SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of November
6, 2003, by and among VA Software Corporation, a Delaware corporation, with
headquarters located at 47071 Bayside Parkway, Fremont, California 94538 (the
"Company"), and the investors listed on the Schedule of Buyers attached hereto
(individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and each Buyer is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act"), and
Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the 1933 Act;
B. Each Buyer wishes to purchase, and the Company wishes to sell, upon
the terms and conditions stated in this Agreement, (i) that aggregate amount of
shares of the Company's Common Stock, par value $0.001 per share (the "Common
Stock") set forth opposite such Buyer's name in column (3) on the Schedule of
Buyers (which aggregate amount for all Buyers together shall be $15,000,000 and
shall collectively be referred to herein as the "Common Shares") and (ii)
warrants, in substantially the form attached hereto as Exhibit A (the
"Warrants"), to acquire that number of shares of Common Stock set forth opposite
such Buyer's name in column (4) on the Schedule of Buyers (which aggregate
amount for all Buyers together shall be 705,883 shares of Common Stock) (as
exercised, collectively, the "Warrant Shares");
C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit B (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Common Shares, and the Warrant Shares
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.
D. The Common Shares, the Warrants and the Warrant Shares
collectively are referred to herein as the "Securities".
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.
(a) Purchase of Common Shares and Warrants.
Subject to the satisfaction (or waiver) of the conditions set forth in
Sections 6 and 7 below, the Company shall issue and sell to each Buyer, and each
Buyer severally, but not jointly, agrees to purchase from the Company on the
Closing Date (as defined below), the number of Common Shares as is set forth
opposite such Buyer's name in column (3) on the Schedule of Buyers, along with
Warrants to acquire that number of Warrant Shares as is set forth opposite such
Buyer's name in column (4) on the Schedule of Buyers (the "Closing").
(b) Purchase Price. The purchase price for each Buyer (the
"Purchase Price") of the Common Shares and related Warrants to be purchased by
each such Buyer at Closing shall be equal to $4.25 for each Common Share and
related Warrants being purchased by such Buyer at the Closing.
(c) Closing Date. The date and time of the Closing (the
"Closing Date") shall be 9:00 a.m., local time, on the date hereof after
notification of satisfaction (or waiver) of the conditions to the Closing set
forth in Sections 6 and 7 below (or such later time and date as is mutually
agreed to by the Company and each Buyer) at the offices of Schulte Roth & Zabel
LLP, 919 Third Avenue, New York, New York 10022.
(d) Form of Payment. On the Closing Date, (i) each Buyer shall
pay its Purchase Price to the Company for the Common Shares and Warrants to be
issued and sold to such Buyer at the Closing, by wire transfer of immediately
available funds in accordance with the Company's written wire instructions, (ii)
the Company shall deliver to each Buyer the Warrants (in the amounts as such
Buyer shall request) such Buyer is purchasing, duly executed on behalf of the
Company and registered in the name of such Buyer or its designee, and (iii) the
Company shall authorize its transfer agent (the "Transfer Agent") to issue each
Buyer one or more stock certificates or credit shares to the applicable balance
account registered in the name of such Buyer, respectively, the number of shares
set forth opposite such Buyer's name in column (3) on the Schedule of Buyers,
which shall bear the following legend referring to the fact that the Shares were
sold in reliance upon the exemption from registration provided by Section 4(2)
of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 506
under the Securities Act:
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR (B) AN OPINION OF COUNSEL,
IN FORM REASONABLY SATISFACTORY TO VA SOFTWARE, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
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(a) No Public Sale or Distribution; Prior Sales. Such Buyer is
(i) acquiring the Common Shares and the Warrants and (ii) upon exercise of the
Warrants will acquire the Warrant Shares issuable upon exercise thereof, in the
ordinary course of business for its own account and not with a view towards, or
for resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act and has no agreement
or understanding, directly or indirectly, with any Person to distribute any of
the Securities; provided, however, that by making the representations herein,
such Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with this Agreement, the Registration Rights Agreement, and with
federal and state securities laws applicable to such transfer, sale or
disposition.
(b) Investor Status.
(i) Such Buyer is an "accredited investor" as that
term is defined in Rule 501(a) of Regulation D.
(ii) Buyer is knowledgeable, sophisticated and
experienced in making, and is qualified to make, decisions with respect to
investments in shares representing an investment decision like that involved in
the purchase of the Shares, including investments in securities issued by the
Company, and has requested, received, reviewed and considered all information it
deems relevant in making an informed decision to purchase the Shares.
(iii) The Purchaser has completed or caused to be
completed the Stock Certificate Questionnaire and the Registration Statement
Questionnaire, attached to this Agreement as Appendices I and II, for use in
preparation of the Registration Statement (as defined in Section 7.3 below), and
the answers to the Questionnaires are true and correct in all material respects
as of the date of this Agreement and will be true and correct as of the
effective date of the Registration Statement; provided that the Purchasers shall
be entitled to update such information by providing notice thereof to the
Company before the effective date of such Registration Statement.
(c) Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
(d) Information. Such Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances, and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by such Buyer. Such Buyer and its advisors,
if any, have been afforded the opportunity to ask questions of the Company.
Neither such inquiries nor any other due diligence investigations conducted by
such Buyer or its advisors, if any, or its representatives shall modify, amend
or affect such Buyer's right to rely on the Company's representations and
warranties contained herein. Such
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Buyer understands that its investment in the Securities involves a high degree
of risk and is able to afford a complete loss of such investment. Such Buyer has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Securities. Such Buyer has, in connection with its decision to purchase the
number of shares and warrant shares set forth on the Schedule of Buyers relied
solely upon the representations and warranties of the Company in this Agreement,
the SEC Documents (as defined below) and publicly available information.
(e) No Governmental Review. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(f) Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in form reasonably acceptable to the Company, to
the effect that such Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration, or (C)
such Buyer provides the Company with reasonable assurance (including such
representations and warranties as may be requested by the Company) that such
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A promulgated under the 1933 Act, as amended, (or a successor rule thereto)
(collectively, "Rule 144"); (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144 and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the Person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
Person is under any obligation to register the Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. The Securities may be pledged in connection with a bona
fide margin account or other loan secured by the Securities and such pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Buyer effecting a pledge of Securities shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, this Section 2(f); provided, that in
order to make any sale, transfer or assignment of Securities, such Buyer and its
pledgee makes such disposition in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
(g) Legends. Such Buyer understands that the certificates or
other instruments representing the Common Shares and the Warrants and, until
such time as the resale of the Common Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Warrant Shares, except as set
forth below, shall bear any legend as required by the "blue sky" laws of any
state and a restrictive legend in substantially the form set forth in Section
1(d) (and a
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stop-transfer order may be placed against transfer of such stock certificates).
The legend set forth in Section 1(d) shall be removed if, unless otherwise
required by state securities laws, (i) such Securities are registered for sale
under the 1933 Act, (ii) in connection with a sale, assignment or other
transfer, such holder provides the Company with an opinion of counsel, in form
reasonably acceptable to the Company, to the effect that such sale, assignment
or transfer of the Securities may be made without registration under the 1933
Act and that such legend is no longer required, or (iii) such holder provides
the Company with reasonable assurance that the Securities can be sold, assigned
or transferred pursuant to Rule 144. The Company shall, and shall use
commercially reasonable efforts to cause its transfer agent to, promptly process
requests for transfer or de-legending of Shares or certificates representing
Shares in compliance with this Agreement.
(h) Validity; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of such Buyer and shall constitute the legal, valid and binding
obligations of such Buyer enforceable against such Buyer in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated in this Agreement and the fulfillment of the terms
of this Agreement have been duly authorized by all necessary corporate or LLC
action and will not conflict with or constitute a breach of, or default under,
or result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Purchaser pursuant to, any contract, indenture,
mortgage, loan agreement, deed, trust, note, lease, sublease, voting agreement,
voting trust or other instrument or agreement to which the Purchaser is a party
or by which it or any of them may be bound, or to which any of the property or
assets of the Purchaser is subject, nor will such action result in any violation
of the provisions of the charter or bylaws, or other organizational documents,
of the Purchaser or any applicable statute, law, rule, regulation, ordinance,
decision, directive or order applicable to the Purchaser or its property or
assets.
(i) Residency. Such Buyer is a resident of that country or
state specified below its address on the Schedule of Buyers.
(j) Certain Trading Limitations. Each Buyer agrees that prior
to the earlier to occur of (a) 90 days from the Closing Date and (b) the
effective date of the registration statement to be filed in connection with the
sale of the Shares, it will not enter into any Short Sales. For purposes of this
Agreement, a "Short Sale" by a Buyer means a sale of Common Stock that is marked
as a short sale and that is executed at a time when such Buyer has no equivalent
offsetting long position in the Common Stock. For purposes of determining
whether a Buyer has an equivalent offsetting long position in the Common Stock,
all Common Stock that would be issuable upon exercise in full of all Securities
then held by such Buyer (assuming that such Securities were then fully
exercisable, notwithstanding any provisions to the contrary, and giving effect
to any exercise price adjustments scheduled to take effect in the future) shall
be deemed to be held long by such Buyer.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on the Schedule of Exemptions attached hereto as
Exhibit C, the Company represents and warrants to each of the Buyers as of the
date hereof and as of the Closing Date that:
(a) Organization and Qualification. Each of the Company and
its Subsidiaries are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power and authorization to own their properties and
to carry on their business as now being conducted. Each of the Company and each
Subsidiary is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Agreement, "Material
Adverse Effect" means any material adverse effect on the business affairs,
properties, assets or results of operations of the Company and its Subsidiaries,
taken as a whole, or on the transactions contemplated hereby or by the
agreements and instruments to be entered into in connection herewith, or on the
authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined below). For purposes of this Agreement,
"Subsidiary" means any entity in which the Company, directly or indirectly, owns
capital stock or holds an equity or similar interest which would require such
entity to be consolidated in its financial statements. The Company has no
Subsidiaries except as set forth on the Schedule of Exceptions.
(b) Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 5(b)), the
Warrants and each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement (collectively,
the "Transaction Documents") and, to issue the Securities in accordance with the
terms hereof and thereof. The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Common Shares and the Warrants and the reservation for issuance and the
issuance of the Warrant Shares issuable upon exercise thereof have been duly
authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders. This Agreement and the other Transaction Documents of even date
herewith have been duly executed and delivered by the Company, and constitute
the legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except (i) as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies, or (ii) as any rights to indemnity or contribution under
the Transaction Documents may be limited by federal and state securities laws
and public policy consideration. As of the Closing, the Transaction Documents
dated after the date hereof and required to have been executed and delivered
with respect to the Closing shall have been duly executed and delivered by the
Company, and shall constitute the legal, valid and binding obligations of the
Company enforceable against the Company in accordance with
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their respective terms, except (i) as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditor's rights and
remedies or (ii) as any rights to indemnity or contribution under the
Transaction Documents may be limited by federal and state securities laws and
public policy consideration.
(c) Issuance of Securities. The Common Shares and Warrants are
duly authorized and, upon issuance in accordance with the terms hereof, shall be
free from all taxes, liens and encumbrances with respect to the issue thereof.
As of the Closing Date, the Company shall have duly authorized and reserved for
issuance a number of shares of Common Stock which equals the number of Warrant
Shares. The Company shall, so long as any of the Warrants are outstanding, take
all action necessary to reserve and keep available out of its authorized and
unissued Capital Stock, solely for the purpose of effecting the exercise of the
Warrants, 120% of the number of shares of Common Stock issuable upon exercise of
the Warrants. Upon exercise in accordance with the Warrants, the Warrant Shares
will be validly issued, fully paid and nonassessable and free from all taxes,
liens and encumbrances with respect to the issue thereof, with the holders being
entitled to all rights accorded to a holder of Common Stock. Assuming the
accuracy of each of the representations and warranties set forth in Section 2
hereof, the issuance by the Company of the Securities in conformance with this
Agreement is exempt from the registration requirements of Section 5 of the 1933
Act.
(d) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Common Shares and Warrants and reservation for issuance and
issuance of the Warrant Shares) will not (i) result in a violation of the
certificate of incorporation, any certificate of designations, preferences and
rights of any outstanding series of preferred stock or Bylaws of the Company or
any Subsidiary or (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement filed with the SEC Documents, or (iii) result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Nasdaq National Market (the "Principal Market")) applicable to the Company or
any Subsidiary or by which any property or asset of the Company or any
Subsidiary is bound or affected, except in the case of clauses (ii) and (iii),
for such breaches or defaults as would not be reasonably expected to have a
Material Adverse Effect.
(e) Consents. The Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court, governmental agency or any regulatory or self-regulatory agency or any
other Person in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents, in each case in
accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the Closing Date. The Company is not in violation of the listing requirements of
the Principal Market and has no knowledge of any facts that would reasonably
lead to delisting or suspension of the Common Stock in the next 12 months.
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(f) Acknowledgment Regarding Buyer's Purchase of Securities.
The Company acknowledges and agrees that each Buyer is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby and thereby. The Company further
acknowledges that no Buyer is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby, and any advice given by a
Buyer or any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to such Buyer's purchase of the Securities. The Company further
represents to each Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives and in reliance on the representations and
warranties of each Buyer hereunder.
(g) No General Solicitation; Placement Agent's Fees. Neither
the Company, nor any of its affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Securities. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or brokers' commissions (other than for
persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, attorney's fees and out-of-pocket expenses) arising in connection
with any such claim.
(h) No Integrated Offering. None of the Company, any
Subsidiary, any of their affiliates, and any Person acting on their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of any of the Securities under the 1933 Act or cause this offering
of the Securities to be integrated with prior offerings by the Company for
purposes of the 1933 Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Company are
listed or designated. None of the Company or any Subsidiary, their affiliates
and any Person acting on their behalf will take any action or steps referred to
in the preceding sentence that would cause the offering of the Securities to be
integrated with other offerings for purposes of any registration requirement
under the 1933 Act or any applicable rules of the Principal Market.
(i) Application of Takeover Protections; Rights Agreement. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Certificate of Incorporation
(as defined in Section 3(q)) or the laws of the state of its incorporation which
is or could become applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and any Buyer's ownership of the Securities. The
Company has not adopted a stockholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Common Stock or a change in
control of the Company.
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(j) SEC Documents; Financial Statements. Since July 31, 2002,
the Company has timely filed all reports, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the 1934 Act (all of the foregoing filed prior to the date hereof or prior to
the date of the Closing, and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference therein
being hereinafter referred to as the "SEC Documents"). The Company has delivered
to the Buyers or their respective representatives true, correct and complete
copies of the SEC Documents not available on the EDGAR system. As of the date
filed, the SEC Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Documents complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto and have
been prepared in accordance with United States generally accepted accounting
principles ("GAAP"), consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may exclude footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the Company and each
Subsidiary as of the dates indicated and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(k) Absence of Certain Changes. Except as disclosed in the
Schedule of Exceptions, since July 31, 2003, there has been no material adverse
change and no material adverse development in the business affairs, properties,
assets, or results of operations of the Company or any Subsidiary. Since July
31, 2003, the Company has not (i) declared or paid any dividends or (ii) sold
any assets, individually or in the aggregate, in excess of $100,000 outside of
the ordinary course of business. The Company has not filed for protection
pursuant to any bankruptcy law nor does the Company have any knowledge that its
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do so within the
next 12 months. The Company currently is not and, after giving effect to the
transactions contemplated hereby to occur at each Closing, will not be Insolvent
(as defined below). For purposes of this Section 3(k), "Insolvent" means (i) the
present fair saleable value of the Company's assets is less than the amount
required to pay the Company's total indebtedness, contingent or otherwise, (ii)
the Company is unable to pay its debts and liabilities, subordinated, contingent
or otherwise, as such debts and liabilities become absolute and matured, (iii)
the Company intends to incur or believes that it will incur debts that would be
beyond its ability to pay as such debts mature or (iv) the Company has
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted.
(l) No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists with respect to the Company or any Subsidiary that would be required to
be disclosed by the Company on a balance sheet or in the related notes to the
consolidated financial statements
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prepared in accordance with GAAP which were, individually or in the aggregate,
material to the business, results or operations or financial condition of the
Company taken as a whole, except (i) as has been publicly announced or (ii) as
otherwise incurred in the ordinary course of business.
(m) Conduct of Business; Regulatory Permits. Neither the
Company nor any Subsidiary is in violation of any term of or in default under
its Certificate of Incorporation, any Certificate of Designations, Preferences
and Rights of any outstanding series of preferred stock of the Company or Bylaws
or their organizational charter or bylaws, respectively. Neither the Company nor
any Subsidiary is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Company or any Subsidiary,
except for violations which would not, individually or in the aggregate, have a
Material Adverse Effect. Without limiting the generality of the foregoing, the
Company is not in violation of any of the rules, regulations or requirements of
the Principal Market. Since July 31, 2003, (i) the Common Stock has been
designated for quotation or listed on the Principal Market, (ii) trading in the
Common Stock has not been suspended by the SEC or the Principal Market and (iii)
the Company has received no communication, written or oral, from the SEC or the
Principal Market regarding the suspension or delisting of the Common Stock from
the Principal Market. The Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, except
where the failure to possess such certificates, authorizations or permits would
not have, individually or in the aggregate, a Material Adverse Effect, and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of its certificate, authorization or
permit.
(n) Transactions With Affiliates. Except as set forth in the
Company's Annual Report on Form 10-K for the year ended July 31, 2003, none of
the officers, directors or employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for ordinary course
services as employees, officers or directors), including any contract, agreement
or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.
(o) Equity Capitalization. As of the date hereof,
(i) The authorized capital stock of the Company
consists of 250,000,000 shares of Common Stock and 10,000,000 shares of
Preferred Stock, par value $0.001 per share.
(ii) The issued and outstanding capital stock of the
Company consists of 56,974,623 shares of Common Stock. The shares of issued and
outstanding capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable and have not been issued in violation
of or are not otherwise subject to any preemptive or other similar rights.
10
(iii) The Company has reserved 20,719,465 shares of
Common Stock for issuance upon the exercise of stock options granted or
available for future grant under the Company's stock option plan.
(iv) The Company has reserved 2,181,528 shares of
Common Stock for purchase under the Company's Employee Stock Purchase Plan.
With the exception of the foregoing, there are (i) no outstanding
subscriptions, options, warrants, convertible or exchangeable securities or
other rights granted to or by the Company to purchase shares of Common Stock or
other securities of the Company and there are no commitments, or agreements to
issue any shares of Common Stock or any security convertible into or
exchangeable for Common Stock; (ii) there are no outstanding debt securities,
notes, credit agreements, credit facilities or other agreements, documents or
instruments evidencing Indebtedness (as defined in Section 3(q)) of the Company
or any Subsidiary or by which the Company or any Subsidiary is or may become
bound; (iii) except as set forth in Exhibit 10.5 of the Company's Form 10-K for
the year ended July 31, 2003, there are no agreements or arrangements under
which the Company or any Subsidiary is obligated to register the sale of their
securities under the 1933 Act (except the Registration Rights Agreement); and
(iv) there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities.
(p) Indebtedness and Other Contracts. Except as disclosed in
the Schedule of Exceptions, neither the Company nor any Subsidiary (i) has any
outstanding Indebtedness (as defined below), or (ii) is in violation of any term
of or in default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect. For purposes of
this Agreement: (x) "Indebtedness" of any Person means, without duplication (A)
all indebtedness for borrowed money, (B) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, change, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) "Contingent Obligation" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person
11
with respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability
will be protected (in whole or in part) against loss with respect thereto; and
(z) "Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(q) Absence of Litigation. Except as set forth in the
Company's 10-K for the year ended July 31, 2003, there is no material action,
suit, proceeding, inquiry or investigation before or by the Principal Market,
any court, public board, government agency, self-regulatory organization or body
pending, to the knowledge of the Company, threatened against or affecting the
Company, the Common Stock or any Subsidiary or any of the Company's or any
Subsidiary's officers or directors in their capacities as such.
(r) Insurance. The Company and its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged.
(s) Employee Relations.
(i) Neither the Company nor any Subsidiary is a party
to any collective bargaining agreement or employs any member of a union. The
Company and its Subsidiaries believe that their relations with their employees
are good. No executive officer of the Company (as defined in Rule 501(f) of the
1933 Act) has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer's employment with the Company.
(ii) The Company and its Subsidiaries are in
compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
(t) Title. The Company and its Subsidiaries have good and
marketable title to all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects or such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company and its Subsidiaries. Neither the Company nor any
Subsidiary owns any real property. Any real property and facilities held under
lease by the Company and its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries.
12
(u) Intellectual Property Rights. To the knowledge of the
Company, the Company and its Subsidiaries own or possess adequate rights or
licenses to use all trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and other
intellectual property rights ("Intellectual Property Rights") necessary to
conduct their respective businesses as now conducted. None of the Company's
issued patents that are assigned to it or any Intellectual Property Rights that
are material to the business of the Company have expired or terminated, or are
expected to expire or terminate within three years from the date of this
Agreement. The Company does not have any knowledge of any infringement by the
Company or any Subsidiary of Intellectual Property Rights of others except where
such infringement would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. There is no claim, action or proceeding or to the
knowledge of the Company, pending or being threatened, against the Company or
any Subsidiary regarding its Intellectual Property Rights which could have a
Material Adverse Effect. The Company is unaware of any facts or circumstances
which might give rise to any of the foregoing infringements or claims, actions
or proceedings. The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
Intellectual Property Rights.
(v) Environmental Laws. To the knowledge of the Company, the
Company and its Subsidiaries (i) are in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses and (iii) are in compliance with all
terms and conditions of any such permit, license or approval where, in each of
the foregoing clauses (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. The term "Environmental Laws" means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(w) Subsidiary Rights. The Company has the unrestricted right
to vote, and (subject to limitations imposed by applicable law) to receive
dividends and distributions on, all capital securities of each Subsidiary as
owned by the Company.
(x) Taxes. The Company has filed all income tax and all other
material tax returns required to be filed, which returns are true and correct in
all material respects, and the Company is not in default in the payment of any
taxes, including penalties and interest, assessments, fees and other charges,
shown thereon due or otherwise assessed, other than those being contested in
good faith and for which adequate reserves have been provided or those currently
payable without interest which were payable pursuant to said returns or any
assessments with respect thereto.
13
(y) Disclosure. To the Company's knowledge, the Company
confirms that neither it nor any other Person acting on its behalf has provided
any of the Buyers or their respective agents or counsel with any information
that constitutes or might constitute material, nonpublic information, other than
information related to the transactions contemplated by this Agreement. The
Company acknowledges and agrees that no Buyer makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in the Transaction Documents.
(z) Sarbanes-Oxley Act. The Company is in compliance with any
and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are
effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the date
hereof, to the extent that the foregoing are effective and applicable to the
Company, except where such noncompliance would not have a Material Adverse
Effect.
(aa) Form S-3 Eligibility. The Company is eligible to register
shares of Common Stock for resale by the Buyers under Form S-3 promulgated under
the 1933 Act.
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
(b) Form D and Blue Sky. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Securities for sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States (or to obtain an exemption from such qualification), and shall provide
evidence of any such action so taken to the Buyers on or prior to the Closing
Date. The Company shall make all filings and reports that it reasonably
determines are necessary relating to the offer and sale of the Securities
required under applicable securities or "Blue Sky" laws of the states of the
United States following the Closing Date; provided, however, that the Company
shall not for any such purpose be required to qualify generally to transact
business as a foreign corporation in any jurisdiction where it is not so
qualified or to consent to general service of process in any such jurisdiction.
(c) Listing. The Company shall promptly secure the listing of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents. The Company
shall use reasonable best efforts to maintain the Common Stock's authorization
for quotation on the Principal Market, except in connection with an Organic
Change (as defined in the Warrants). The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section 4(c).
14
(d) Fees. The Company shall reimburse the Buyers in the
aggregate $25,000 for the Buyers' reasonable expenses incurred in connection
with the preparation, execution and performance of this Agreement and the
transactions contemplated hereunder, which amount shall be net funded from the
Purchase Price of The Riverview Group LLC at the Closing. The Company shall be
responsible for the payment of any placement agent's fees or broker's
commissions relating to or arising out of the transactions contemplated hereby.
Except as otherwise set forth in this Agreement or in the Registration Rights
Agreement, each party to this Agreement shall bear its own expenses in
connection with the sale of the Securities to the Buyers.
(e) Disclosure of Transactions and Other Material Information.
On or before 8:30 a.m., New York City Time, on the first Trading Day following
the Closing Date, the Company shall file a Current Report on Form 8-K with the
SEC describing the terms of the transactions contemplated by this Agreement and
attaching this Agreement, the form of Warrant, the Registration Rights Agreement
and the press release referred to below as exhibits to such filing (the "8-K
Filing"). Upon the 8-K Filing with the SEC, no Buyer shall be in possession of
any material, nonpublic information received from the Company, any Subsidiary or
any of its respective officers, directors, employees or agents, that is not
disclosed in the 8-K Filing. The Company shall not, and shall cause each
Subsidiary and each of its respective officers, directors, employees and agents,
not to, provide any Buyer with any material nonpublic information regarding the
Company or any Subsidiary from and after the filing of the 8-K Filing with the
SEC without the express written consent of such Buyer; provided, however, that
the foregoing obligation shall not apply in the event that the Buyer requests
such material nonpublic information from the Company. Neither the Company nor
any Buyer shall issue any press releases or any other public statements with
respect to the transactions contemplated by this Agreement; provided, however,
that the Company shall be entitled, without the prior approval of any Buyer, to
make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) is required by applicable law.
(f) Additional Registration Statements. Until such time as the
Registration Statement (as defined in the Registration Rights Agreement) is
declared effective by the SEC, the Company will not file a registration
statement under the 1933 Act relating to securities that are not the Securities.
(g) Right of First Refusal. (i) For a period of one year
following the Closing Date, the Company shall not issue, sell or exchange, agree
or obligate itself to issue, sell or exchange or reserve or set aside for
issuance, sale or exchange, (A) any shares of Common Stock, (B) any other equity
security of the Company, including without limitation shares of preferred stock,
(C) any debt security of the Company (other than debt with no equity feature),
including without limitation any debt security which by its terms is convertible
into or exchangeable for any equity security of the Company, (D) any security of
the Company that is a combination of debt and equity, or (E) any option, warrant
or other right to subscribe for, purchase or otherwise acquire any such equity
security or any such debt security of the Company, unless in each case the
Company shall have first offered to sell such securities (the "Offered
Securities") to the Buyers as follows: The Company shall offer to sell to each
Buyer (1) that portion of the Offered Securities as the number of shares of
Common Stock (including
15
all Common Shares and Warrant Shares on an as-converted basis) then held by such
Buyer and acquired pursuant to the terms of the Transaction Documents, bears to
the total number of shares of Common Stock (including all shares of capital
stock convertible into Common Stock on an as-converted basis) held on such date
by all Buyers and acquired pursuant to the terms of the Transaction Documents
(the "Basic Amount"), and (2) such additional portion of the Offered Securities
as such Buyer shall indicate it will purchase should the other Buyers subscribe
for less than their Basic Amounts (the "Undersubscription Amount"), at a price
and on such other terms as shall have been specified by the Company in writing
delivered to such Buyer (the "Offer"), which Offer by its terms shall remain
open and irrevocable for a period of ten (10) Business Days from receipt of the
Offer.
(ii) Notice of each Buyer's intention to accept, in
whole or in part, any Offer made pursuant to Section 4(g)(i) shall be evidenced
by a writing signed by such Buyer and delivered to the Company prior to the end
of the 10-day period of such offer, setting forth such of the Buyer's Basic
Amount as such Buyer elects to purchase and, if such Buyer shall elect to
purchase all of its Basic Amount, the Undersubcription Amount as such Buyer
shall elect to purchase (the "Notice of Acceptance"). If the Basic Amounts
subscribed for by all Buyers are less than the total Offered Securities then
each Buyer who has set forth Undersubscription Amounts in its Notice of
Acceptance shall be entitled to purchase all Undersubcription Amounts it has
subscribed for; provided, however, that should the Undersubscription Amounts
subscribed for exceed the difference between the Offered Securities and the
Basic Amounts subscribed for (the "Available Undersubcription Amount"), each
Buyer who has subscribed for any Undersubcription Amount shall be entitled to
purchase only that portion of the Available Undersubcription Amount as the
Undersubcription Amount subscribed for by such Buyer bears to the total
Undersubcription Amounts subscribed for by all Buyers, subject to rounding by
the Board of Directors to the extent it deems reasonably necessary.
(iii) Permitted Sales of Refused Securities. In the
event that Notices of Acceptance are not given by the Buyer in respect of all
the Offered Securities, the Company shall have sixty (60) days from the
expiration of the period set forth in Section 4(g)(i) to close the sale of all
or any part of such Offered Securities as to which a Notice of Acceptance has
not been given by the Buyer (the "Refused Securities") to the person or persons
specified in the Offer, but only for cash and otherwise in all respects upon
terms and conditions, including, without limitation, unit price and interest
rates, which are no more favorable, in the aggregate, to such other person or
persons or less favorable to the Company than those set forth in the Offer.
(iv) Reduction in Amount of Offered Securities. In
the event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section
4(g)(iii) above), then each Buyer may, at its sole option and in its sole
discretion, reduce the number or other units of the Offered Securities specified
in its Notice of Acceptance to an amount which shall be not less than the amount
of the Offered Securities which such Buyer elected to purchase pursuant to
Section 4(g)(ii) multiplied by a fraction, (A) the numerator of which shall be
the amount of Offered Securities which the Company actually proposes to sell,
and (B) the denominator of which shall be the amount of all Offered Securities.
In the event that any Buyer so elects to reduce the number or amount of Offered
Securities specified in its Notice of Acceptance, the Company may not sell or
otherwise
16
dispose of more than the reduced amount of the Offered Securities until such
securities have been offered to the Buyers in accordance with Section 4(g).
(v) Closing. Upon each closing under this Section
4(g), which shall include full payment to the Company, the Buyer shall purchase
from the Company, and the Company shall sell to the Buyer the number of Offered
Securities specified in the Notices of Acceptance, as reduced pursuant to
Section 4(g)(iv) if the Buyers have so elected, upon the terms and conditions
specified in the Offer. The purchase by the Buyers of any Offered Securities is
subject in all cases to the preparation, execution and delivery by the Company
and the Buyers of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Buyers and their respective
counsel.
(vi) Further Sale. In each case, any Offered
Securities not purchased by the Buyers or other Person or Persons in accordance
with Section 4 may not be sold or otherwise disposed of until they are again
offered to the Buyers under the procedures specified in Section 4(g).
(vii) Exception. The rights of the Buyers under this
Section 4(g) shall not apply to: (A) Common Stock issued as a stock dividend to
holders of Common Stock or upon any subdivision or combination of shares of
Common Stock, (B) shares of Common Stock issued upon exercise of the Warrants or
issued upon conversion or exercise of any other currently outstanding securities
of the Company pursuant to the terms of such securities, (C) pursuant to a bona
fide underwritten firm commitment public offering with a nationally recognized
underwriter which generates gross proceeds to the Company in excess of
$20,000,000 (other than an "at the market offering" as defined in Rule 415(a)(4)
under the 1933 Act and "equity lines"), (D) in connection with any employee
benefit plan which has been approved by the Board of Directors of the Company,
pursuant to which the Company's securities may be issued to any employee,
officer or director of, or consultant or other service provider to, the Company
for services provided to the Company, (E) securities of the Company issued in
connection with the acquisition of any Person (whether by merger, purchase of
stock or assets or otherwise) the primary purpose of which is not to raise
capital and (F) securities of the Company issued in connection with one or more
strategic partnerships or joint ventures in which there is a significant
commercial relationship with the Company and (G) securities of the Company where
the principal purpose of the issuance, sale or exchange is not capital fund
raising (collectively, "Excluded Securities").
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) Register. The Company shall maintain at its principal
executive offices or its transfer agent (or such other office or agency of the
Company as it may designate by notice to each holder of Warrants), a register
for the Warrants, in which the Company shall record the name and address of the
Person in whose name the Warrants have been issued (including the name and
address of each transferee), and the number of Warrant Shares issuable upon
exercise of the Warrants held by such Person. The Company shall keep the
register open and available at all times during business hours for reasonable
inspection of any Buyer or its legal representatives.
17
(b) Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates or credit shares to the applicable balance accounts
at DTC, registered in the name of each Buyer or its respective nominee(s), for
the Warrant Shares in such amounts as specified from time to time by each Buyer
to the Company upon exercise of the Warrants in the form of Exhibit D attached
hereto (the "Irrevocable Transfer Agent Instructions"). The Company warrants
that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5(b), and stop transfer instructions to give effect
to Section 2(f) hereof and as contemplated by the Registration Rights Agreement,
will be given by the Company to its transfer agent, and that, as to actions by
the Company, the Securities shall otherwise be freely transferable on the books
and records of the Company as and to the extent provided in this Agreement and
the other Transaction Documents. If a Buyer effects a sale, assignment or
transfer of the Securities in accordance with Section 2(f), the Company shall
permit the transfer and shall promptly instruct its transfer agent to issue one
or more certificates or credit shares to the applicable balance accounts at DTC
in such name and in such denominations as specified by such Buyer to effect such
sale, transfer or assignment. In the event that such sale, assignment or
transfer involves Warrant Shares sold, assigned or transferred pursuant to an
effective registration statement or pursuant to Rule 144, the transfer agent
shall issue such Warrant Shares to the Buyer, assignee or transferee, as the
case may be, without any restrictive legend, subsequent to compliance with
applicable state and federal securities laws.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
Closing Date. The obligation of the Company hereunder to issue and sell
the Common Shares and the related Warrants to each Buyer at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion by
providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of the
Transaction Documents to which it is a party and delivered the same to the
Company and .
(ii) Such Buyer shall have delivered to the Company
the Purchase Price (less, the amounts withheld pursuant to Section 4(e)) for the
Common Shares and the related Warrants being purchased by such Buyer at the
Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(iii) The representations and warranties of such
Buyer shall be true and correct in all material respects (except for
representations and warranties that are qualified by materiality, which shall be
true and correct in all respects) as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and such Buyer shall have performed, satisfied and
complied in all material respects (except for covenants, agreements and
conditions that are qualified by materiality, which shall be true and correct in
all respects) with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Buyer at or prior
to the Closing Date.
18
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
Closing Date. The obligation of each Buyer hereunder to purchase the
Common Shares and the related Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion by providing the
Company with prior written notice thereof:
(i) The Company shall have executed and delivered to
such Buyer each of the Transaction Documents and the related Warrants (in such
amounts as such Buyer shall request) and shall have authorized the Transfer
Agent to issue the Common Shares (in such amounts as such Buyer shall request)
being purchased by such Buyer at the Closing pursuant to this Agreement within
two (2) Business Days of the Closing.
(ii) Such Buyer shall have received the opinion of
Wilson Sonsini Goodrich & Rosati, the Company's counsel, dated as of the Closing
Date, in form, scope and substance reasonably satisfactory to such Buyer and in
substantially the form of Exhibit E attached hereto.
(iii) The Company shall have delivered to such Buyer
a copy of the Irrevocable Transfer Agent Instructions, in the form of Exhibit D
attached hereto, which instructions shall have been delivered to the Company's
transfer agent.
(iv) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company in its
state of incorporation issued by the Secretary of State of such state of
incorporation as of a date within 10 days of the Closing Date.
(v) The Company shall have delivered to such Buyer a
certificate evidencing the Company's qualification as a foreign corporation and
good standing issued by the Secretary of State of the State of California as of
a date within five days of the Closing Date.
(vi) The Company shall have delivered to such Buyer a
certificate, executed by the Assistant Secretary of the Company and dated as of
the Closing Date, as to (i) the resolutions consistent with Section 3(b) as
adopted by the Company's Board of Directors in a form reasonably acceptable to
such Buyer (the "Resolutions"), (ii) the Certificate of Incorporation and (iii)
the Bylaws, each as in effect at the Closing, in the form attached hereto as
Exhibit F.
(vii) The representations and warranties of the
Company shall be true and correct in all material respects (except for
representations and warranties that are qualified by materiality, which shall be
true and correct in all respects) as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects (except for covenants, agreements and
conditions that are qualified by materiality, which shall be complied with in
all respects) with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with
19
by the Company at or prior to the Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in the form attached hereto as Exhibit G.
(viii) The Company shall have delivered to such Buyer
a letter from the Company's transfer agent certifying the number of shares of
Common Stock outstanding as of a date within five days of the Closing Date.
(ix) The Company shall have obtained all
governmental, regulatory or third party consents and approvals, if any,
necessary for the sale of the Common Shares and the Warrants , including,
without limitation, the expiration or waiver of the 15-day period set forth in
Rule 4310(c)(17) of the National Association of Securities Dealers, Inc.
(x) The Common Stock (I) shall be designated for
quotation or listed on the Principal Market and (II) shall not have been
suspended by the SEC or the Principal Market from trading on the Principal
Market nor shall suspension by the SEC or the Principal Market have been
threatened either (A) in writing by the SEC or the Principal Market or (B) by
falling below the minimum listing maintenance requirements of the Principal
Market.
8. TERMINATION. In the event that the Closing shall not have
occurred with respect to a Buyer on or before forty-five (45) days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of any party to
any other party; provided, however, that if this Agreement is terminated
pursuant to this Section 8 by Buyer and the Company has failed to satisfy the
conditions in Section 7 above, the Company shall remain obligated to
reimburse the Buyers for the expenses described in Section 4(e) above.
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York. Each party hereby irrevocably submits to the non-exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of
Manhattan for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing
20
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes
all other prior oral or written agreements between the Buyers, the Company,
their affiliates and Persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of Common Shares representing at least a majority of the
amount of the Common Shares, or, if prior to the Closing Date, the Buyers listed
on the Schedule of Buyers as being obligated to purchase at least a majority of
the amount of the Common Shares. No provision hereof may be waived other than by
an instrument in writing signed by the party against whom enforcement is sought.
No such amendment shall be effective to the extent that it applies to less than
all of the holders of the Common Shares then outstanding. No consideration shall
be offered or paid to any Person to amend or consent to a waiver or modification
of any provision of any of the Transaction Documents unless the same
consideration also is offered to all of the parties to the Transaction
Documents, holders of Common Shares or holders of the Warrants, as the case may
be. The Company has not, directly or indirectly, made any agreements with any
Buyers relating to the terms or conditions of the transactions contemplated by
the Transaction Documents except as set forth in the Transaction Documents.
(f) Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
21
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with an overnight courier service, in each case properly addressed
to the party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Phone: (510) 687-7000
Fax: (408) 745-9130
Attention: Ms. Kathleen R. McElwee
with a copy to:
Wilson Sonsini Goodrich & Rosati, R.C.
650 Page Mill Road
Palo Alto, CA 94304
Phone: (650) 493-9300
Fax: (650) 493-6811
Attention: Bret M. DiMarco, Esq.
If to the Transfer Agent:
EquiServe Trust Company, N.A.
P.O. Box 43023
Providence, RI 02940-3023
Phone: (816) 843-4299
Fax: (617) 360-6900
Attention: Investor Relations
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers, or to such other address and/or facsimile number and/or to the
attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.
(g) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Common Shares or the Warrants. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the holders of Common Shares representing
at least a majority of the number of the Common Shares, including by merger or
consolidation. A Buyer may assign some or all of its rights hereunder
22
without the consent of the Company, in which event such assignee shall be deemed
to be a Buyer hereunder with respect to such assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
(i) Survival. Unless this Agreement is terminated under
Section 8, the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9 shall survive until the three (3) year anniversary of the
Closing. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
(j) Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(k) Indemnification. In consideration of each Buyer's
execution and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company's other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless each Buyer and each other holder of the Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby or
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party (including for these purposes a derivative action brought on
behalf of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, or (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities. To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 9(k)
shall be the same as those set forth in Section 6 of the Registration Rights
Agreement.
23
(l) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
(m) Remedies. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
all rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which such holders have
under any law. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
Furthermore, the Company recognizes that in the event that it fails to perform,
observe, or discharge any or all of its obligations under this Agreement, any
remedy at law may prove to be inadequate relief to the Buyers. The Company
therefore agrees that the Buyers shall be entitled to seek temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages and without posting a bond or other security.
(n) Payment Set Aside. To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to any of the other
Transaction Documents or the Buyers enforce or exercise their rights hereunder
or thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
(o) Independent Nature of Buyers' Obligations and Rights. The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers are
in any way acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each Buyer confirms
that it has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each Buyer
shall be entitled to independently protect and enforce its rights, including,
without limitations, the rights arising out of this Agreement or out of any
other Transaction Documents, and it shall not be necessary for any other Buyer
to be joined as an additional party in any proceeding for such purpose.
[Signature Page Follows]
24
IN WITNESS WHEREOF, each Buyer and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY: BUYERS:
VA SOFTWARE CORPORATION THE RIVERVIEW GROUP LLC
By: By:
------------------------------- ----------------------------
Name: Ali Jenab Name: Terry Feeney
Title: Chief Executive Officer Title: Chief Operating Officer
SCHEDULE OF BUYERS
(1) (2) (3) (4) (5)
Address and Number of Number of Legal Representative's Address and
Buyer Facsimile Number Common Shares Warrants Facsimile Number
----- ---------------- ------------- -------- ----------------
The Riverview Group LLC 666 Fifth Avenue, 8th floor 3,529,412 705,883 Schulte Roth & Zabel LLP
New York, New York 10103 919 Third Avenue
Attention: Manager New York, NY 10022
Facsimile: (212) 841-4141 Attn: Eleazer Klein, Esq.
Telephone: (212) 841-4100 Facsimile: (212) 593-5955
Residence: New York Telephone: (212) 756-2000
EXHIBITS
--------
Exhibit A Form of Warrants
Exhibit B Form of Registration Rights Agreement
Exhibit C Schedule of Exceptions
Exhibit D Form of Irrevocable Transfer Agent Instructions
Exhibit E Form of Company Counsel Opinion
Exhibit F Form of Secretary's Certificate
Exhibit G Form of Officer's Certificate