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SECURITIES PURCHASE AND INVESTOR RIGHTS AGREEMENT
Between
ADEPT TECHNOLOGY, INC.
and
JDS UNIPHASE CORPORATION
Dated as of October 22, 2001
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ADEPT TECHNOLOGY, INC.
SECURITIES PURCHASE AND INVESTOR RIGHTS AGREEMENT
This Securities Purchase and Investor Rights Agreement (this
"Agreement") is made and entered into as of October 22, 2001, by and between
Adept Technology, Inc., a California corporation (the "Company"), and JDS
Uniphase Corporation, a Delaware corporation (the "Investor").
RECITALS
WHEREAS, the Company desires to sell to the Investor, and the Investor
desires to purchase from the Company, shares of Series A Convertible Preferred
Stock, no par value ("Series A Preferred"), and Series B Convertible Preferred
Stock, no par value ("Series B Preferred"), of the Company (collectively, the
"Preferred Stock"), on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. AGREEMENT TO PURCHASE AND SELL SECURITIES.
(a) Authorization. The Company's Board of Directors will,
prior to the Closing (as defined below), authorize: (i) the creation of the
Series A Preferred and Series B Preferred, and file with the California
Secretary of State a Statement of Preferences (the "Statement of Preferences")
setting forth the rights preferences and privileges of the Preferred Stock,
substantially in the form of Exhibit A attached hereto; and (ii) authorize the
issuance of the number of shares of Preferred Stock, pursuant to the terms and
conditions of this Agreement, being purchased hereunder.
(b) Agreement to Purchase and Sell Certain Securities. The
Company hereby agrees to issue to the Investor at the Closing, and the Investor
hereby agrees to acquire from the Company at the Closing, 78,000 shares of
Series A Preferred and 22,000 shares of Series B Preferred (the "Purchased
Shares") for an aggregate purchase price of Twenty Five Million Dollars
($25,000,000) (the "Purchase Price"), or Two Hundred Fifty Dollars ($250) per
share.
(c) Use of Proceeds. The Company intends to apply the net
proceeds from the sale of the Purchased Shares for working capital and other
general corporate purposes.
2. CLOSING. The purchase and sale of the Purchased Shares shall take
place at the offices of Gibson, Dunn & Crutcher LLP, 1530 Page Mill Road, Palo
Alto, California, at 10:00 a.m. California time, within three (3) business days
after the conditions set forth in Sections 5 and 6 have been satisfied (or
waived by the party entitled to waive any such conditions), or at such other
time and place as the Company and the Investor mutually agree upon (which time
and place are referred to in this Agreement as the "Closing"). At the Closing,
the Company will deliver to the Investor certificates representing the Purchased
Shares against
delivery to the Company by the Investor of the Purchase Price in cash paid by
wire transfer of immediately available funds to the Company. Closing documents
may be delivered by facsimile with original signature pages sent by overnight
courier. The date of the Closing is referred to herein as the "Closing Date". At
the Closing the Company and Investor shall also execute and deliver the Supply,
Development and License Agreement (the "Development Agreement").
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Investor that the statements in this Section 3
are true and correct, except as set forth in the Disclosure Letter. The
Disclosure Letter (the "Disclosure Letter") shall set forth exceptions, if any,
to the representations and warranties made by the Company in Section 3 hereof.
Such Disclosure Letter shall be organized such that any exceptions specifically
identify the representation and warranty, by section, to which they relate, and
shall clearly identify the nature of the exception, to the Investor's reasonable
satisfaction. As used in this Agreement, "Material Adverse Effect" means a
material adverse effect on, or a material adverse change in, or a group of such
effects on or changes in, the business, operations, financial condition, results
of operations, assets or liabilities of the Company and its Subsidiaries, taken
as a whole, or Investor and its Subsidiaries, taken as a whole, as the case may
be, but excluding any adverse effect or circumstance (i) that is attributable to
the announcement or performance of this agreement or the transactions
contemplated hereby or (ii) that are the result of economic factors or other
events (including military operations and terrorist acts) affecting the economy
as a whole. As used in this Agreement, "Person" means an individual,
corporation, partnership, limited liability company, association, trust,
unincorporated organization or other legal entity, including a governmental
entity, and the term "Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with such other Person, including without limitation, a
subsidiary.
(a) Organization Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all corporate power and authority
required to: (i) own or lease and operate its properties and assets and to carry
on its business as presently conducted, and (ii) enter into this Agreement, the
Development Agreement and the other agreements, instruments and documents
contemplated hereby, and to consummate the transactions contemplated hereby. The
Company is duly qualified to do business as a foreign corporation and is in good
standing in every jurisdiction in which the nature of the business conducted by
it or the character or location of the properties owned or leased by it makes
such qualification necessary, except where the failure to be so qualified would
not have a Material Adverse Effect.
(b) Capitalization. The capitalization of the Company, without
giving effect to the transactions contemplated by this Agreement, is as follows.
The authorized stock of the Company consists only of 70,000,000 shares of Common
Stock, no par value ("Common Stock"), of which approximately 13,184,453 shares
were issued and outstanding as of September 10, 2001, and 5,000,000 shares of
preferred stock, none of which is issued or outstanding on the date hereof. All
such shares of Common Stock have been duly authorized, and all such issued and
outstanding shares of Common Stock have been validly issued, are fully paid and
nonassessable and are free and clear of all liens, claims and encumbrances,
other than any liens, claims or encumbrances created by or imposed upon the
holders thereof. As of September 30, 2001, the Company also had reserved
7,468,576 shares of Common Stock for issuance upon
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exercise of options, rights, or other stock awards granted to officers,
directors, employees, consultants or independent contractors or Affiliates of
the Company under the Company's employee benefit, stock purchase, stock option
and equity incentive plans. All shares of Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no other equity
securities, options, warrants, calls, rights, commitments or agreements of any
character to which the Company is a party or by which it is bound obligating the
Company to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of the
Company or obligating the Company to grant, extend or enter into any such equity
security, option, warrant, call, right, commitment or agreement.
(c) Due Authorization. All corporate actions on the part of
the Company, its officers, directors and stockholders necessary for the
authorization, execution, delivery of, and the performance of all obligations of
the Company under this Agreement and the Development Agreement and the
authorization, issuance, reservation for issuance and delivery of all of the
Purchased Shares (and the Common Stock issuable upon conversion thereof) being
sold under this Agreement have been or will be taken prior to the Closing, and
this Agreement and the Development Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with their respective terms, except (a) as may be limited by (i) applicable
bankruptcy, insolvency, reorganization or others laws of general application
relating to or affecting the enforcement of creditors' rights generally and (ii)
the effect of rules of law governing the availability of equitable remedies and
(b) as rights to indemnity or contribution may be limited under federal or state
securities laws or by principles of public policy thereunder.
(d) Valid Issuance of Stock.
(i) Valid Issuance. The Purchased Shares will be,
upon payment therefor by the Investor in accordance with this Agreement, duly
authorized, validly issued, fully paid and non-assessable. The Common Stock
issuable upon conversion of the Purchased Shares will be, upon issuance in
accordance with the Statement of Preferences, duly authorized, validly issued,
fully paid and non-assessable.
(ii) Compliance with Securities Laws. Assuming the
correctness of the representations made by the Investor in Section 4 hereof, the
Purchased Shares (and the Common Stock issuable upon conversion thereof) will be
issued to the Investor in compliance with applicable exemptions from (i) the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended (the "Securities Act") and (ii) the registration and qualification
requirements of all applicable securities laws of the states of the United
States.
(e) Subsidiaries and Affiliates.
(i) The SEC Documents sets forth a list of all
significant subsidiaries (as such term is defined in the Rules and Regulations)
of the Company (collectively, the "Subsidiaries"). Unless otherwise specified or
unless the context otherwise requires, all references to the Company in Section
3 shall mean the Company and the Subsidiaries.
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(ii) All capital stock or other equity interests
owned by the Company as described pursuant to Section 3(e)(i) are owned by the
Company or its Subsidiaries, as the case may be, as record and beneficial owner
thereof free and clear of all liens, charges, encumbrances, equities and claims
whatsoever. There is no outstanding or authorized option, subscription, warrant,
call, right, commitment or other agreement of any character obligating the
Company to issue, sell, transfer, pledge or otherwise encumber any share of
capital stock or other equity interest described pursuant to Section 3(e)(i) or
any security or other instrument convertible into or exercisable for or
evidencing the right to subscribe for any such share of capital stock or other
equity interest.
(iii) Each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its state of
organization. Each Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing in every jurisdiction in which the nature of
the business conducted by it or the character or location of the properties
owned or leased by it makes such qualification necessary, except where the
failure to be so qualified would not have a Material Adverse Effect. Each
Subsidiary has all requisite corporate power and authority to own or lease and
operate its properties and assets and to carry on its business as now conducted.
(f) Consents. No consent, approval, order or authorization of,
or registration qualification, designation, declaration or filing with, or
notice to, any federal, state or local governmental authority or any other
Person on the part of the Company is required in connection with the issuance of
the Purchased Shares (or the Common Stock issuable upon conversion thereof) to
the Investor, or the consummation of the other transactions contemplated by this
Agreement or the Development Agreement. All such qualifications and filings
will, in the case of qualifications, be effective on the Closing and will, in
the case of filings, be made within the time prescribed by law.
(g) Non-Contravention. The execution, delivery and performance
of this Agreement and the Development Agreement by the Company, and the
consummation by the Company of the transactions contemplated hereby and thereby
(including issuance of the Purchased Shares (and the Common Stock issuable upon
conversion thereof), do not and will not (i) contravene or conflict with the
Articles of Incorporation or Bylaws of the Company; (ii) constitute a violation
of any provision of any federal, state, local or foreign law binding upon or
applicable to the Company; or (iii) constitute a default or require any consent
under, give rise to any right of termination, cancellation or acceleration of,
or to a loss of any benefit to which the Company is entitled under, or result in
the creation or imposition of any lien, claim or encumbrance on any assets of
the Company under, any contract to which the Company is a party or any permit,
license or similar right relating to the Company or by which the Company may be
bound or affected and, in the case of any of the violations described in clause
(ii) and (iii) above, as individually or in the aggregate would reasonably be
expected to have a Material Adverse Effect.
(h) Litigation. Except as set forth in the Disclosure Letter,
there is no action, suit, proceeding, claim, administrative hearing or action,
arbitration or investigation ("Action") pending or, to the best of the Company's
knowledge, threatened: (i) against the Company or its Subsidiaries, their
respective activities, properties or assets, or any officer, director or
employee
5
of the Company in connection with such officer's, director's or employee's
relationship with, or actions taken on behalf of, the Company or a Subsidiary
that has had or is reasonably likely to have a Material Adverse Effect, or (ii)
that seeks to prevent, enjoin, alter or delay the transactions contemplated by
this Agreement. Neither the Company nor any of its Subsidiaries is a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. No Action by the Company is
currently pending nor does the Company intend to initiate any Action that is
reasonably likely to have a Material Adverse Effect.
(i) Compliance with Law and Charter Documents; Permits. The
Company is not in violation or default of any provisions of its Articles of
Incorporation or Bylaws, both as amended. The Company has complied in all
respects and is in compliance with all applicable statutes, laws, rules,
regulations and orders of the United States of America and all states thereof,
foreign countries and other governmental bodies and agencies having jurisdiction
over the Company's business or properties, except where the failure to so comply
has not had and is not reasonably likely to have a Material Adverse Effect. The
Company has obtained and maintained in full force and effect all licenses,
authorizations and permits (collectively, "Permits") required to be obtained
from governmental authorities for the operation of the business of the Company
and the Subsidiaries as currently and in the past conducted, except for any such
Permits, the failure to obtain which, individually or in the aggregate, has not
had and is not reasonably likely to have a Material Adverse Effect.
(j) SEC Documents.
(i) Reports. The Disclosure Letter includes a
complete and correct list of all registration statements, reports and proxy
statements filed by the Company with the Securities and Exchange Commission (the
"SEC") under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") on or after June 30, 2001 (the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 2001, and all such other registration statements,
reports and proxy statements are collectively referred to herein as the "SEC
Documents"), all of which complied, as to form, with the requirements of the
Exchange Act or the Securities Act, as applicable. Each of the SEC Documents, as
of the respective date thereof (or if amended or superseded by a filing prior to
the Closing Date, then on the date of such filing), did not, and each of the
registration statements, reports and proxy statements filed by the Company with
the SEC after the date hereof and prior to the Closing will not, as of the date
thereof (or if amended or superseded by a filing after the date of this
Agreement, then on the date of such filing), contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The Company is not a party to any material contract,
agreement or other arrangement that was required to have been filed as an
exhibit to the SEC Documents that was not so filed.
(ii) Financial Statements. The Company has provided
the Investor with copies of its audited financial statements (the "Audited
Financial Statements") for the fiscal year ended June 30, 2001 (the "Balance
Sheet Date"). Since the Balance Sheet Date, the Company has duly filed with the
SEC all registration statements, reports and proxy statements required to be
filed by it under the Exchange Act and the Securities Act. The audited and
6
unaudited consolidated financial statements of the Company included in the SEC
Documents fairly present, in conformity with generally accepted accounting
principles ("GAAP") applied on a consistent basis (except as otherwise may be
stated in the notes thereto), the consolidated financial position of the Company
and its consolidated Subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject
to normal year-end audit adjustments in the case of unaudited interim financial
statements).
(k) Absence of Certain Changes Since Balance Sheet Date. Since
the Balance Sheet Date, the business and operations of the Company have been
conducted in the ordinary course consistent with past practice, and there has
not been:
(i) any declaration, setting aside or payment of any
dividend or other distribution of the assets of the Company with respect to any
shares of capital stock of the Company or any repurchase, redemption or other
acquisition by the Company or any Subsidiary of the Company of any outstanding
shares of the Company's capital stock;
(ii) any damage, destruction or loss, whether or not
covered by insurance, except for such occurrences, individually and
collectively, that are not material to the Company;
(iii) any waiver by the Company of a valuable right
or of a material debt owed to it, except for such waivers, individually and
collectively, that are not material;
(iv) any material change or amendment to, or any
waiver of any material right under a material contract or arrangement by which
the Company or any of its assets or properties is bound or subject, except for
changes, amendments or waivers that are expressly provided for or disclosed in
this Agreement;
(v) any change by the Company in its accounting
principles (including, without limitation, with respect to inventory), methods
or practices or in the manner it keeps its accounting books and records, except
any such change required by a change in GAAP; or
(vi) any other event or condition of any character,
except for such events and conditions that have not resulted, and could not
reasonably be expected to result, either individually or collectively, in a
Material Adverse Effect.
(l) Intellectual Property.
(i) Ownership or Right to Use. The Company has title
to and owns, or is licensed or otherwise possesses legally enforceable rights to
use, all patents or patent applications, software, know-how, registered or
unregistered trademarks and service marks and any applications therefor,
registered or unregistered copyrights, trade names, and any applications
therefor, trade secrets or other confidential or proprietary information
("Intellectual Property") necessary to enable the Company to carry on its
business as currently conducted. All registrations of material Company owned
Intellectual Property are valid and subsisting, all necessary registration and
renewal fees in connection with such registrations have been filed with the
relevant patent, copyright and trademark authorities in the United States for
the
7
purposes of maintaining such registrations. The Company has complied with all
applicable disclosure requirements and, to the Company's knowledge, neither the
Company nor any named inventor or assignee has committed any fraudulent act in
the application for or maintenance of any material patent, trademark or
copyright of the Company.
(ii) No Infringement. Except as set forth in the
Disclosure Letter, to the Company's knowledge, the Company has not violated or
infringed, and is not currently violating or infringing, any Intellectual
Property of any other Person, in either case which is reasonably likely to have
a Material Adverse Effect. The Company has not received any written
communications during the three years prior to the date of this Agreement
alleging any such violation or infringement by the Company (or any of its
employees or consultants). The Company has no knowledge of any infringement by
any third party on, or any competing claim of right to use or own any of, the
Company's material Intellectual Property rights. The Company has no knowledge
that any of the activities of the employees or consultants of the Company on
behalf of the Company violate any agreements which any such employees or
consultants have with former employers in a way which would have a Material
Adverse Effect.
(m) Undisclosed Liabilities. The Company has no liabilities or
obligations of any nature except (a) liabilities which are fully reflected or
reserved against in the balance sheet included in the Company's Annual Report on
10-K for the fiscal year ended June 30, 2001 (including the footnotes thereto),
(b) liabilities incurred in the ordinary course of business operations since the
date of such balance sheet, and (c) liabilities or obligations occurring prior
to the date of such balance sheet which, pursuant to GAAP consistently applied
in accordance with past practices of the Company are not required to be set
forth in such balance sheet.
(n) Contracts. The contracts filed as Exhibits to the
Company's Form 10-K for the fiscal year ended June 30, 2001 are valid, binding
and in full force and effect. The Company is not in material default of any of
its obligations under such contracts, and to the Company's knowledge, no other
party to such contracts is in material default thereunder, in each case where
such default could reasonably be expected to have a Material Adverse Effect.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF INVESTOR.
Investor hereby represents and warrants to the Company, and agrees that:
(a) Organization Good Standing and Qualification. Investor is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all corporate power and authority required
to carry on its business as presently conducted, to enter into this Agreement
and the Development Agreement and to consummate the transactions contemplated
hereby and thereby.
(b) Authorization. The execution of this Agreement and the
Development Agreement have been duly authorized by all necessary corporate
action on the part of Investor. This Agreement and the Development Agreement
constitute Investor's legal, valid and binding obligations, enforceable in
accordance with their respective terms, except (a) as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the effect of rules of law governing the availability of
equitable remedies, and (b) as rights to indemnity or
8
contribution may be limited under federal or state securities laws or by
principles of public policy thereunder.
(c) Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
Investor is required in connection with the purchase of the Purchased Shares or
the consummation of the other transactions contemplated by this Agreement and
the Development Agreement by the Investor.
(d) Non-Contravention. The execution, delivery and performance
of this Agreement and the Development Agreement and the consummation by Investor
of the transactions contemplated hereby and thereby (including purchase of the
Purchased Shares), do not and will not (i) contravene or conflict with the
Certificate of Incorporation or Bylaws of Investor; (ii) constitute a violation
of any provision of any federal, state, local or foreign law binding upon or
applicable to Investor; or (iii) constitute a default or require any consent
under, give rise to any right of termination, cancellation or acceleration of,
or to a loss of any benefit to which Investor is entitled under, or result in
the creation or imposition of any lien, claim or encumbrance on any assets of
Investor under, any contract to which Investor is a party or any permit, license
or similar right relating to Investor or by which Investor may be bound or
affected and as individually or in the aggregate would reasonably be expected to
have a Material Adverse Effect.
(e) Purchase for Own Account. The Purchased Shares are being
acquired for investment for Investor's own account, not as a nominee or agent,
and not with a view to the public resale or distribution thereof within the
meaning of the Securities Act, and Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. Investor also
represents that it has not been formed for the specific purpose of acquiring the
Purchased Shares.
(f) Investment Experience. Investor understands that the
purchase of the Purchased Shares involves substantial risk. Investor has
experience as an investor in securities of companies and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment in the
Purchased Shares and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of this investment
in the Purchased Shares and protecting its own interests in connection with this
investment.
(g) Accredited Investor Status. Investor is an "accredited
investor" within the meaning of Regulation D promulgated under the Securities
Act. Investor has not incurred, and will not incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or the acquisition of the Purchased
Shares.
(h) Restricted Securities. Investor understands that the
Purchased Shares are characterized as "restricted securities" under the
Securities Act, inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that such securities may be
resold under the Securities Act and applicable regulations thereunder only
pursuant to a registration statement under the Securities Act or an exemption
therefrom. Investor
9
acknowledges that the Purchased Shares shall not be listed for trading on the
Nasdaq National Market or any other exchange. Investor is familiar with Rule 144
of the SEC, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.
(i) Disclosure of Information. Investor acknowledges that it
has been furnished (i) with substantially the same kind of information regarding
the Company and its business, assets, results of operation, and financial
condition as would be contained in a registration statement prepared in
connection with a public sale of the Purchased Shares and (ii) copies of all the
Company's SEC filings since June 30, 2001. Investor has had an opportunity to
review all such information about the Company as the Investor desires and has
been given an opportunity to ask questions and receive answers about the
Company. Investor hereby acknowledges that the Company has not made any
representations or warranties to the Investor with respect to the value of the
Purchased Shares, and the actual value of thereof may be more or less than the
consideration being paid therefor pursuant to this Agreement. Nothing in the
foregoing shall limit or modify, in any manner, any of the representations or
warranties of the Company set forth in Section 3 of this Agreement.
(j) Legends. Investor agrees that the certificates for the
Purchased Shares shall bear a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 or with any state
securities commission, and may not be transferred or disposed
of by the holder in the absence of a registration statement
which is effective under the Securities Act of 1933 and
applicable state laws and rules, or, unless, immediately prior
to the time set for transfer, such transfer may be effected
without violation of the Securities Act of 1933 and other
applicable state laws and rules."
In addition, Investor agrees that the Company may place stop transfer orders
with its transfer agents with respect to such certificates. The appropriate
portion of the legend and the stop transfer orders will be removed promptly upon
delivery to the Company of such satisfactory evidence as reasonably may be
required by the Company that such legend or stop orders are not required to
ensure compliance with the Securities Act.
5. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT CLOSING. The obligations
of Investor under Sections l and 2 of this Agreement are subject to the
fulfillment or waiver, on or before the Closing, of each of the following
conditions:
(a) Representations and Warranties True. Each of the
representations and warranties of the Company contained in Section 3 shall be
true and correct in all material respects on and as of the date hereof and on
and as of the date of the Closing, except as set forth in the Disclosure Letter,
with the same effect as though such representations and warranties had been made
as of the Closing.
(b) Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be
10
performed or complied with by it on or before the Closing and shall have
obtained all approvals, consents and qualifications necessary to complete the
purchase and sale described herein.
(c) Securities Exemptions. The offer and sale of the Purchased
Shares to the Investor pursuant to this Agreement shall be exempt from the
registration requirements of the Securities Act and the registration and/or
qualification requirements of all applicable state securities laws.
(d) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Investor, and the Investor shall have received all such
counterpart originals and certified or other copies of such documents as it may
reasonably request. Such documents shall include but not be limited to the
following:
(i) Certified Charter Documents; Good Standing. A
copy of (i) the Articles of Incorporation certified as of a recent date by the
Secretary of State of California as a complete and correct copy thereof, (ii)
(iii) the Bylaws of the Company (as amended through the date of the Closing)
certified by the Secretary of the Company as a true and correct copy thereof as
of the Closing; and (iii) certificates from the California Secretary of State
and the Franchise Tax Board that the Company is in good standing in California.
(ii) Board Resolutions. A copy, certified by the
Secretary of the Company, of the resolutions of the Board of Directors of the
Company providing for the approval of this Agreement and the issuance of the
Purchased Shares and the other matters contemplated hereby.
(e) Opinion of Company Counsel. The Investor will have
received an opinion on behalf of the Company, dated as of the date of the
Closing, from counsel to the Company, in the form attached as Exhibit B.
(f) No Material Adverse Effect. Between the date hereof and
the Closing, there shall not have occurred any event constituting a Material
Adverse Effect.
(g) Other Actions. The Company shall have executed such
certificates, agreements, instruments and other documents, and taken such other
actions as shall be customary or reasonably requested by the Investor in
connection with the transactions contemplated hereby.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to the Investor under this Agreement are subject to the
fulfillment or waiver, on or before the Closing, of each of the following
conditions:
(a) Representations and Warranties True. The representations
and warranties of Investor contained in Section 4 shall be true and correct in
all material respects on and as of the date hereof and on and as of the date of
the Closing with the same effect as though such representations and warranties
had been made as of the Closing.
(b) Performance. Investor shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be
11
performed or complied with by it on or before the Closing and shall have
obtained all approvals, consents and qualifications necessary to complete the
purchase and sale described herein.
(c) Payment of Purchase Price. Investor shall have delivered
to the Company the Purchase Price as specified in Section 1(b).
(d) Securities Exemptions. The offer and sale of the Purchased
Shares to the Investor pursuant to this Agreement shall be exempt from the
registration requirements of the Securities Act and the registration and/or
qualification requirements of all applicable state securities laws.
(e) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto will be reasonably satisfactory in form and
substance to the Company and to the Company's legal counsel, and the Company
will have received all such counterpart originals and certified or other copies
of such documents as it may reasonably request.
7. COVENANTS AND AGREEMENTS OF THE PARTIES.
(a) Information Rights.
(i) Financial Information. The Company covenants and
agrees that, commencing on the Closing and continuing for so long as Investor
and its Affiliates together hold at least 50% of the Purchased Shares (such
number to be proportionately adjusted for stock splits, stock dividends and
similar events) and/or ten percent (10%) or more of the outstanding Common
Stock, the Company shall:
(A) Annual Reports. Furnish to Investor
promptly following the filing of such report with the SEC a copy of the
Company's Annual Report on Form 10-K for each fiscal year. In the event the
Company shall no longer be required to file Annual Reports on Form 10-K, the
Company shall, within 90 days following the end of each respective fiscal year,
deliver to the Investor a copy of a consolidated balance sheet as of the end of
such fiscal year, a consolidated statement of income and a consolidated
statement of cash flows of the Company and its Subsidiaries for such year,
setting forth in each case in comparative form the figures from the Company's
previous fiscal year, all prepared in accordance with generally accepted
accounting principles and practices and audited by nationally recognized
independent certified public accountants.
(B) Quarterly Reports. Furnish to Investor
promptly following the filing of such report with the SEC, a copy of each of the
Company's Quarterly Reports on Form 10-Q. In the event the Company shall no
longer be required to file Quarterly Reports on Form 10-Q, the Company shall,
within 45 days following the end of each of the first three fiscal quarters of
each fiscal year, deliver to the Investor a copy a consolidated balance sheet as
of the end of the respective fiscal quarter, consolidated statements of income
and consolidated statements of cash flows of the Company and its Subsidiaries
for the respective fiscal quarter and for the year to-date, setting forth in
each case in comparative form the figures from the comparable periods in the
Company's immediately preceding fiscal year, all prepared in
12
accordance with generally accepted accounting principles and practices, but all
of which may be unaudited.
(ii) SEC Filings. The Company shall deliver to
Investor copies of each other document filed by the Company with the SEC on a
non-confidential basis promptly following the filing of such document with the
SEC; provided, however, this provision shall not apply to any document that
relates solely to any employee benefit, stock purchase, stock option or equity
incentive plans.
(b) Registration Rights.
(i) Definitions. For purposes of this Section 7(b):
(A) Registration. The terms "register,"
"registered" and "registration" refer to a registration effected by preparing
and filing a registration statement in compliance with the Securities Act, and
the declaration or ordering of effectiveness of such registration statement.
(B) Registrable Securities. The term
"Registrable Securities" means: (x) all Common Stock issued upon conversion of
the Purchased Shares, and (y) any shares of Common Stock of the Company or other
securities of the Company issued as (or issuable upon the conversion or exercise
of any warrant, right or other security that is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, any of
the securities described in clause (x). Notwithstanding the foregoing,
"Registrable Securities" shall exclude any Registrable Securities sold by a
Person in a transaction in which rights under this Section 7(b) are not assigned
in accordance with this Agreement or any Registrable Securities sold in a public
offering, whether sold pursuant to Rule 144 promulgated under the Securities
Act, in a registered offering, or otherwise.
(C) Holder. For purposes of this Section
7(b), the term "Holder" means any Person owning of record Registrable Securities
that have not been sold to the public or pursuant to Rule 144 promulgated under
the Securities Act or any permitted assignee of record of such Registrable
Securities to whom rights under this Section 7(b) have been duly assigned in
accordance with this Agreement.
(D) Form S-3. The term "Form S-3" means such
form under the Securities Act as is in effect on the date hereof or any
successor registration form under the Securities Act subsequently adopted by the
SEC that permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
(ii) Demand Registration.
(A) The Company shall, within sixty (60)
days after the Closing Date, file a registration statement under the Securities
Act on Form S-3 or, if Form S-3 is not then available for use by the Company,
then such other form as such Holders (upon the advice of the underwriters, if
any, engaged by such Holders) may request (including a "shelf" registration
statement, if requested by such Holders), during any period of time that Rule
144 is not available as an exemption for the sale in a single 90-day period of
all of the Registrable Securities that any
13
such Holder desires to sell, in which case the Company shall, subject to Section
7(b)(viii), maintain the effectiveness of such "shelf" registration statement
until all such Registrable Securities are sold under such registration statement
or could be sold under Rule 144 in a single 90-day period, and shall use
commercially reasonable efforts to effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities held by the
Holders. Such registration statement shall register for sale all the Registrable
Securities.
(B) Underwriting. If the Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, then they shall so advise the Company as a part of their request,
and the Company shall include such information in the written notice referred to
in Section 7(b)(ii)(A). In such event, the right of any Holder to include his or
her Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the initiating Holders and such Holder determined
based on the number of Registrable Securities held by such Holders being
registered). All Holders proposing to distribute their securities through such
underwriting shall enter into an underwriting agreement in customary form with
the managing underwriter or underwriters selected for such underwriting by the
Holders of a majority of the Registrable Securities being registered and
reasonably acceptable to the Company (including a market stand-off agreement of
up to 120 days if requested by such underwriters). Notwithstanding any other
provision of this Section 7(b)(ii), if the underwriter(s) advise(s) the Company
in writing that marketing factors require a limitation of the number of
securities to be underwritten then the Company shall so advise all Holders of
Registrable Securities that would otherwise be registered and underwritten
pursuant hereto, and the number of Registrable Securities that may be included
in the underwriting shall be reduced as required by the underwriter(s) and
allocated among the Holders of Registrable Securities on a pro rata basis
according to the number of Registrable Securities requested to be included in
such registration by each Holder requesting registration (including the
initiating Holders); provided, however, that the number of shares of Registrable
Securities to be included in such underwriting and registration shall not be
reduced unless all other securities of the Company and any selling
securityholder other than the Holders are first entirely excluded from the
underwriting and registration. Any Registrable Securities excluded and withdrawn
from such underwriting shall be withdrawn from the registration.
(C) Maximum Number of Demand Registrations.
The Company shall be obligated to effect only one such registration pursuant to
this Section 7(b)(ii); provided, that, subject to Section 7(b)(viii), such
registration shall be maintained during the period required under subparagraph
(A) above.
(D) Expenses. All expenses incurred in
connection with any registration pursuant to this Section 7(b)(ii), including
all federal and "blue sky" registration, filing and qualification fees,
printer's and accounting fees, and fees and disbursements of counsel for the
Company (but excluding underwriters' discounts and commissions relating to
shares sold by the Holders and fees and expenses of counsel to the Holders),
shall be borne by the Company. Each Holder participating in a registration
pursuant to this Section 7(b)(ii) shall bear such Holder's proportionate share
(based on the total number of shares sold in such registration other than for
the account of the Company) of all discounts, commissions or other amounts
payable to
14
underwriters or brokers and fees and expenses of counsel to the Holders in
connection with such offering by the Holders. Notwithstanding the foregoing, the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to this Section 7(b)(ii) if the registration request
is subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered, unless the Holders of such majority
agree that such registration constitutes the use by the Holders of one demand
registration pursuant to this Section 7(b)(ii) (in which case such registration
shall also constitute the use by all Holders of Registrable Securities of one
such demand registration); provided further, however, that if at the time of
such withdrawal, the Holders have learned of a material adverse change relating
to the Company not known to the Holders at the time of their request for such
registration and have withdrawn their request for registration after learning of
such material adverse change, then the Holders shall not be required to pay any
of such expenses and such registration shall not constitute the use of a demand
registration pursuant to this Section 7(b)(ii).
(iii) Piggyback Registrations. The Company shall
notify all Holders of Registrable Securities in writing at least 20 days prior
to filing any registration statement under the Securities Act for purposes of
effecting a public offering of securities of the Company (including registration
statements relating to secondary offerings of securities of the Company, but
excluding registration statements relating to any employee benefit plan or any
merger or other corporate reorganization) and will afford each such Holder an
opportunity to include in such registration statement all or any part of the
Registrable Securities then held by such Holder, provided, that Rule 144 is not
available as an exemption for the sale in a consecutive 90-day period of all of
the Registrable Securities that any such Holder desires to sell. Each Holder
desiring to include in any such registration statement all or any part of the
Registrable Securities held by such Holder shall within ten days after receipt
of the above-described notice from the Company, so notify the Company in
writing, and in such notice shall inform the Company of the number of
Registrable Securities such Holder wishes to include in such registration
statement. If a Holder decides not to include all of its Registrable Securities
in any registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(A) Underwriting. If a registration
statement under which the Company gives notice under this Section 7(b)(iii) is
for an underwritten offering, then the Company shall so advise the Holders of
Registrable Securities. In such event, the right of any such Holder's
Registrable Securities to be included in such a registration pursuant shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the managing underwriter or underwriters selected for
such underwriting (including a market stand-off agreement of up to 120 days if
required by such underwriters); provided, however, that it shall not be
considered customary to require any of the Holders to provide representations
and warranties regarding the Company or indemnification of the underwriters for
material misstatements or omissions of the Company in the registration statement
or prospectus for such offering. Notwithstanding any other provision of this
Agreement, if the managing underwriter determine(s) in good faith that marketing
factors
15
require a limitation of the number of shares to be underwritten, then the
managing underwriter(s) may exclude shares from the registration and the
underwriting; provided, however, that the securities to be included in the
registration and the underwriting shall be allocated, (1) first (A) in
connection with any registrations other than a registration statement relating
to a demand registration of other shareholders of the Company, to the Company;
or (B) in connection any registration statement relating to a demand
registration of other shareholders of the Company, such shareholder exercising
such demand registration rights, (2) second, to the extent the managing
underwriter determines additional securities can be included after compliance
with clause (1), to each of the Holders (to the extent not included pursuant to
clause (1)) requesting inclusion of their Registrable Securities in such
registration statement on a pro rata basis based on the total number of
Registrable Securities and other securities entitled to registration requested
to be included by each such Holder, and (3) third, to the extent the managing
underwriter determines additional securities can be included after compliance
with clauses (1) and (2), to all other holders of Common Stock of the Company
having the right to include their shares in such registration allocated in such
manner as they may agree. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration.
(B) Expenses. All expenses incurred in
connection with a registration pursuant to this Section 7(b)(iii) (excluding
underwriters' and brokers' discounts and commissions relating to shares sold by
the Holders), including all federal and "blue sky" registration, filing and
qualification fees, printers' and accounting fees, and fees and disbursements of
counsel for the Company, shall be borne by the Company.
(C) Not Demand Registration. Registration
pursuant to this Section 7(b)(iii) shall not be deemed to be a demand
registration as described in Section 7(b)(ii) above.
(iv) Obligations of the Company. Whenever required to
effect the registration of any Registrable Securities under this Agreement the
Company shall, as expeditiously as reasonably possible:
(A) Registration Statement. Prepare and file
with the SEC a registration statement with respect to such Registrable
Securities and use commercially reasonable efforts to cause such registration
statement to become effective; provided, however, that, except with respect to
the registration statement described in Section 7(b)(ii), the Company shall not
be required to keep any such registration statement effective for more than 90
days.
(B) Amendments and Supplements. Prepare and
file with the SEC such amendments and supplements to such registration statement
and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement.
(C) Prospectuses. Furnish to the Holders
such number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to
16
facilitate the disposition of the Registrable Securities owned by them that are
included in such registration.
(D) Blue Sky. Use commercially reasonable
efforts to register and qualify the securities covered by such registration
statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Holders, provided that the Company shall
not be required in connection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of process in any such
states or jurisdictions.
(E) Underwriting. In the event of any
underwritten public offering, enter into and perform its obligations under an
underwriting agreement in usual and customary form (including customary
indemnification of the underwriters by the Company), with the managing
underwriter(s) of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement;
provided, however, that it shall not be considered customary to require any of
the Holders to provide representations and warranties regarding the Company or
indemnification of the underwriters for material misstatements or omissions of
the Company in the registration statement or prospectus for such offering.
(F) Notification. Notify each Holder of
Registrable Securities covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing. In such event, the Company promptly shall prepare
and file with the SEC a supplement or post-effective amendment to such
registration statement or related prospectus or file any other required document
so that, as thereafter delivered to the purchasers of Registrable Securities
sold thereunder, the prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(v) Furnish Information. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to
Sections 7(b)(ii) or (iii) that the selling Holders shall furnish to the Company
such information regarding themselves, the Registrable Securities held by them,
and the intended method of disposition of such securities as shall be required
to timely effect the registration of their Registrable Securities.
(vi) Indemnification. In the event any Registrable
Securities are included in a registration statement under Sections 7(b)(ii) or
(iii):
(A) By the Company. To the extent permitted
by law, the Company will indemnify and hold harmless each Holder, the partners,
officers, shareholders, employees, representatives and directors of each Holder,
any underwriter (as determined in the Securities Act) for such Holder and each
Person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act against any losses, claims,
17
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"):
(x) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto;
(y) the omission or alleged omission
to state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or
(z) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any federal or
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any federal or state securities law in connection with
the offering covered by such registration statement;
and the Company will reimburse each such Holder, partner, officer, shareholder,
employee, representative, director, underwriter or controlling Person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon (i) a
Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, shareholder, employee, representative, director,
underwriter or controlling Person of such Holder, (ii) any failure by such
Holder to deliver a copy of the registration statement or prospectus or any
amendment or supplement thereto as required by the Securities Act or the rules
or regulations thereunder, or (iii) any failure by such Holder to stop using the
registration statement or prospectus or any amendment or supplement thereto
after receipt of written notice from the Company to stop.
(B) By Selling Holders. To the extent
permitted by law, each selling Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed the
registration statement, each Person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, officers, shareholders, employees, representatives and directors and
any Person who controls such Holder within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages or liabilities (joint or
several) to which the Company or any such officer or director, controlling
Person, underwriter or other such Holder, partner, officer, shareholder,
employee, representative, director or controlling Person of such other Holder
may become subject under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon any
18
(i) Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration,
(ii) any failure by such Holder to deliver a copy of the registration statement
or prospectus or any amendment or supplement thereto as required by the
Securities Act or the rules or regulations thereunder, or (iii) any failure by
such Holder to stop using the registration statement or prospectus or any
amendment or supplement thereto after receipt of written notice from the Company
to stop; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such officer or director, controlling
Person, underwriter or other Holder, partner, officer, shareholder, employee,
representative, director or controlling Person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this subsection shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld; and
provided further, that the total amounts payable in indemnity by a Holder under
this subsection or otherwise in respect of any and all Violations shall not
exceed in the aggregate the net proceeds received by such Holder in the
registered offering out of which such Violations arise.
(C) Notice. Promptly after receipt by an
indemnified party under of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this section, deliver
to the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, to the extent that representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential conflict of interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
liability except to the extent the indemnifying party is prejudiced as a result
thereof.
(D) Defect Eliminated in Final Prospectus.
The foregoing indemnity agreements of the Company and Holders are subject to the
condition that, insofar as they relate to any Violation made in a preliminary
prospectus but eliminated or remedied in the amended prospectus on file with the
SEC at the time the registration statement in question becomes effective or the
amended prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
Person if a copy of the Final Prospectus was timely furnished to the indemnified
party and was not furnished to the Person asserting the loss, liability, claim
or damage at or prior to the time such action is required by the Securities Act.
(E) Contribution. In order to provide for
just and equitable contribution to joint liability under the Securities Act in
any case in which either (i) any Holder exercising rights under this Agreement,
or any controlling Person of any such Holder, makes a
19
claim for indemnification pursuant to this section, but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this section provides for indemnification in such
case, or (ii) contribution under the Securities Act may be required on the part
of any such selling Holder or any such controlling Person in circumstances for
which indemnification is provided under this section; then, and in each such
case, the Company and such Holder will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that such Holder is responsible for the
portion represented by the percentage that the public offering price of its
Registrable Securities offered by and sold under the registration statement
bears to the public offering price of all securities offered by and sold under
such registration statement, and the Company and other selling Holders are
responsible for the remaining portion; provided, however, that, in any such
case: (A) no such Holder will be required to contribute any amount in excess of
the public offering price of all such Registrable Securities offered and sold by
such Holder pursuant to such registration statement; and (B) no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(F) Survival. The obligations of the Company
and Holders under this Section 7(b)(vii) shall survive until the third
anniversary of the completion of any offering of Registrable Securities in a
registration statement, regardless of the expiration of any statutes of
limitation or extensions of such statutes.
(vii) Termination of the Company's Obligations. The
Company shall have no obligations pursuant to this Section 7(b) with respect to
any Registrable Securities proposed to be sold by a Holder in a registration
pursuant to Section 7(b)(ii), (iii) or (iv) more than four (4) years after the
the effective date of the registration statement under Section 7(b)(ii).
(viii) Suspension Provisions. Notwithstanding the
foregoing subsections of this Section 7(b), the Company shall not be required to
take any action with respect to the registration or the declaration of
effectiveness of the registration statement following written notice to the
Holders from the Company (a "Suspension Notice") of the existence of any state
of facts or the happening of any event (including pending negotiations relating
to, or the consummation of, a transaction, or the occurrence of any event that
the Company's Board of Directors believes, in good faith, requires additional
disclosure of material, non-public information by the Company in the
registration statement that the Board of directors, with the advice of counsel,
believes it has a bona fide business purpose for preserving confidentiality or
that renders the Company unable to comply with the published rules and
regulations of the SEC promulgated under the Securities Act or the Exchange Act,
as in effect at any relevant time (the "Rules and Regulations")) that would
result in (1) the registration statement, any amendment or post-effective
amendment thereto, or any document incorporated therein by reference containing
an untrue statement of a material fact or omitting to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (2) the prospectus issued under the registration statement, any
prospectus supplement, or any document incorporated therein by reference
including an untrue statement of material fact or omitting to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under
20
which they were made, not misleading, provided that the Company (1) shall not
issue a Suspension Notice more than twice in any 12 month period, (2) shall use
its best efforts to remedy, as promptly as practicable, but in any event within
90 days of the date on which the Suspension Notice was delivered, the
circumstances that gave rise to the Suspension Notice and deliver to the Holders
notification that the Suspension Notice is no longer in effect and (3) shall not
issue a Suspension Notice for any period during which the Company's executive
officers are not similarly restrained from disposing of shares of the Common
Stock. Upon receipt of a Suspension Notice from the Company, all time limits
applicable to the Holders under this Section 7(b) shall automatically be
extended by an amount of time equal to the amount of time the Suspension Notice
is in effect, the Holders will forthwith discontinue disposition of all such
shares pursuant to the registration statement until receipt from the Company of
copies of prospectus supplements or amendments prepared by or on behalf of the
Company (which the Company shall prepare promptly), together with a notification
that the Suspension Notice is no longer in effect, and if so directed by the
Company, the Holders will deliver to the Company all copies in their possession
of the prospectus covering such shares current at the time of receipt of any
Suspension Notice.
(ix) Lock-Up Provision. Investor agrees that so long
as (i) it holds at least 5% of the Voting Stock (as defined below) and (ii) it
is provided an opportunity to participate on a pro rata basis (up to 19.9%) in a
registration pursuant to Section 7(b)(iii), upon request of the Company or the
managing underwriters in such offering, it will not sell, make any short sale,
loan or grant any option for the purchase, or otherwise dispose of any
securities of the Company (other than those included in such registration),
without the prior written consent of the Company or such managing underwriters,
as the case may be, for such period of time (not to exceed 120 days) as may be
requested by the Company or the managing underwriters. Investor further agrees
to execute an agreement as may be requested by the underwriters incorporating
the above terms, and agrees that the Company may impose stop-transfer
instructions in order to implement the above restrictions.
(x) Limitation on Subsequent Registration Rights.
After the Closing Date, the Company shall not, without the prior written consent
of Investor, enter into any agreement with any holder or prospective holder of
any securities of the Company that would grant such holder registration rights
senior to those granted to Investor hereunder.
8. OBLIGATIONS REGARDING CONFIDENTIAL INFORMATION. Investor and the
Company agree that disclosure of confidential information shall be governed by
the terms of the Non-Disclosure Agreement attached as an exhibit to the
Development Agreement.
(a) Press Releases, Etc. Upon execution of this Agreement, the
parties will agree on the content of a joint press release announcing the
existence of this Agreement and the Development Agreement, which press release
will be issued as mutually agreed by the parties. Except for such press release
and except as required to comply with applicable law, neither party shall (a)
issue any press release or make any public filing or statement, or (b) make any
other statement or disclosure to any third party, in either case, regarding the
transactions described herein or in the Development Agreement or the
relationship between the parties, without the written approval of the other
party, which approval may be denied in the other party's sole
21
discretion. Investor acknowledges that the Company may be required to file a
Form 8-K under the Exchange Act disclosing the terms of this Agreement and
including this Agreement as an exhibit to such filing, or make such disclosures
with the Company's reports or in a registration statement filed under the
Securities Act or the Exchange Act.
9. CERTAIN OTHER AGREEMENTS OF THE PARTIES.
(a) Board Observer. So long as Investor, together with any
Affiliate, holds at least 10% of the outstanding Voting Stock (as defined below)
of the Company (including Preferred Stock or Common Stock issued upon conversion
thereof), the Company will permit a representative of Investor (the "Observer")
to attend all meetings of the Board of Directors of the Company (the "Board")
and all committees thereof (whether in person, telephonic or other) in a
non-voting, observer capacity, and shall provide to Investor, concurrently with
the members of the Board, and in the same manner, notice of such meeting and a
copy of all materials provided to such members; provided, however, that the
Company reserves the right to withhold any information or materials and to
exclude the Observer from any meeting or portion thereof if the Board reasonably
believes in its sole discretion that access to such information or attendance at
such meeting would: (i) involve a conflict of interest regarding a material
issue for the Company, including discussions of matters related to the Company's
business with competitors of Investor; (ii) be necessary in order to meet or
protect any fiduciary obligations of the Board or (iii) adversely affect
attorney-client privilege between the Company and its counsel. Exchanges of
confidential and proprietary information between the Company and the Observer
shall be governed by the terms of the confidentiality agreement executed by the
Company and Investor.
(b) Actions to Increase Percentage Ownership of Investor. So
long as Investor together with any of its Affiliates holds any shares of
Preferred Stock, the Company agrees that it will not take any action, the effect
of which would be to increase the percentage ownership of the Company's
outstanding voting securities held by Investor and its Affiliates to 20% or
more; provided, however, that fluctuations in the price of the Common Stock
resulting from actions taken by the Company in the ordinary course of business
shall be excluded.
(c) Standstill. Investor agrees that until 180 days following
the date on which Investor and its Affiliates no longer hold at least 5% of the
Voting Stock, neither Investor nor its Affiliates shall acquire, hold, nor enter
into discussions, negotiations, arrangements or understandings with any third
party to acquire, beneficial ownership (as defined in Rule 13d-3 promulgated
under the Exchange Act) of any Voting Stock (as defined below) or any securities
convertible into or exchangeable for Voting Stock, or any other right to acquire
Voting Stock (except, in any case, by way of stock dividends or other
distributions or offerings made available to holders of any Voting Stock
generally or in connection with the conversion of the Preferred Stock into
Common Stock) without the written consent of the Company.
(d) Voting Agreement. Subject to the last sentence of this
paragraph, for so long as Investor and its Affiliates beneficially own at least
5% of the Voting Stock, Investor and its Affiliates shall vote all shares of
Voting Stock they hold (a) for management's nominees to the Company's Board of
Directors, (b) in accordance with the recommendation of the
22
Company's Board of Directors, with respect to any merger, combination,
reorganization, exchange offer, acquisition or sale of assets or securities
(each, a "Major Transaction"), and (c) with respect to all other matters to be
voted on by the Company's shareholders, in the same manner and in the same
proportion as the votes cast by holders of the majority of the outstanding
Common Stock (excluding all such shares held by Investor and its Affiliates). If
any Major Transaction constitutes an exchange offer, Investor shall participate
in such exchange offer and tender its shares of Company securities as and when
recommended by the Company's Board of Directors. Notwithstanding the foregoing,
Investor shall have no obligation under this Section 9(d) with respect to any
Major Transaction (or the shareholder approval thereof), which, in the
reasonable judgment of Investor's Board of Directors, would materially impair
the value of its equity interest in the Company. For purposes of the preceding
sentence, the Board of Directors will not be deemed to have exercised reasonable
judgment unless (a) the average closing price of one share of Common Stock on
the Nasdaq National Market for the ten (10) trading days commencing with the
first full trading day after the public announcement of a Major Transaction is
twenty percent (20%) or more lower than such average for the same period ending
on and including the last full trading day preceding such public announcement or
(b) Investor obtains the written opinion of a nationally recognized investment
bank, opining that the terms of the Major Transaction are unfair, from a
financial standpoint, to Investor.
(e) Certain Additional Restrictions. For so long as Investor
and its Subsidiaries and Affiliates beneficially own at least 5% of the Voting
Stock, Investor and its Subsidiaries and Affiliates, without the Company's prior
consent, neither Investor nor its Subsidiaries or Affiliates shall (a) deposit
any Voting Stock in a voting trust or subject any such securities to any
arrangement or agreement with respect to the voting thereof, (b) solicit proxies
with respect to any Voting Stock, or become a "participant" in any "election
contest" (as such terms are used in Rule 14a-11 under the Exchange Act) relating
to the election of the Company's directors, or (c) engage in the purchase and
sale of puts and calls or other derivative securities in respect of the Common
Stock ("Hedging Transactions"), or short sales of Common Stock, except for bona
fide Hedging Transactions effected with or through a registered broker-dealer
provided that Investor retains record and beneficial ownership of the underlying
securities in connection with any such Hedging Transactions.
(f) Certain Definitions. As used in this Section 9 the term
"Voting Stock" means the Preferred Stock, Common Stock (including, without
limitation, the Common Stock issuable upon conversion of the Preferred Stock)
and any other securities issued by the Company having the ordinary power to vote
in the election of directors of the Company (other than securities having such
power only upon the happening of a contingency that has not occurred); and (ii)
the term "Event of Default" shall have the meaning set forth in the Statement of
Preferences.. For purposes of this Section 9, Investor shall not be deemed to
have beneficial ownership of any Voting Stock held by a pension plan or other
employee benefit program of Investor if Investor does not have the power to
control the investment decisions of such plan or program.
(g) Notice of Events of Default. Without limiting any other
rights available to Investor under this Agreement, at law or in equity, the
provisions of Sections 9(c), (d) and (e) shall immediately and automatically
terminate upon the first to occur of (i) an Event of Default,
23
or (ii) a determination (in accordance with Section 12 below) that the Company
has breached any covenant, representation, warranty or obligation set forth
herein.
(h) Additional Listing Application. Within a reasonable time
following the Closing (but in any event on or prior to the effective date of the
registration statement described in Section 7(b)(ii) hereof), the Company shall
file an application to list the Common Stock issuable upon conversion of the
Preferred Stock on the Nasdaq National Market.
(i) No Debt. In the event that the Company redeems any of the
Preferred Stock in accordance with the terms of the Statement of Preferences the
redemption price shall be paid by the issuance of a promissory note (the
"Promissory Note")substantially in the form attached to this Agreement as
Exhibit C. The Company agrees that, from the time of execution and delivery of
the Promissory Note until such Promissory Note is paid in full, it shall not,
create, incur or assume any indebtedness, whether secured or unsecured (other
than Permitted Debt) unless such debt is expressly subordinated to the payment
in full of the Promissory Note. The term "Permitted Debt" shall mean (i) trade
payables; (ii) debt existing immediately prior to the date of the Promissory
Note (including any extension or refinancing of such existing debt in an amount
not to exceed the committed principal amount); and (iii) debt arising in
connection with equipment leases and similar financings entered into in the
ordinary course of business. Notwithstanding the forgoing, the Company agrees
that until the Preferred Stock is converted, it will not issue convertible
securities (including debt securities, or equity securities, options, warrants,
puts, calls, or other similar rights) with effective conversion prices of less
than 100% of the average closing price of the Common Stock for the 10 trading
days prior to the issuance of such securities.
10. ASSIGNMENT. The Purchased Shares and the rights of the Investor
under this Agreement are transferable only to an Affiliate of Investor or to a
Person who acquires all or substantially all of the stock or assets of Investor
, or pursuant to any transaction under which Investor undergoes a change in
control; provided, however, that the rights under Section 9(a) shall terminate
upon the consummation of any such transaction. Shares of Common Stock issued
upon conversion of the Purchased Shares shall remain subject to the provisions
of this Agreement, including but not limited to Section 9, until such shares are
sold or transferred pursuant to the terms of this Agreement and applicable law.
The contractual rights associated with shares of Common Stock contained in this
Agreement (other than the rights provided in Section 7(b) hereof) shall
terminate upon any sale, transfer or other disposition of shares of Common Stock
to a Person that is not a Subsidiary or Affiliate of Investor, other than a
change of control of Investor. No assignment permitted by this Section 10 shall
be effective until the Company is given written notice by the assigning party
stating the name and address of the assignee and identifying the securities of
the Company as to which the rights in question are being assigned. In all cases,
any such assignee shall receive such assigned rights subject to all the terms
and conditions of this Agreement.
11. TERMINATION. Prior to the Closing, this Agreement may be terminated
and the purchase and sale of the Purchased Shares contemplated by this Agreement
may be abandoned only in accordance with the following provisions:
(a) by mutual written consent of the Investor and the Company;
24
(b) by the Investor or the Company if any court of competent
jurisdiction in the United States or other United States federal or state
governmental authority shall have taken any action, restraining, enjoining or
otherwise prohibiting the purchase and sale of the Purchased Shares, and such
order, decree, ruling or other action is or shall have become nonappealable;
(c) by the Investor or the Company, upon five (5) days written
notice to the other party, if the Closing shall not have occurred by November
15, 2001 (the "Outside Date"); provided, however, that the neither party may
terminate this Agreement pursuant to this clause (c) if such party's failure to
fulfill any of its obligations under this Agreement shall have been a principal
reason that the Closing shall not have occurred on or before said date;
(d) by the Company if (i) there shall have been a breach of
any representation or warranty on the part of the Investor set forth in this
Agreement or if any representation or warranty of the Investor shall have become
untrue such that the conditions set forth in Section 6(a) would be incapable of
being satisfied by the Outside Date; provided, however, that the Company shall
only be able to terminate this Agreement under this Section 11(d)(i) if it has
not breached any of its obligations hereunder in any material respect; or (ii)
there shall have been a breach by the Investor of any of its respective
covenants or agreements hereunder in any material respect, and the Investor has
not cured such breach within ten (10) business days after notice by the Company
thereof; provided, however, that the Company shall only be able to terminate
this Agreement under this Section 11(d)(ii) if it has not breached any of its
obligations hereunder in any material respect; or
(e) by the Investor if (i) there shall have been a breach of
any representation or warranty on the part of the Company set forth in this
Agreement or if any representation or warranty of the Investor shall have become
untrue such that the conditions set forth in Section 5(a) would be incapable of
being satisfied by the Outside Date; provided, however, that the Investor shall
only be able to terminate this Agreement under this Section 11(e)(i) if it has
not breached any of its obligations hereunder in any material respect; or (ii)
there shall have been a breach by the Company of any of its respective covenants
or agreements hereunder in any material respect, and the Company has not cured
such breach within ten (10) business days after notice by the Investor thereof;
provided, however, that the Investor shall only be able to terminate this
Agreement under this Section 11(e)(ii) if it has not breached any of its
obligations hereunder in any material respect.
In the event of the termination of this Agreement, this Agreement shall
forthwith become void and have no effect without any liability on the part of
any party hereto or its affiliates, directors, officers or shareholders;
provided, however, nothing contained herein shall relieve any party from
liability for any breach of this Agreement prior to such termination.
12. INDEMNIFICATION.
(a) Agreement to Indemnify.
(i) Company Indemnity. Investor and its Affiliates,
and each officer, director, shareholder, employer, representative and agent of
any of the foregoing (collectively, the "Investor Indemnitees") shall each be
indemnified and held harmless to the extent set forth in
25
this Section 12 by the Company with respect to any and all Damages (as defined
below) incurred by any Investor Indemnitee due to, resulting from or as a
proximate result of any misrepresentation in, or breach of, any representation,
warranty, covenant or agreement made by the Company in this Agreement; provided,
however, no Investor Indemnitee may make a claim for indemnification hereunder
unless the aggregate amount of such Damages (together with all concurrent or
prior claims hereunder) exceeds $50,000 (the "Indemnification Threshold") in
which case the Company will be liable for the full amount of such Damages
including the initial $50,000 of Damages. Subject to the last sentence of
Section 12(e), the aggregate liability of the Company hereunder will not in any
event exceed $20,000,000 (the "Indemnification Cap"). Indemnification claims
arising from the registration of Registrable Securities under Federal and state
securities laws are covered by Section 7 and not this Section 12.
(ii) Investor Indemnity. The Company and its
Affiliates, and each officer, director, shareholder, employer, representative
and agent of any of the foregoing (collectively, the "Company Indemnitees")
shall each be indemnified and held harmless to the extent set forth in this
Section 12, by Investor, in respect of any and all Damages incurred by any
Company Indemnitee due to, resulting from or as a proximate result of any
misrepresentation in, or breach of, any representation, warranty, covenant or
agreement made by the Investor in this Agreement; provided, however, no Company
Indemnitee may make a claim for indemnification hereunder unless the aggregate
amount of such Damages (together with all concurrent or prior claims hereunder)
exceeds the Indemnification Threshold, in which case Investor will be liable for
the full amount of such Damages including the initial $50,000 of Damages.
Subject to the last sentence of Section 12(e), the aggregate liability of
Investor hereunder will not in any event exceed the Indemnification Cap.
Indemnification claims arising from the registration of Registrable Securities
under Federal and state securities laws are covered by Section 7 and not this
Section 12.
(iii) Equitable Relief. Nothing set forth in this
Section 12 shall be deemed to prohibit or limit any Investor Indemnitee's or
Company Indemnitee's right at any time before, on or after the Closing, to seek
injunctive or other equitable relief for the failure of any Indemnifying Party
to perform or comply with any covenant or agreement contained herein.
(b) Survival. All representations and warranties of the
Investor and the Company contained herein and all claims of any Investor
Indemnitee or Company Indemnitee in respect of any inaccuracy or
misrepresentation in or breach thereof, shall survive the Closing until the
first anniversary of the Closing Date, regardless of whether the applicable
statute of limitations, including extensions thereof, may expire, other than
with respect to written claims regarding losses for such breaches made prior to
the first anniversary of the Closing Date. All covenants and agreements of the
Investor and the Company contained in this Agreement shall survive the Closing
in perpetuity (except to the extent any such covenant or agreement shall expire
by its terms). All claims of any Investor Indemnitee or Company Indemnitee in
respect of any breach of such covenants or agreements shall survive the Closing
until the expiration of one year following the non-breaching party's obtaining
actual knowledge of such breach.
(c) Claims for Indemnification. If any Investor Indemnitee or
Company Indemnitee (an "Indemnitee") shall believe that such Indemnitee is
entitled to indemnification pursuant to this Section 12 in respect of any
Damages, such Indemnitee shall give the appropriate
26
Indemnifying Party (which for purposes hereof, in the case of an Investor
Indemnitee, means the Company, and in the case of a Company Indemnitee, means
the Investor) prompt written notice thereof. Any such notice shall set forth in
reasonable detail and to the extent then known the basis for such claim for
indemnification. The failure of such Indemnitee to give notice of any claim for
indemnification promptly shall not adversely affect such Indemnitee's right to
indemnity hereunder except to the extent that such failure adversely affects the
right of the Indemnifying Party to assert any reasonable defense to such claim.
Each such claim for indemnity shall expressly state that the Indemnifying Party
shall have only the twenty (20) business day period referred to in the next
sentence to dispute or deny such claim. The Indemnifying Party shall have twenty
(20) business days following its receipt of such notice either (a) to acquiesce
in such claim by giving such Indemnitee written notice of such acquiescence or
(b) to object to the claim by giving such Indemnitee written notice of the
objection. If the Indemnifying Party does not object thereto within such twenty
(20) business day period, such Indemnitee shall be entitled to be indemnified
for all Damages in respect of such claim. If the Indemnifying Party objects to
such claim in a timely manner, the senior management of the Company and the
Investor shall meet to attempt to resolve such dispute. If the dispute cannot be
resolved by the senior management within twenty (20) business days of the date
of an objection notice, either party may make a written demand for formal
arbitration of the dispute in accordance with the provisions of Section 12(f).
(d) Defense of Claims. In connection with any claim that may
give rise to indemnity under this Section 12 resulting from or arising out of
any claim or proceeding against an Indemnitee by a person or entity that is not
a party hereto, the Indemnifying Party may (unless such Indemnitee elects not to
seek indemnity hereunder for such claim) but shall not be obligated to, upon
written notice to the relevant Indemnitee, assume the defense of any such claim
or proceeding and provides assurances, reasonably satisfactory to such
Indemnitee, that the Indemnifying Party will be financially able to satisfy such
claim to the extent provided herein if such claim or proceeding is decided
adversely. If the Indemnifying Party assumes the defense of any such claim or
proceeding, the Indemnifying Party shall select counsel reasonably acceptable to
such Indemnitee to conduct the defense of such claim or proceeding, shall take
all steps necessary in the defense or settlement thereof and shall at all times
diligently and promptly pursue the resolution thereof. If the Indemnifying Party
shall have assumed the defense of any claim or proceeding in accordance with
this Section 12(d), the Indemnifying Party shall be authorized to consent to a
settlement of, or the entry of any judgment arising from, any such claim or
proceeding, with the prior written consent of such Indemnitee, not to be
unreasonably withheld; provided, however, that the Indemnifying Party shall pay
or cause to be paid all amounts arising out of such settlement or judgment
concurrently with the effectiveness thereof; and provided further, that a
condition to any such settlement shall be a complete release of such Indemnitee
and its Affiliates, directors, officers, employees and agents with respect to
such claim. Such Indemnitee shall be entitled to participate in (but not
control) the defense of any such action, with its own counsel and at its own
expense. Each Indemnitee shall, and shall cause each of its Affiliates,
directors, officers, employees and agents to, reasonably cooperate (at the
Indemnifying Party's expense) with the Indemnifying Party in the defense of any
claim or proceeding being defended by the Indemnifying Party pursuant to this
Section 12(d). If the Indemnifying Party does not assume the defense of any
claim or proceeding resulting therefrom in accordance with the terms of this
Section 12(d), such Indemnitee may defend against such claim or proceeding in
such manner as it may deem appropriate, including settling such claim or
27
proceeding after giving notice of the same to the Indemnifying Party, on such
terms as such Indemnitee may deem appropriate.
(e) No Other Claims. The indemnification obligations set forth
in this Section 12 shall be the exclusive remedy of the Investor and the Company
for claims against each other in connection with this Agreement (but not the
Development Agreement or the Promissory Note), whether such claims are in tort
or contract or whether such claims are made for breach of any representation,
warranty or covenant herein or otherwise. Notwithstanding the foregoing, nothing
in Sections 12, 13(m) or elsewhere in this Agreement shall limit any party's
rights or remedies arising from or due to common law fraud or intentional
misrepresentation by the other party.
(f) Arbitration. Any and all claims, controversies or
disputes, pursuant to Section 12 of this Agreement and which have not been
resolved by senior management of the parties (a "Dispute") shall be resolved
solely by binding arbitration in accordance with the Commercial Arbitration
Rules (the "Rules") of the American Arbitration Association ("AAA") at the
offices of the AAA in Santa Clara, California. Either party may commence
arbitration by sending a notice thereof to the other party and the AAA. The
arbitration shall be conducted by a single arbitrator if the parties are able to
reach agreement upon a single arbitrator within 30 days after a party has sent a
notice seeking arbitration. If the parties are unable to reach agreement on a
single arbitrator, each party shall appoint one arbitrator with the two
arbitrators thus appointed selecting a third arbitrator. The party requesting
arbitration shall appoint one arbitrator and within 15 days thereafter the other
party shall appoint the second arbitrator. Within 15 days after the appointment
of the second arbitrator, the two arbitrators so chosen shall mutually agree
upon the selection of the third, impartial and neutral arbitrator. In the event
the chosen arbitrators cannot agree upon the selection of the third arbitrator,
the Rules for the selection of such an arbitrator shall be followed. The
arbitrators shall (by decision of a majority of the arbitrators) make a decision
and award resolving the dispute as soon as practical after the selection of the
last arbitrator and within 30 days of the last hearing held concerning such
dispute(s). Within 30 days after the arbitrators make their decision and award,
the arbitrators shall render findings of fact and conclusions of law and a
written opinion setting forth the basis and reasons for any decision and award
rendered by them and deliver such documents to each party to this Agreement
along with a signed copy of the award. Discovery shall be allowed as
contemplated by the United States Federal Rules of Civil Procedure. All
arbitration proceedings, including all evidence and statements, shall be
confidential and shall not be used or disclosed for any other purpose. Expenses
of arbitration (other than attorney's fees and expenses, which shall constitute
Damages if the party seeking indemnification shall prevail, as determined by the
arbitrators) shall be equally divided between the parties, provided, however,
the arbitrators shall have the authority to assess any of the foregoing costs
against any party acting in bad faith. The award of the arbitrators shall be
final and binding and is the sole and exclusive remedy of the parties regarding
any Disputes hereunder. A judgment on the award may be entered in any court
having jurisdiction thereof. Should either party bring any legal action against
the other with respect to any claim required to be arbitrated under this
Agreement by any method other than arbitration, the other party shall be
entitled to recover from such party all damages, costs, expenses and attorneys'
fees incurred as a result of such action.
28
(g) Certain Definitions. As used in this Section 12, "Damages"
means all demands, claims, actions or causes of action, assessments, losses,
damages, costs, expenses, liabilities, judgments, awards, fines, response costs,
sanctions, taxes, penalties, charges and amounts paid in settlement, including
reasonable out-of-pocket costs, fees and expenses (including reasonable costs,
fees and expenses of attorneys, accountants and other agents of, or other
parties retained by, such party).
13. MISCELLANEOUS.
(a) Successors and Assigns. Subject to Section 10, the terms
and conditions of this Agreement will inure to the benefit of and be binding
upon the respective permitted successors and assigns of the parties.
(b) Governing Law. This Agreement will be governed by and
construed under the internal laws of the State of California, without reference
to principles of conflict of laws or choice of laws.
(c) Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(d) Headings. The headings and captions used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules will, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
(e) Notices. Any notice required or permitted under this
Agreement shall be given in writing, shall be effective when received, and shall
in any event be deemed received and effectively given upon personal delivery to
the party to be notified or three (3) business days after deposit with the
United States Post Office, by registered or certified mail, postage prepaid, or
one (1) business day after deposit with a nationally recognized courier service
such as FedEx for next business day delivery under circumstances in which such
service guarantees next business day delivery, or one (1) business day after
facsimile with copy delivered by registered or certified mail, in any case,
postage prepaid and addressed to the party to be notified at the address
indicated for such party below or at such other address as the Investor or the
Company may designate by giving at least ten (10) days advance written notice
pursuant to this Section 13(e).
(a) if to the Company, to:
29
Adept Technology, Inc.
150 Rose Orchard Way
San Jose, California 95134
Attn: Brian R. Carlisle
Michael W. Overby
Telephone: (408) 432-0888
Facsimile: (408) 434-5005
with a copy (which will not constitute notice) to
Gibson, Dunn & Crutcher LLP
1530 Page Mill Road
Palo Alto, California 94304
Attn: Lawrence Calof, Esq.
Telephone: (650) 849-5300
Facsimile: (650) 849-5030
(b) if to Investor, to:
JDS Uniphase Corporation
210 Baypointe Parkway
San Jose, CA 95134
Attn: Michael C. Phillips
Facsimile: (408) 954-0813
(f) No Finder's Fees. The Investor will indemnify and hold
harmless the Company from any liability for any commission or compensation in
the nature of a finders' or broker's fee for which the Investor or any of its
officers, partners, employees or consultants, or representatives is responsible.
The Company will indemnify and hold harmless the Investor from any liability for
any commission or compensation in the nature of a finder's or broker's fee for
which the Company or any of its officers, employees or consultants or
representatives is responsible.
(g) Amendments and Waivers. The provisions of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company, the Investor (so
long as the Investor shall hold any of the Purchased Shares or Common Stock
issuable upon conversion thereof) and the holders of Purchased Shares
representing at least a majority of the total aggregate number of Purchased
Shares then outstanding (excluding any of such shares that have been sold in a
transaction in which rights under Section 7(b) are not assigned in accordance
with this Agreement or sold to the public pursuant to SEC Rule 144 or
otherwise). Any amendment or waiver effected in accordance with this Section
13(g) will be binding upon the Investor, the Company and their respective
successors and assigns.
30
(h) Severability. If any provision of this Agreement is held
to be unenforceable under applicable law, such provision will be excluded from
this Agreement and the balance of the Agreement will be interpreted as if such
provision were so excluded and will be enforceable in accordance with its terms.
(i) Entire Agreement. This Agreement and the Development
Agreement, together with all exhibits and schedules hereto, constitutes the
entire agreement and understanding of the parties with respect to the subject
matter hereof and supersedes any and all prior negotiations, correspondence,
agreements. understandings duties or obligations between the parties with
respect to the subject matter hereof.
(j) Further Assurances. From and after the date of this
Agreement upon the request of the Company or the Investor, the Company and the
Investor, as applicable, will execute and deliver such instruments, documents or
other writings, and take such other actions, as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
(k) Meaning of Include and Including. Whenever in this
Agreement the word "include" or "including" is used, it shall be deemed to mean
"include, without limitation" or "including, without limitation," as the case
may be, and the language following "include" or "including" shall not be deemed
to set forth an exhaustive list.
(l) Fees, Costs and Expenses. All fees, costs and expenses
(including attorney's' fees and expenses) incurred by either part hereto in
connection with the preparation, negotiation and execution of this Agreement and
the consummation of the transactions contemplated hereby and thereby (including
the costs associated with any filings with, or compliance with any of the
requirements of, any governmental authorities), shall be the sole and exclusive
responsibility of such party.
(m) No Consequential Damages. IN NO EVENT SHALL EITHER PARTY
BE LIABLE FOR ANY CONSEQUENTIAL, INDIRECT, INCIDENTAL, PUNITIVE, OR SPECIAL
DAMAGES WHATSOEVER, INCLUDING WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS
PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION, AND THE LIKE,
ARISING OUT OF THIS AGREEMENT.
(n) Competition. Nothing set forth herein shall be deemed to
preclude, limit or restrict the Company's or the Investor's ability to compete
with the other.
(o) Stock Splits, Dividends and other Similar Events. The
provisions of this Agreement (including the number of shares of Common Stock and
other securities described herein) shall be appropriately adjusted to reflect
any stock split, stock dividend, reorganization or other similar event that may
occur with respect to the Company after the date hereof.
(p) Knowledge. For purposes of this Agreement, knowledge shall
mean, with respect to the Company, the actual knowledge of Messrs. Brian R.
Carlisle, Charles S. Duncheon, Bruce E. Shimano and Michael W. Overby.
[The balance of this page is intentionally left blank.]
31
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
ADEPT TECHNOLOGY, INC. JDS UNIPHASE CORPORATION
By: /s/ Brian R. Carlisle By: /s/ Michael C. Phillips
---------------------------- ----------------------------
Name: Brian R. Carlisle Name: Michael C. Phillips
---------------------------- ----------------------------
Title: CEO Title: Senior Vice President,
---------------------------- General Counsel
----------------------------
{Signature page to Securities Purchase and Investor Rights Agreement}
32
EXHIBIT A
STATEMENT OF PREFERENCES
OF
SERIES A PREFERRED STOCK AND
SERIES B PREFERRED STOCK
OF
ADEPT TECHNOLOGY, INC.
Brian R. Carlisle and Bruce E. Shimano certify that:
1. They are the President and Secretary, respectively, of Adept
Technology, Inc., a California corporation (the "Corporation").
2. The Corporation has five million (5,000,000) shares of Preferred
Stock authorized, none of which has been issued. The Board of Directors has by
resolution designated (a) seventy-eight thousand (78,000) shares of the
undesignated Preferred Stock as "Series A Convertible Preferred Stock," none of
which has been issued or is outstanding, and (b) twenty-two thousand (22,000)
shares of the undesignated Preferred Stock as "Series B Convertible Preferred
Stock," none of which has been issued or is outstanding.
3. Pursuant to the authority given to it by the Corporation's Articles
of Incorporation, the Board of Directors of the Corporation has duly adopted the
following recitals and resolutions:
"WHEREAS, the Articles of Incorporation of the Corporation, as
amended, provide for a class of shares known as the Preferred Stock,
issuable from time to time in one or more series;
WHEREAS, the Board of Directors of the Corporation is
authorized, within the limitations and restrictions stated in the
Articles of Incorporation, to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon
each wholly unissued series of the Preferred Stock, to fix the number
of shares constituting each such series, and to determine the
designation thereof;
WHEREAS, the Board of Directors of the Corporation desires,
pursuant to its authority as aforesaid, to designate a series of the
Preferred Stock as "Series A Convertible Preferred Stock" and to
designate the number of shares constituting such series and to fix the
rights, preferences, privileges and restrictions of such series; and
WHEREAS, the Board of Directors of the Corporation desires,
pursuant to its authority as aforesaid, to designate a series of the
Preferred Stock as "Series B Convertible Preferred Stock" and to
designate the number of shares constituting such series and to fix the
rights, preferences, privileges and restrictions of such series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors of
the Corporation hereby designates such new series of the Preferred
Stock and the number of shares constituting such series and fixes the
rights, preferences, privileges and restrictions relating to such
series as follows:
(A) Designation of Series. The Corporation shall have a series of
Preferred Stock designated as "Series A Convertible Preferred Stock" (the
"Series A Preferred") and a series of Preferred Stock designated as "Series B
Convertible Preferred Stock" (the "Series B Preferred" and collectively with the
Series A Preferred, the "Preferred Stock").
(B) Designation of Number of Shares in Series. The number of shares
constituting the Series A Preferred shall be seventy-eight thousand (78,000),
and the number of shares constituting the Series B Preferred shall be twenty-two
thousand (22,000).
(C) Fixing the Rights, Preferences, Privileges and Restrictions. The
following rights, preferences, privileges and restrictions are hereby granted to
and imposed upon the Preferred Stock:
1. Dividends.
(a) The holders of the Preferred Stock shall be entitled to
receive in any fiscal year, out of the funds legally available therefor,
dividends at the rate of $15.00 per share (adjusted for any subdivisions,
combinations, consolidations or stock distributions or stock dividends with
respect to such shares) per annum on each outstanding share of Preferred Stock,
payable in preference and priority to any payment of any dividend on the Common
Stock. The right to such dividends on the Preferred Stock shall be cumulative,
and the right to receive such dividends shall accrue to holders of the Preferred
Stock by reason of the fact that dividends on such shares are not declared or
paid in any prior year. Any accrued and unpaid dividends on the Preferred Stock
shall be payable only in the event of a liquidation, dissolution or winding up
of the Corporation or other Liquidity Event (as defined in Section 2(c)).
(b) No dividends shall be paid on any share of Common Stock
during any fiscal year of the Corporation until dividends in the total amount of
$15.00 per share (adjusted for any subdivisions, combinations, consolidations or
stock distributions or stock dividends with respect to such shares) on the
Preferred Stock shall have been paid or declared and set apart during that
fiscal year and any prior year in which dividends accumulated but remain unpaid,
and no dividends shall be paid on any share of Common Stock unless a dividend is
paid with respect to all outstanding shares of Preferred Stock, in an amount for
each such share of Preferred Stock equal to or greater than the aggregate amount
of such dividends for all shares of Common Stock into which each such share of
Preferred Stock could then be converted, as the case may be.
2. Liquidation Preference. In the event of any liquidation, dissolution
or winding up of the Corporation, either voluntary or involuntary, distributions
to the shareholders of the Corporation shall be made in the following manner:
(a) The holders of the Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Common Stock by reason of
their ownership of such stock, the amount equal to
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$250.00 (adjusted for any subdivisions, combinations, consolidations or stock
distributions or stock dividends with respect to the Preferred Stock) (the
"Initial Preferred Stock Price") for each share of Preferred Stock then held by
them and, in addition, an amount equal to all cumulated and unpaid dividends on
the Preferred Stock. If upon the occurrence of a liquidation, dissolution or
winding up of the Corporation the assets and funds thus distributed among the
holders of the Preferred Stock shall be insufficient to permit the payment to
such holders of the full preferential amount, then the entire assets and funds
of the Corporation legally available for distribution shall be distributed
ratably among the holders of the Preferred Stock on a pro rata basis, based upon
the number of shares of Preferred Stock then held by each holder.
(b) After setting apart or paying in full the preferential
amounts due pursuant to Section 2(a), the remaining assets of the Corporation
available for distribution to shareholders, if any, shall be distributed to the
holders of the Common Stock on a pro rata basis, based on the number of shares
of Common Stock then held by each holder on an as-converted basis.
(c) The occurrence of any of the following events: (i) the
consummation of (x) an acquisition of the Corporation by another corporation or
entity by merger, consolidation or other reorganization in which the holders of
the Corporation's outstanding voting stock immediately prior to such transaction
own, directly or indirectly, immediately following such merger, consolidation or
reorganization, shares representing less than 50% of the combined voting power
of the outstanding voting securities of the corporation or other entity
resulting from such merger, consolidation or reorganization; or (y) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the Corporation; or (ii)
the shareholders of the Corporation approve a plan or proposal for the
liquidation or dissolution of the Corporation; or (iii) any 'person' (as defined
in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") shall become the 'beneficial owner' (as defined in Rule
13d-3 under the Exchange Act) directly or indirectly of 50% or more of the
Corporation's outstanding Common Stock (each, a "Liquidity Event"), shall be
deemed to be a liquidation, dissolution or winding up within the meaning of this
Section 2.
(d) Notwithstanding any other provision of this Section 2, the
Corporation may at any time, out of funds legally available therefor, repurchase
shares of Common Stock of the Corporation issued to or held by employees,
officers or consultants of the Corporation or its subsidiaries upon termination
of their employment or services, pursuant to any agreement providing for such
right of repurchase, whether or not dividends on the Preferred Stock shall have
been declared and funds set aside therefor and such repurchases shall not be
subject to the liquidation preferences of the Preferred Stock.
(e) In the event the Corporation proposes to distribute assets
other than cash in connection with any liquidation, dissolution or winding up of
the Corporation, the value of the assets to be distributed to the holder of
shares of Preferred Stock and Common Stock shall be determined in good faith by
the Board of Directors. Any securities not subject to investment letter or
similar restrictions on free marketability shall be valued as follows:
(i) If traded on the Nasdaq Stock Market or another
securities exchange, the value shall be deemed to be the average of the
security's closing prices on Nasdaq
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or such exchange over the thirty trading (30) day period ending on and including
the day immediately preceding the distribution; and
(ii) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid prices over the thirty
trading (30) day period ending on and including the day immediately preceding
the distribution.
The method of valuation of securities subject to investment letter or other
restrictions on free marketability shall be adjusted to make an appropriate
discount from the market value determined as in clauses (i) or (ii) to reflect
the fair market value thereof as determined in good faith by the Board of
Directors, which determination shall be final and conclusive.
3. Voting Rights. Except as otherwise required by law or as set forth
herein, the holder of each share of Common Stock issued and outstanding shall
have one vote for each share of Common Stock held by such holder, and the holder
of each share of Preferred Stock shall be entitled to the number of votes equal
to the number of shares of Common Stock into which such share of Preferred Stock
could be converted assuming a conversion rate equal to (a) the Initial Preferred
Stock Price divided by (b) 8.18. Holders of Common Stock and Preferred Stock
shall be entitled to notice of any shareholders' meeting in accordance with the
Bylaws of the Corporation.
4. Conversion. The holders of the Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) Right to Convert. Subject to Section 6, each share of
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the earlier of (i) the first anniversary of the date on which the
shares of Preferred Stock are originally issued (the "Original Issue Date"),
(ii) the public announcement of a Liquidity Event or (iii) the occurrence of an
Event of Default (as defined in Section 5(a)). Each such share shall be
convertible into such number of fully paid and nonassessable shares of Common
Stock as is determined in accordance with Section 5. The date of any conversion
of the Preferred Stock under this Section 4 is referred to as the "Conversion
Date".
(b) Automatic Conversion. Subject to Sections 5(g) and 6, each
share of Preferred Stock shall automatically be converted into shares of Common
Stock at the then effective conversion rate determined in accordance with
Section 5 hereof upon and after the third anniversary of the Original Issue
Date.
(d) Mechanics of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of the Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then fair
value of a share of Preferred Stock as determined in good faith by the Board of
Directors of the Corporation. Before any holder of Preferred Stock shall be
entitled to convert the same into full shares of Common Stock and to receive
certificates therefor, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Preferred Stock and shall give written notice to the
Corporation at such office that he elects to convert the same. The Corporation
shall, as soon as
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practicable thereafter (but in any event within five (5) business days
thereafter), issue and deliver at such office to such holder of Preferred Stock
a certificate or certificates for the number of shares of Common Stock to which
he shall be entitled as aforesaid and a check payable to the holder in the
amount of any cash amounts payable as the result of a conversion into fractional
shares of Common Stock. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date. Upon the occurrence of any event specified in Section
4(b), but subject to Section 5(g), the outstanding shares of Preferred Stock
shall be converted into Common Stock automatically without the need for any
further action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent; provided, however, that the Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such conversion
unless the certificates evidencing such shares of Preferred Stock are either
delivered to the Corporation or its transfer agent as provided below, or the
holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates.
(e) Reservation of Stock Issuable Upon Conversion. This
Corporation 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 shares of the Preferred Stock such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Preferred Stock subject to the limitations set
forth in Section 5, 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
then outstanding shares of the Preferred Stock eligible for conversion, this
Corporation 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 purposes.
5. Determination of Conversion Rate.
(a) Special Definitions. For purposes of this Section 5, the
following definitions shall apply:
(i) "Announcement Date Price" means $4.09.
(ii) "Cash Balance" means the sum of the cash and
cash equivalents and short-term investments on the Corporation's balance sheet
(exclusive of any (x) borrowed funds, whether held in the form of cash, cash
equivalents or short-term investments, or (y) funds raised on or after October
23, 2001 from public or private equity or debt financings) determined in
accordance with generally accepted accounting principles, consistently applied.
(iii) "Conversion Date Price" means the average of
the closing prices of one share of Common Stock on the Nasdaq National Market
over the thirty (30) trading days ending on and including the trading date
immediately preceding the applicable Conversion Date.
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(iv) "Event of Default" means (a) the filing of any
bankruptcy, insolvency, trustee or receivership with respect to the Corporation
or its assets, (b) the public announcement, publication or reporting by the
Corporation of Cash Balances of less than fifteen million dollars ($15,000,000)
as at (x) the end of any fiscal quarter of the Corporation included in the
Reporting Period, or (y) as at any other date included in the Reporting Period
on which the Corporation publicly announces, publishes or reports Cash Balances,
or (c) the occurrence of a Liquidity Event (other than a Liquidity Event
described in Section 2(c)(i), (ii) or (iii), which is approved by the
Corporation's Board of Directors.
(v) "Excess Shares" shall mean any shares of Series A
Preferred, the conversion of which, applying the conversion rate formula using
the denominator set forth in clause (y) of Section 5(b), would result in the
issuance of shares of Common Stock in excess of the number of shares issuable
based on a conversion rate under Section 5(b) having a denominator equal to
4.09.
(vi) "Reporting Period" means the period beginning
October 1, 2001 and ending on September 30, 2002.
(b) Determination of Conversion Rate. The conversion rate per
share of Preferred Stock shall be a fraction, the numerator of which shall be
the Initial Preferred Stock Price and the denominator shall be the lower of the
following:
(i) 8.18; and
(ii) 75% of the Conversion Date Price.
provided, however, subject to clause (c) below, (x) the
denominator shall in no event be less than 4.09 with respect to any shares of
Series B Preferred, and (y) the denominator shall in no event be less than 2.05
with respect to any shares of Series A Preferred.
(c) Event of Default Conversion Rate. Notwithstanding the
foregoing clause (b), upon the occurrence of an Event of Default, the conversion
rate per share of Preferred Stock shall be a fraction, the numerator of which
shall be the Initial Preferred Stock Price and the denominator shall be the
lower of the following:
(i) 4.09; and
(ii) 75% of the Conversion Date Price.
(d) Adjustments for Stock Dividends, Subdivisions,
Combinations or Consolidations of Common Stock. In the event, prior to
conversion of the Preferred Stock, the outstanding shares of Common Stock shall
be (i) subdivided (by stock dividend, stock split, or otherwise) into a greater
number of shares of Common Stock, or (ii) consolidated or combined (by a reverse
stock split or otherwise) into a lesser number of shares of Common Stock, then,
in either case, the conversion rates described in Sections 5(b) and 5(c) shall
be proportionately increased or decreased, as applicable.
38
(e) Adjustments for Other Distributions. In the event the
Corporation at any time or from time to time makes, or files a record date for
the determination of, holders of Common Stock entitled to receive any
distribution payable in securities or assets of the Corporation other than
shares of Common Stock then in each such event provision shall be made so that
the holders of Preferred Stock shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of securities or assets of the Corporation which they would have received
had their Preferred Stock been converted into Common Stock on the date of such
event and had they thereafter, during the period from the date of such event to
and including the date of conversion, retained such securities or assets
receivable by them as aforesaid during such period, subject to all other
adjustment called for during such period under this Section 5 with respect to
the rights of the holders of the Preferred Stock.
(f) Adjustments for Reclassification, Exchange and
Substitution. If the Common Stock issuable upon conversion of the Preferred
Stock shall be changed into the same or a different number of shares of any
other class or classes of stock of the Corporation or another entity (including
without limitation, pursuant to a Liquidity Event), whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares provided for above), then and in each such event the
holder of each share of Preferred Stock shall have the right thereafter to
convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization or reclassification
or other change by holders of the number of shares of Common Stock that would
have been subject to receipt by the holders upon conversion of the Preferred
Stock immediately before that change, all subject to further adjustment as
provided herein.
(g) Miscellaneous.
(i) The Preferred Stock shall not be convertible, in
the aggregate, into 20% or more of the outstanding voting securities of the
Corporation. No holder of Preferred Stock may convert shares of Preferred Stock
into shares of Common Stock if, and to the extent, after giving effect to such
conversion, such holder shall hold, in the aggregate, 20% or more of the
outstanding voting securities of the Corporation. The foregoing shall not affect
the applicable conversion rate and any shares of Preferred Stock not permitted
to be converted pursuant to this Section 5(g)(i) shall be immediately
convertible, unless redeemed in accordance with Section 6, at such time as such
holder subsequently holds, in the aggregate, less than 20% of such securities.
The Conversion Date for automatic conversion specified in Section 4 shall be
extended as required to permit the full conversion of all Preferred Stock
pursuant to this paragraph.
(ii) calculations under this Section 5 shall be made
to the nearest cent or to the nearest one hundredth (1/100) of a share, as the
case may be.
(iii) No adjustment in the conversion rate of the
Preferred Stock need be made if such adjustment would result in a change in such
conversion rate of less than 0.5%. Any adjustment of less than 0.5% which is not
made shall be carried forward and shall be made at the time of and together with
any subsequent adjustment which, on a cumulative basis, amounts to an adjustment
of 0.5% or more in such Conversion Rate.
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6. Redemption.
(a) Redemption Right. The Corporation shall, subject to the
provisions of this Section 6, have the right, but not the obligation, to redeem
from each holder of Excess Shares elected to be converted, any or all of such
Excess Shares, effective on the day immediately prior to the Conversion Date
applicable to such Excess Shares (each a "Redemption Date") as provided in
clause (c).
(b) Redemption Price. Any Excess Shares elected to be redeemed
by the Corporation shall be redeemed at a price per Excess Share equal to the
sum of the Initial Preferred Stock Price, plus all cumulated and unpaid
dividends (the "Series A Redemption Price"). Such Series A Redemption Price for
all Excess Shares to be redeemed shall be paid in the form of a senior unsecured
promissory note bearing interest from and after the Redemption Date at the rate
of 6% per annum, maturing two (2) years after the Redemption Date and prepayable
in whole or in part, without premium or penalty.
(c) Notice of Redemption. At least five (5) days prior to any
Redemption Date, the Corporation shall send a notice (a "Redemption Notice") to
all holders of Excess Shares to be redeemed setting forth (A) the Series A
Redemption Price for the shares to be redeemed; (B) the Redemption Date, and (C)
the place at which such holders may obtain payment of the Series A Redemption
Price upon surrender of their share certificates. If the Corporation does not
have sufficient funds legally available to redeem all shares to be redeemed at
the Redemption Date, then it shall redeem such shares pro rata from the holders
thereof to the extent possible and shall redeem the remaining shares to be
redeemed as soon as sufficient funds are legally available.
(d) Mechanics of Redemption. On or after such Redemption Date,
each holder of shares of Excess Shares to be redeemed shall surrender such
holder's certificates representing such shares to the Corporation in the manner
and at the place designated in the Redemption Notice, and thereupon the Series A
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. In the event less than all the
shares represented by such certificates are redeemed, a new certificate shall be
issued representing the unredeemed shares. From and after such Redemption Date,
unless the Corporation is unable to pay the Series A Redemption Price due to not
having sufficient legally available funds, all rights of the holder of such
Excess Shares (except the right to receive the Series A Redemption Price,
without interest upon surrender of their certificates), shall cease and
terminate with respect to such shares; provided that in the event that shares of
Series A Preferred are not redeemed because the Corporation does not have
sufficient legally available funds, such shares of Series A Preferred shall
remain outstanding and shall be entitled to all of the rights and preferences
provided herein.
(e) Conversion Rights After Redemption Notice. In the event of
a call for redemption of any shares of Series A Preferred, the Conversion Rights
set forth in Section 4 for such Series A Preferred shall terminate as to the
shares designated for redemption at the close of business on the business day
preceding the Redemption Date.
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7. Protective Provisions. So long as any shares of Preferred Stock are
outstanding, the Corporation shall not, without first obtaining the approval of
the holders of at least a majority of the then-outstanding shares of Preferred
Stock, take any action that:
(a) alters the rights, preferences or privileges of the
Preferred Stock;
(b) increases the number of authorized shares of Preferred
Stock;
(b) creates any new class or series of shares that has a
preference over or is on a parity with the Preferred Stock with respect to
voting, dividends, or liquidation preferences;
(c) reclassifies stock into shares having a preference over or
on a parity with the Preferred Stock with respect to voting, dividends or
liquidation preferences; or
(d) supplements, amends or modifies this Statement of
Preferences.
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- ------------------------------ -------------------------------
Brian R. Carlisle, President Bruce E. Shimano, Secretary
Each of the undersigned declares under penalty of perjury under the laws of the
State of California that he has read the foregoing certificate and knows the
contents thereof and that the same is true of his own knowledge.
Dated: October __, 2001
- ------------------------------ -------------------------------
Brian R. Carlisle Bruce E. Shimano
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EXHIBIT B
Opinion of Counsel to Company
Matters to be covered by opinion of counsel, subject to customary limitations
and qualifications.
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of California. The Company has all
requisite corporate power and authority to own or lease its properties and
assets and to conduct its business as it currently conducted. The Company is
qualified to do business and is in good standing in the states of Arizona,
Connecticut, North Carolina, Michigan and Ohio.
2. The Company has all requisite corporate power and authority to
execute and deliver the Securities Purchase and Investor Rights Agreement, to
sell and issue the Purchased Shares (and the Common Stock issuable upon
conversion thereof) to the Investor and to otherwise carry out and perform its
obligations under the terms of the Securities Purchase and Investor Rights
Agreement. The Securities Purchase and Investor Rights Agreement has been duly
and validly authorized, executed and delivered by the Company, and constitutes a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms.
3. Based in part on the representations and warranties of Investor in
the Securities Purchase and Investor Rights Agreement, the offer and sale of the
Purchased Shares (and the Common Stock issuable upon conversion thereof) are
exempt from the registration provisions of the Securities Act of 1933, as
amended.
4. All corporate and shareholder actions necessary on the part of the
Company for the sale and the issuance of the Purchased Shares to the Investor
and the execution and delivery of the Securities Purchase and Investor Rights
Agreement and the performance of the Company's obligations thereunder have been
taken. The Purchased Shares (and the Common Stock issuable upon conversion
thereof), when issued and paid for as provided in the Securities Purchase and
Investor Rights Agreement and the Articles of Incorporation, will be validly
issued, fully paid and nonassessable.
5. To such counsel's knowledge, the Company is not in violation of any
term of its Articles of Incorporation or Bylaws. Neither the execution, delivery
and performance of the Securities Purchase and Investor Rights Agreement nor the
issuance of the Purchased Shares (and the Common Stock issuable upon conversion
thereof) will result in a violation of any term of the Company's Articles of
Incorporation or Bylaws. To such counsel's knowledge, neither the execution,
delivery and performance of the Securities Purchase and Investor Rights
Agreement nor the issuance of the Purchased Shares will result in any such
violation or constitute a default under or breach of (i) the provision of any
judgment, writ, decree or order applicable to, or binding upon, the Company or
(ii) any law, rule or regulation applicable to the Company.
6. Except for the listing of the Common Stock reserved for issuance
upon conversion of the Purchased Shares on the Nasdaq National Market,
post-closing filings with the
SEC, no consent, approval or authorization of, or designation, declaration or
filing with, any governmental authority on the part of the Company is required
for the execution and delivery of the Securities Purchase and Investor Rights
Agreement and the sale and issuance of the Purchased Shares (and the Common
Stock issuable upon conversion thereof).
44
EXHIBIT C
Form of Promissory Note
$[amount] [Redemption Date], 200_
FOR VALUE RECEIVED, Adept Technology, Inc. (the "Debtor"), promises to pay to
the order of [name of Preferred Holder] ("Holder"), the principal sum of
_________ Dollars ($_______) and to pay interest on the outstanding principal of
this Promissory Note (this "Note"), in accordance with Section 3 of this Note.
1. Maturity. The entire unpaid principal balance shall automatically
mature and be due and payable on [date which is second anniversary of redemption
date] (as such date may be accelerated pursuant to Section 5 below, the
"Maturity Date"), and accrued interest on this Note shall be due and payable on
the Maturity Date. The Debtor shall pay the entire unpaid principal balance and
all interest accrued thereon on the Maturity Date. All payments received shall
be applied first against accrued and unpaid interest, then against principal.
All sums owing hereunder are payable in lawful money of the United States of
America, in immediately available funds.
2. Unsecured Note. The amounts due and owing under this Note shall be
unsecured obligations of the Debtor. If the Debtor does not repay the principal
and all accrued interest to Holder on the Maturity Date, Holder may pursue any
contractual, legal or equitable remedies that are available to it.
3. Interest. Interest shall begin to accrue on the unpaid principal
balance of this Note, if any, commencing on the date hereof and continuing until
repayment of this Note in full at the rate of six percent (6%) per annum
calculated on the basis of a 365 day year and actual days elapsed. If not
previously repaid in acccordance with Section 4, interest accrued on this Note
shall be paid upon repayment of this Note. After the occurrence of an event of
default under Section 5 hereof, this Note shall bear interest until paid at a
rate equal to the lower of fourteen percent (14%) per annum or the highest rate
permitted by law in California.
4. Prepayment. The unpaid principal balance and all accrued interest
and any and all other sums payable to Holder hereunder may be prepaid in whole
or in part prior to the Maturity Date without penalty or premium.
5. Default. The Debtor will be deemed to be in default hereunder, the
maturity of this Note shall be immediately and automatically accelerated, and
the unpaid principal balance of this Note, together with all accrued interest
thereon, will become immediately due and payable if any of the following occur:
45
(a) The Debtor shall default in the payment of the principal
or accrued interest of this Note as and when the same shall become due and
payable, whether by acceleration or otherwise; or
(b) The Debtor shall:
(i) become insolvent or unable to pay its debts as
they become due; or
(ii) apply for the appointment of a trustee,
receiver, sequestrator or other custodian for the Debtor or any of its property,
or make a general assignment for the benefit of creditors or shall have any such
proceeding commenced against it that is not dismissed within 60 days following
the commencement of such proceeding;
(c) The filing of a petition in bankruptcy or under any
similar insolvency law by the Debtor, the making of an assignment for the
benefit of creditors, or if any voluntary petition in bankruptcy or under any
similar insolvency law is filed against the Debtor and such petition is not
dismissed within sixty (60) days after the filing thereof; or
(d) take any corporate or other action authorizing, or in
furtherance of, any of the foregoing.
6. Miscellaneous.
(a) The Debtor hereby waives presentment, demand, protest,
notice of dishonor, diligence and all other notices, any release or discharge
arising from any extension of time, discharge of a prior party, release of any
or all of any security given from time to time for this Note, or other cause of
release or discharge other than actual payment in full hereof.
(b) Holder shall not be deemed, by any act or omission, to
have waived any of its rights or remedies hereunder unless such waiver is in
writing and signed by Holder and then only to the extent specifically set forth
in such writing. No delay or omission of Holder to exercise any right, whether
before or after a default hereunder, shall impair any such right or shall be
construed to be a waiver of any right or default, and the acceptance at any time
by Holder of any past-due amount shall not be deemed to be a waiver of the right
to require prompt payment when due of any other amounts then or thereafter due
and payable.
(c) Time is of the essence hereof. Upon any default hereunder,
Holder may exercise all rights and remedies provided for herein and by law or
equity, including, but not limited to, the right to immediate payment in full of
this Note.
(d) The remedies of Holder as provided herein, or any one or
more of them, or in law or in equity, shall be cumulative and concurrent, and
may be pursued singularly, successively or together at Holder's sole discretion,
and may be exercised as often as occasion therefor shall occur.
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(e) If any provisions of this Note would require the Debtor to
pay interest hereon at a rate exceeding the highest rate allowed by applicable
law, the Debtor shall instead pay interest under this Note at the highest rate
permitted by applicable law.
(g) This Note shall be governed by and construed in accordance
with and the laws of the State of California applicable to contracts wholly made
and performed in the State of California.
IN WITNESS WHEREOF, the Debtor has executed this Promissory Note as of
the date first above written.
ADEPT TECHNOLOGY, INC.
By:
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Name:
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Title:
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47