necessary to cause the Shares issued upon exercise of
conversion rights under the Convertible Notes to be listed on Nasdaq upon such
conversion following expiration of the Restricted Period (subject, if required,
to notice to Nasdaq of the actual number of shares issued). The Company further
agrees, if the Company applies to have the Common Stock traded on any other
principal stock exchange or market, it will include in such application the
Shares and will take such other action as is necessary or desirable to cause the
Shares to be listed on such other exchange or market upon expiration of the
Restricted Period.
(g) The Exchange Act Reports are the only filings made by the
Company since December 31, 1995 pursuant to Sections 13(a), 13(c), 14 and 15(d)
of the Exchange Act, and the Company will cause its Common Stock to continue to
be registered under Section 12(g) or 12(b) of the Securities Exchange Act of
1934, will comply in all respects with its reporting and filing obligations
under said Act, and will not take any action or file any document (whether or
not
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permitted by said Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under said Act. The Company will take all action necessary to continue the
listing and trading of its Common Stock on Nasdaq and will comply in all
respects with the Company's reporting, filing and other obligations under the
by-laws or rules of the NASD and Nasdaq.
(h) The Company 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. 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 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. "Material Adverse Effect" means any
adverse effect on the business, operations, properties, prospects, or financial
condition of the entity with respect to which such term is used and which is
material to such entity.
(i) The Company has furnished or made available to the Buyer
true and correct copies of the Company's Certificate of Incorporation 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").
(j) The Company has delivered or made available to the Buyer
true and complete copies of the Exchange Act Reports (including, without
limitation, proxy information and solicitation materials excluding any
preliminary proxy not distributed). The Company has not provided to the Buyer
any information which, according to applicable law, rule or regulation, should
have been disclosed publicly by the Company but which has not been so disclosed.
As of their respective dates, the Exchange Act Reports complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder and other federal, state and local laws, rules
and regulations applicable to such Exchange Act Reports, and none of the
Exchange Act Reports 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; except that the Company's 1993 financial
statements are not audited for the reasons stated in the Exchange Act Reports
and the related disclosures contained in such reports. The financial statements
of the Company included in the Exchange Act Reports comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto; except that the Company's 1993 financial statements are not
audited for the reasons stated in the Exchange Act Reports and the related
disclosures contained in such reports. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto; or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements) and fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
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(k) Except as set forth in the financial statements and other
documents filed by the Company under the Exchange Act, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to December 31, 1995 and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
such financial statements, which individually or in the aggregate, are not
material to the financial condition or operating results of the Company. The
Company has not provided to the Buyer any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed.
(l) Since December 31, 1995 there has been no material adverse
change and no material adverse development in the business, properties,
operations, financial condition, results of operations or prospects of the
Company, except as disclosed in accordance with the Exchange Act Reports and
except that the Company continues to incur losses.
(m) There is no material action, suit, proceeding, inquiry or
to the knowledge of the Company or any of its subsidiaries, investigation before
or by any court, public board, government agency, self-regulatory organization
or body pending, or to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company or any of its subsidiaries, except
as disclosed in the Exchange Act Reports.
(n) Neither the Company, nor any or its affiliates, nor any
person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of the Securities under the
Act.
(o) The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments by the Buyer relating to this Agreement of the transactions
contemplated hereby, except for dealings with First Bermuda Securities Limited,
whose commissions and fees will be paid for by the Company.
(p) As of the date hereof, the Company has reserved and the
Company shall continue to reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to satisfy any obligation to issue shares of its Common Stock upon
conversion of the Securities; provided, however, that the number of shares so
reserved shall at all times be at least 3,000,000. The number of shares so
reserved may be reduced by the number of shares actually delivered pursuant to
the conversion of the Securities (provided that in no event shall the number of
shares so reserved be less than the number required to satisfy the remaining
conversion rights on the unconverted Securities) and the number of shares so
reserved shall be increased to reflect stock splits and stock dividends and
distributions.
(q) No legend has been or shall be placed on the Securities or
share certificates representing the Securities or Shares and no note or stock
transfer instructions have been or shall be given to the Company's transfer
agent with respect thereto other than as set forth in Section 10.
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(r) Based upon the truth and accuracy of the representations
and warranties made by the Buyer, the sale of the Securities pursuant to this
Agreement will be made in accordance with the provisions and requirements of
Regulation S and applicable state law.
(s) No offer to sell the Securities was made by the Company to
any person in the United States.
(t) None of the Company, any affiliate of the Company, or any
person acting on behalf of the Company or any such affiliate has engaged, or
will engage, in any Directed Selling Efforts as that term is defined in
Regulation S with respect to the Securities nor any general solicitation of the
Securities.
(u) The transactions contemplated by this Agreement (i) have
not been pre-arranged with a purchaser who is in the United States or is a U.S.
Person; and (ii) are not part of a plan or scheme to evade the registration
provisions of the Act.
(v) The Company undertakes and agrees to make all necessary
filings in connection with this offering as required by the laws and regulations
of all appropriate jurisdictions and securities exchanges in the United States
of America.
(w) Each party shall indemnify the other against any loss,
cost or damages (including reasonable attorney's fees and expenses) incurred as
a result of such parties' breach of any representation, warranty, covenant or
agreement in this Agreement.
7. Offering Materials. All offering materials and documents used in connection
with offers and sales of the Securities prior to the expiration of the
Restricted Period referred to in Section 3(h) hereof shall include statements to
the effect that the Securities and the shares issuable upon the exercise of
conversion rights have not been registered under the 1933 Act and that the
Buyer, may not directly or indirectly offer or sell the Securities or such
shares in the United States or to a U.S. Persons (other than distributors)
unless the Securities or shares are registered under the 1933 Act, or an
exemption from the registration requirements of the 1933 Act is available. Such
statements shall appear (1) on the cover of any prospectus or offering circular
used in connection with the offer or sale of the Securities; (2) in the
underwriting section of any prospectus or offering circular used in connection
with the offer or sale of the Securities; and (3) in any advertisement made or
issued by Seller, Buyer, any other distributor, any of their respective
affiliates, or any person acting on behalf of any of the foregoing. Seller
represents that all offering materials and documents used in connection with the
offers and sales of the Securities prior to the Closing of the transactions
contemplated herein have complied with the foregoing.
8. Covenants of the Company. (a) The Company agrees that during the period
beginning on the date hereof and ending 90 days following the Closing Date, the
Company will not negotiate or contract with any party to obtain additional
equity financing (including debt financing with an equity component) in any form
(the "Future Offerings"). In addition, the Company will not conduct any Future
Offerings during the period beginning on the 90th day following the date hereof
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and ending 180 days following the Closing Date unless it shall have first
delivered to the Buyer at least ten (10) business days prior to the closing of
such Future Offering, written notice describing the proposed Future Offering,
including the terms and conditions thereof, and providing the Buyer an option
during such ten (10) day period to purchase all or any portion of its "pro-rata"
share of the securities being offered in the Future Offerings on the same terms
as contemplated by such Future Offering (the limitations referred to in this and
the immediately preceding sentence are collectively referred to as the "Capital
Raising Limitation"). The Capital Raising Limitation shall not apply to a
subsequent offering of convertible debt securities not exceeding $5 million
which will close not less than 90 days after this closing and any transaction
involving the Company's commercial banking arrangements or issuances of
securities in connection with a merger, consolidation or sale of assets, or in
connection with any strategic partnership or joint venture (the primary purpose
of which is not to raise equity capital), or in connection with the disposition
or acquisition of a business, product or license by the Company (so long as the
securities so issued are "restricted securities" within the meaning of Rule 144
under the 1933 Act and do not carry registration or piggy back rights for at
least 360 days from the date of this Agreement), the issuance of securities to
settle securities litigation, or exercise of options by or the grant of
performance shares to employees, consultants or directors. The terms (i)
"majority-in-interest" means Holders of 8% Convertible Notes holding more than
50% of the Common Stock underlying the Securities (treating the Securities on an
as converted basis); and (ii) "pro-rata share" means the principal amount of the
Securities initially purchased divided by the aggregate principal amount of all
Securities sold hereunder.
(b) The parties shall use their best efforts timely to satisfy each of
the conditions described in Section 9 of this Agreement.
(c) So long as the Buyers beneficially own any of the Securities, the
Company shall timely file all reports required to be filed with the SEC pursuant
to the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination.
(d) The Company agrees to send the following reports to Buyer until
Buyer transfers, assigns, or sells all of the Securities: (i) within ten (10)
days after the filing with the SEC, a copy of its Annual Report on Form 10-K,
its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; and (ii)
within two (2) business days after release, copies of all press releases issued
by the Company or any of its subsidiaries.
(e) The Company shall at all times have authorized, and reserved for
the purpose of issuance, a sufficient number of shares of Common Stock to
provide for the full conversion of the outstanding Securities and issuance of
the Conversion Shares in connection therewith (based on the Conversion Price of
the Securities in effect from time to time). In that regard, on the Closing
Date, the Company shall have at least 2,000,000 shares reserved for issuance
upon conversion of the Securities (subject to adjustment in order to comply with
the immediately preceding sentence); provided that the Company shall not reduce
the number of shares of Common Stock reserved for issuance upon conversion of
the Securities without the consent of a majority-in-interest of the Buyers,
which consent will not be unreasonably withheld.
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(f) So long as the Buyer beneficially owns any Securities, the Company
shall maintain its corporate existence, except in the event of a merger,
consolidation or sale of all or substantially all of the Company's assets, as
long as the surviving or successor entity in such transaction (i) assumes the
Company's obligations hereunder and under the agreements and instruments entered
into in connection herewith; and (ii) is a publicly traded corporation whose
Common Stock is listed for trading on the AMEX, the NYSE or the NASDAQ.
(g) The Company and the Buyer agree that the Closing Date, when
certified by Escrow Agent as the Closing shall be deemed to be a conclusion of
the offering of the Securities contemplated hereby. The Company acknowledges and
agrees that, for purposes of clarifying and specifying the applicable Restricted
Period under Regulation S, the Buyer intends to observe as the Restricted Period
(as defined in Regulation S) for the Securities, the period of 40 days
commencing on the Closing Date and ending 40 days thereafter.
(h) The Conversion Shares and the certificates evidencing the same
shall at all times be free of legends (except as provided in Section 10 below),
"stock transfer restrictions," or other restrictions, except for covenants of
the Buyers expressly set forth in this Agreement.
9. Conditions Precedent to the Buyer's Obligation. The obligations of the Buyer
hereunder are subject to the performance by the Company of its obligations
hereunder and to the satisfaction of the following additional conditions
precedent:
(a) The Buyer shall receive, on the Closing Date, an opinion
of independent counsel to the Company, dated the Closing Date, as to the
representations made by the Company in Sections 6(a) through and including 6(c)
hereof, and the opinion of the Company's general counsel as to matters
represented by the Company in Sections 6(d) through 6(f) hereof, and in Sections
6(m) and 6(n) hereof, and such other matters as Buyer reasonably requests.
The form of such opinions shall be as set forth in Exhibits 1 and 2 hereof.
(b) Delivery of the notes representing the Securities with
restrictive legends to the Escrow Agent as set forth herein.
(c) The Company shall have delivered to the Buyer a
certificate in form and substance reasonably satisfactory to the Buyer, executed
by an executive officer of the Company, to the effect that all the conditions to
the Closing shall have been satisfied and the representations and warranties of
the Company herein are true and correct as of the date when made and as of the
Closing Date, and certifying as to the Company's Certificate of Incorporation,
By-Laws, resolutions authorizing transaction, and incumbency of Company
officers.
(d) The Company and the Buyer shall have entered into the
Registration Rights Agreement contemplated by Section 4.
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10. Legends. (a) The certificates representing the Securities and the Shares
issued during the Restricted Period, shall bear the following legend (the
"Legend"):
"The securities represented hereby have been issued pursuant to
Regulation S promulgated under the Securities Act of 1933, as amended
(the "1933 Act"), and have not been registered under the 1933 Act. Such
securities may not be transferred, offered or sold prior to the end of
the forty (40) day period (the "Restricted Period") commencing on July
15, 1996 unless such transfer, offer or sale is made in an "offshore
transaction" and not to or for the account of or benefit of a "U.S.
Person" (as such terms are defined in Regulation S) and is otherwise in
accordance with the requirements of Regulation S. Following expiration
of the Restricted Period, the securities represented hereby may not be
offered, sold or otherwise transferred in the United States or to a
U.S. Person unless the securities are registered under the 1933 Act and
applicable state securities laws, or such offers, sales and transfers
are made pursuant to an available exemption from the registration
requirements of those laws."
(b) Following the expiration of the Restricted Period, and
subject to Section 10(d) below, the Company will remove or will promptly
instruct its transfer agent to remove the Legend from the Securities and, if
applicable, from the Shares issued during the Restricted Period (and will
instruct its transfer agent to issue without the Legend, the Shares issuable
upon any conversion or exercise occurring after the Restricted Period), if the
Buyer holding such Securities or any other person in whose name such
certificates have been or are to be issued shall have delivered a certificate (a
"Removal Certificate") to the Company to the following effect:
"The undersigned acknowledges that the securities to which this
certificate relates have not been registered under Securities Act of
1933, as amended (the "1933 Act") and that offers, sales or other
transfer of such securities must be made in compliance with Regulation
S promulgated under the 1933 Act, pursuant to an effective registration
statement under the 1933 Act or pursuant to an available exemption from
registration, and the undersigned certifies that the undersigned has
not made, nor will the undersigned make or cause to be made, any offer,
sale or other transfer of such securities, in violation of the 1933
Act, other applicable securities laws or the rules and regulations of
the Securities and Exchange Commission."
(c) Upon the submission, at any time after the expiration of
the Restricted Period, by Buyer of a written request for legend removal for the
purpose of a bona fide pledge or deposit of the Securities with a margin
account, together with the certificates for which the legend removal is being
requested, the Company will reissue or will promptly instruct its transfer agent
to reissue the certificates representing the Securities to be so pledged or
deposited without the Legend, and no Removal Certificate shall be required to be
delivered in connection therewith.
(d) Notwithstanding the provisions of this Section 10, if with
respect to the Company's receipt of a Removal Certificate from any person, prior
to any removal of the Legend, there shall have been after the date hereof any
amendment to the 1933 Act or Regulation S or any no action letter,
interpretative release or other advice from the Securities and Exchange
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Commission after the date hereof which disallows the removal of the Legend under
the circumstances in which the request that it be removed is being made, then
the Company shall have no obligation to remove or to instruct its transfer agent
to remove the Legend, unless the Company shall have received from the person
requesting such removal a written letter of counsel to such person reasonably
acceptable to the Company and its counsel confirming that the Legend may be so
removed or share certificates may be so issued without the Legend without
violation of the 1933 Act. If the person requesting a removal of the Legend is
unable to supply the legal opinion referred to above then the Company shall,
upon demand of such person, be obligated to register the Common Stock for resale
pursuant to the terms of the Registration Rights Agreement.
11. Transfer Agent Instructions. The Company's transfer agent (the "Transfer
Agent") will be instructed to reserve for issuance such number of shares of the
Company's Common Stock as would be issuable if the Convertible Notes were
converted on the Closing Date and such additional number of shares as, from time
to time, shall be necessary to provide for the issuance of Shares upon the
conversion of the Convertible Notes. Additionally, the Company shall deliver to
its transfer agent at closing irrevocable instructions substantially in the form
set forth in Annex D attached hereto, pursuant to which the transfer agent shall
be instructed to issue upon conversion the number of shares provided for in the
Convertible Note being converted on the terms provided for therein without
restrictive legend, registered in the names provided by the Holders. The Company
warrants and covenants that no instructions restricting the transferability of
the Securities and the Shares other than the instructions in the immediately
preceding sentence and instructions for a "stop transfer" instruction until the
end of the Restricted Period have been given, or shall be given, to the Transfer
Agent, and that the Securities and the Shares shall otherwise be freely
transferable on the books and records of the Company. Nothing in this section,
however, shall affect in any way the obligations and agreement of the Buyer to
comply with all applicable federal, state and foreign securities laws upon
resale of the Securities.
12. Miscellaneous. (a) This Agreement may be executed in one or more
counterparts and it is not necessary that signatures of all parties appear on
the same counterpart, but such counterparts together shall constitute but one
and the same agreement.
(b) This Agreement shall be governed by and constructed in
accordance with the laws of the State of California.
(c) This agreement shall inure to the benefit of and be
binding upon the parties hereto, their respective successors, and no other
person shall have any right or obligation hereunder. This Agreement shall not be
assignable by either party without the prior written consent of the other, and
any assignment in violation hereof shall be void. Notwithstanding the foregoing,
the Buyer may assign its rights in this Agreement to, and the provisions of this
Agreement shall inure to the benefit of, and be enforceable by, any transferee
of any of the Securities or Shares.
(d) This Agreement together with the Note and the
Registration Rights Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersede all prior oral or
written proposals or agreements related thereto. This Agreement may not be
amended or any provision hereof waived, in whole or in part, except by a written
amendment signed by both of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, all as of the day and year above written.
BY: PINNACLE MICRO, INC.
_____________________________________________
Name: Lawrence Goelman
Title: President and Chief Executive Officer
or
Name: Roger Hay
Title: Executive Vice President and
Chief Financial Officer
BY:
Name: _______________________________________
Title: ______________________________________
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