EXHIBIT 10.88
BASIC AGREEMENT
REGARDING STOCK PURCHASE
BETWEEN SOUTHWALL/TEIJIN
This Basic Agreement (the "Agreement") is made as of April 9, 1997 by and
between Southwall Technologies Inc., a Delaware corporation whose principal
business offices are at 1029 Corporation Way, Palo Alto, California 94303
(hereinafter called "Southwall" or the "Company")
and
Teijin Limited, a Japanese corporation whose registered office is at 6-7,
Minami-honmachi 1-chome, Chuo-ku, Osaka 541, Japan (hereinafter called "Teijin"
or the "Purchaser").
WlTNESSETH:
WHEREAS, Teijin is the principal supplier of PET film for substrates of
Southwall's products, and Southwall and Teijin have had a productive working
relationship for almost ten (10) years;
WHEREAS, Southwall is in the process of building a new manufacturing plant
with two vacuum coaters and one solvent coater in Tempe, Arizona and desires to
secure the necessary funds to complete the new plant;
WHEREAS, Teijin has been seeking ways to expand its relationship with
Southwall and is willing to make an equity investment in Southwall and arrange
for a loan to Southwall for the completion of the new plant; and
WHEREAS, Southwall and Teijin now wish to set forth the terms and
conditions of the above-mentioned financing and other areas of cooperation
between the parties hereto;
NOW, THEREFORE, the parties hereto have agreed as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article 1:
1.1.1 The term "Closing" shall mean the closing of the purchase and
sale of new shares of Southwall to Teijin as set forth in Article 3.
1.1.2 The term "Closing Date" shall mean April 28, 1997, or any other
date before May 30, 1997, which may be agreed by the parties hereto for the
Closing.
1.1.3 The term "New Plant" shall mean Southwall's new electronics
products manufacturing plant with two vacuum coaters and one solvent coater in
Tempe, Arizona, which is under construction as of the date of this Agreement.
1.1.4 The term "GAAP" shall mean generally accepted United States
accounting principles, applied on a consistent basis.
1.1.5 The term "Securities Act" shall mean the Securities Act of 1933
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law, all of which are effective in the United States of America.
1.1.6 The term "Parties" or "Party" shall collectively mean Southwall
and Teijin or either of them individually.
ARTICLE 2
PURPOSE OF THE AGREEMENT
2.1 The purpose of this Agreement is to set forth a general framework for
mutually beneficial cooperation between Southwall and Teijin.
2.2 The Parties will faithfully seek any and all possible collaboration
opportunities such as, but not limited to:
o Joint development of new products in Article 8;
o Jointly establish a new marketing network in the agreed territory
referred in Article 9; and
o Film supply from Teijin to Southwall under the most favored
conditions in Article 10.
ARTICLE 3
ISSUANCE OF SOUTHWALL'S NEW SHARES
3.1 It is agreed among the parties that Teijin may purchase or partly or
wholly sell Southwall shares in the open market, subject to proceedings and
regulations of the Securities Act and subject to the condition that Teijin will
notify Southwall in advance of any such purchase or sale of Southwall shares
through such market.
3.2 On the basis of the representations and warranties and agreements
contained herein, and subject to the terms and conditions of this Agreement, at
the Closing, Southwall will issue and sell to Teijin, and Teijin agrees to
purchase 667,000 shares of authorized but unissued common stock, par value
US$0.001 (the "Shares") at a price of US$7.50 per share (for an aggregate
purchase price of US$5,002,500.00).
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3.3 The Closing provided for in this Agreement will take place at the
office of Southwall at 10:00 a.m. (California time) on the Closing Date. In
consideration of the purchase of the Shares, Teijin shall pay the purchase price
of the Shares at the Closing by wire transfer to Southwall's bank account
designated by Southwall. Within twenty (20) business days of receipt of such
payment, Southwall shall deliver to Teijin a stock certificate or certificates
evidencing the Shares issued in the name of Teijin. As of the Closing Date,
Southwall shall issue and deliver to Teijin documentation evidencing ownership
of the Shares on the Closing Date.
It is agreed by the Parties that the failure to consummate the Closing on
the date and time and at the place determined under this paragraph will not
result in the immediate termination of this Agreement and will not relieve any
Party of any obligation under this Agreement. In this case, the Parties shall
deliberate in good faith for finding the best solution based upon the purpose of
this Agreement as prescribed in Article 2 of this Agreement.
3.4 It is further agreed by the Parties that in consideration of the
purchase of the Shares at a premium to the current market price for Southwall
Common Stock, Southwall shall issue to Teijin at the Closing a warrant to
purchase an additional 158,000 shares of Common Stock at a price of US$9.00 per
share, which may be exercised within a three (3) year period from the Closing
Date, which warrant shall be in the form attached hereto as Exhibit A.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES AND COVENANTS
BY SOUTHWALL
Southwall agrees to make the representations and warranties set forth on
Exhibit B hereto except as set forth on the Schedule of Exceptions attached
thereto as of the Closing Date.
ARTICLE 5
REPRSENTATIONS AND WARRANTIES BY TEIJIN
Teijin represents and warrants to Southwall as follows:
5.1.1 Teijin is a corporation duly organized, validly existing, and in
good standing under the laws of Japan.
5.1.2 This Agreement constitutes the legal, valid, and binding
obligation of Teijin, enforceable against Teijin in accordance with its terms.
Teijin has the absolute and unrestricted right, power, and authority to execute
and deliver this Agreement.
5.1.3 Teijin is acquiring the 667,000 shares as mentioned in Article 3
hereinabove for its own account and not with a view to their distribution within
the meaning of Section 2(11) of the Securities Act.
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Teijin agrees not to sell or transfer the above-mentioned 667,000 shares of
Southwall Common Stock for at least two (2) years after Closing without the
prior written consent of Southwall. In accordance with Securities Act these
shares shall be governed by Rule 144 and other applicable SEC regulations and
shall contain the appropriate legends.
After the said two (2) years, Teijin may sell such shares without the prior
written consent of Southwall.
ARTICLE 6
REGISTRATION RIGHTS
Each of the parties covenants and agrees as to the provisions as set forth
in Exhibit C hereto.
ARTICLE 7
LOAN
7.1 As soon as practicable after the effective date of this Agreement,
Teijin will make financing arrangement for Southwall in the mount of
US$10,000,000.00 as a part of investment fund of the New Plant of Southwall. A
binding loan agreement, letter of guarantee and related formal instruments, if
any, shall be negotiated as soon as possible and shall be executed subject to
the completion of the Closing.
7.2 Major financing conditions are as follows:
(1) Date of Execution: On or before May 6, 1997
(2) First Draw Down Date: May 6, 1997
(3) Expected First Draw Down Amount: US$5,000,000
(4) Second Draw Down Date: Within six (6) months of First Draw Down
Date
(5) Expected Second Draw Down Amount: Balance of Total Loan Amount
(6) Total Loan Amount: US$10,000,000.
(7) Financing Purpose: Investment fund required for building the New
Plant.
(8) Expected Lender: First class Japanese Bank or its United States
financing company designated by Teijin.
(9) Borrower: Southwall.
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(10) Grace Period: Four (4) years after the First Draw Down Date.
During this period, semi-annual, interest-only payments, including
guarantee fee.
(11) Repayments: Eight (8) semi-annual equivalent principal repayments,
plus accrued interest and guarantee fee starting forty-eight (48)
months after the First Draw Down Date.
(12) Interest rate, including guarantee fee: In total one (1) percent
per annum above six (6) months LIBOR rate by BBA.
(For the purpose of this Agreement, the six (6) months LIBOR rate means the
semi-annual floating rate, which shall first be the effective rate as of (2) two
business days before the date of draw down and thereafter each time to be
decided by the effective rate as of two (2) business days before the next six
(6) month period.)
(13) Security: Southwall shall secure this loan in a manner
satisfactory to Teijin based on mutually agreed upon valuation of
manufacturing equipment and other tangible and intangible assets
of the New Plant.
(14) Prepayment: Southwall may have the right to prepay this loan in
full or in part without any penalty at any time, provided that
Southwall shall notify Teijin and the lender bank at least six (6)
months prior to intended prepayment and will comply with
prepayment terms of the loan agreement and letter of guarantee.
ARTICLE 8
COLLABORATION IN TECHNOLOGY.
Southwall and Teijin will negotiate in good faith with respect to
collaboration on the development of polyester or any other new film substrate
products and/or processes at adequate facilities of Southwall in the United
States of America and/or Teijin in Japan as the case may be, or in such other
appropriate places as the parties may mutually agree.
Both Parties will commence collaboration discussions under this Article
within two (2) months after the Closing Date.
ARTICLE 9
SALE AND DISTRIBUTION OF SOUTHWALL PRODUCTS
Teijin may request Southwall to grant distribution rights for Southwall
products within certain territories, including Japan, subject to existing
contractual relationships. By deliberation Southwall may grant distribution
rights of agreed Southwall products to Teijin in the
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agreed territories. The terms and specific nature of such distribution rights
shall also be separately agreed upon by the Parties.
ARTICLE 10
MATERIAL SUPPLY
It is acknowledged that Teijin is the major supplier of PET film to
Southwall. In recognition of this status Southwall hereby acknowledges Teijin as
a Most Favored Supplier and, during the term of this Agreement, Southwall shall
grant Teijin the most preferential position in respect to Southwall's purchases
of PET film and/or other new films so long as the price, quality and other
supply conditions are competitive with those of other supplier(s).
ARTICLE 11
FAIR RELATIONSHIP
Nothing in this Agreement prohibits or restricts any fair and arm's length
competition between the Parties; provided, however, that if, at any time during
the term of this Agreement, either Party becomes aware of any additional
collaboration opportunity with regard to film substrate products, such Party
shall, to the extent possible and in accordance with the provision of paragraph
2.1 of this Agreement, offer to meet and confer with the other Party concerning
such an additional opportunity.
ARTICLE 12
TERM AND TERMINATION
12.1 This Agreement shall become effective as of the date first above
written subject to the approval of the respective Boards of Directors of
Southwall and Teijin and approval of governmental authorities of Japan and the
United States of America, if such governmental approval is necessary.
12.2 This Agreement may, with sixty (60) days prior written notice, be
terminated:
(a) by either Southwall or Teijin if a material breach of any
provisions of this Agreement has been committed by the other Party and such
breach has not been waived or cured within sixty (60) days after notice of such
breach;
(b) by mutual consent of Southwall and Teijin; or
(c) by either Southwall or Teijin if the Closing has not occurred
(other than through the failure of any Party) on or before May 30, 1997.
12.3 Unless earlier terminated under the preceding paragraph, this
Agreement shall be effective until the termination of the Loan Agreement
stipulated in Article 7 hereinabove or seven (7) years after the effective date
of this Agreement whichever occurs later. If Teijin
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owns 5% of the outstanding Common Stock of Southwall at the time of termination
of this Agreement, the Parties will enter into good faith negotiation regarding
further collaboration to benefit both Parties.
The provisions of paragraphs 13.1, 13.3 and 13.6 shall survive the
termination hereunder.
ARTICLE 13
GENERAL PROVISIONS
13.1 Except as otherwise expressly provided in this Agreement, each Party
will bear its respective expenses incurred in connection with the preparation,
execution and performance of this Agreement and the contemplated transactions,
including all fees and expenses of agents, representatives, legal counsel and
accountants.
In the event of early termination of this Agreement under paragraph 12.2,
the obligation of each Party to pay its own expenses will be subject to any
rights of such Party arising from a breach of this Agreement by the other Party.
13.2 Any public announcement or similar publicity with respect to this
Agreement or the contemplated transactions will not be issued without the prior
written consent of the other Party hereto, except as required by law.
13.3 Each Party will hold in confidence and not disclose to any of its own
personnel who do not have a need to know or to any third party any information
specifically marked as confidential which is received by it from the other Party
in connection with the transactions contemplated hereby, without the prior
written consent of the other Party.
The foregoing obligation of confidence shall extend for the term of this
Agreement and any extensions hereof and for a period of five (5) years
thereafter, provided; however, that the above confidentiality obligation shall
not apply to any information:
(a) which is or becomes part of the public domain other than
through breach of this Agreement or through the fault of the receiving Party;
(b) which is or becomes available to the receiving Party from a
source other than the disclosing Party, which source has no obligation to the
disclosing Party in respect thereof;
(c) which is made available by the disclosing Party in written
form to a third party which is not a subsidiary of the disclosing Party without
any confidentiality restrictions;
(d) which is required to be disclosed by law or governmental
order; or
(e) disclosure of which is mutually agreed to by the Parties.
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13.4 All notices, consents, requests, demands and other communications
authorized or required to be given pursuant to this Agreement shall be given in
writing:
If to Southwall: President
Southwall Technologies Inc.
1029 Corporation Way
Palo Alto, CA 94303
If to Teijin: General Manager
Films Planning & Administration Dept.
Teijin Limited
Iino Bldg.,
1-1, Uchisaiwaicho 2-Chome
Chiyoda-Ku, Tokyo 100
JAPAN
Notices under this Agreement shall be deemed effective on the earlier of:
actual receipt; one working day after dispatch when sent by telex, cable or by
telefax to the recipient's proper telex or telefax number, or when delivered by
hand, or ten (10) working days after being sent by air mail, certified or
registered mail, postage pre-paid, return receipt requested, addressed as set
out above (or as otherwise designated by any Party in writing by notice given in
accordance with this paragraph).
13.5 The provisions in this Agreement relating to the Shares will be
governed by California law; provisions concerning the loan documents
contemplated hereby will be governed by Japanese law unless Teijin agrees that
such provisions shall be governed by California law. All other agreements
contemplated hereby shall be governed according to the mutual agreement of the
parties.
13.6 Any disputes, controversy or claim arising out of or relating to this
Agreement, or breach, termination, invalidity thereof, shall be finally settled
by arbitration in accordance with the UNCITRAL Arbitration Rules as presently in
force. The number of arbitrators shall be three (3). The language to be used in
the arbitration shall be English. If Teijin initiates the arbitration the
location of the arbitration shall be San Francisco, California. If Southwall
initiates the arbitration the location of the arbitration shall be Tokyo, Japan.
13.7 Any failure of Southwall, on the one hand, or Teijin, on the other
hand, to comply with any obligation, covenant, agreement or condition herein may
be waived in writing by the other Party, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits waivers or consents
by or on behalf of either Party, such waiver or consent shall be given in
writing.
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13.8 This Agreement supersedes all prior agreements between the Parties
with respect to its subject matter (including the Letter of Intent between
Southwall and Teijin dated March 7, 1997) and constitutes the complete and
exclusive statement of the agreement between the Parties with respect to its
subject matter. This Agreement may not be amended, waived or modified except by
an instrument in writing executed by the Parties.
13.9 This Agreement shall be binding upon and shall inure to the benefit of
the Parties and their successors and assigns; provided, however, that neither
Party may assign any of its rights under this Agreement without the prior
written consent of the other Party.
13.10 If any term, covenant, restriction or provision of this Agreement is
held invalid or unenforceable by any court of competent jurisdiction, the
remaining terms, covenants, restrictions and provisions of this Agreement will
remain in full force and effect, and shall in no way be affected, impaired or
invalidated; it being the intent of the Parties that they would have executed
the remaining terms, covenants, restrictions and provisions without including
any of such which may be hereafter declared invalid, void or unenforceable.
13.11 Any failure or omission by the Parties in the performance of any
obligation under this Agreement shall not be deemed a breach of this Agreement
and shall not create any liability, if the same arises from any cause or causes
beyond the control of any of the Parties, including, but not limited to, the
following, which, for the purpose of this Agreement, shall be regarded as beyond
the control of each of the Parties: Act of God, fire, storm, flood, earthquake,
governmental regulation or direction, acts of the public enemy, war, rebellion,
insurrection, riot, invasion, strike or lockout; provided, however, that each
Party shall resume the performance whenever such causes are removed.
13.12 The headings of Articles in this Agreement are provided for
convenience only and will not affect its construction or interpretation.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day first above
written.
FOR SOUTHWALL TECHNOLOGIES INC.
/s/ Martin M. Schwartz
----------------------------------------
Martin M. Schwartz
President and Chief Executive Officer
FOR TEIJIN LIMITED
/s/ H. Itagaki
----------------------------------------
Hiroshi Itagaki
President and Chief Executive Officer
EXHIBIT A
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
Void after
May 30, 2000
SOUTHWALL TECHNOLOGIES, INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
This Warrant is issued to Teijin Limited by Southwall Technologies, Inc., a
Delaware corporation (the "Company"), pursuant to the terms of that certain
Basic Agreement Regarding Stock Purchase Between Southwall and Teijin (the
"Stock Purchase Agreement") dated as of April 9, 1997 by and among the Company
and Teijin Limited, a Japanese corporation.
1. Purchase of Shares. Subject to the terms and conditions hereinafter set
forth, the holder of this Warrant is entitled, upon surrender of this Warrant at
the principal office of the Company (or at such other place as the Company shall
notify the holder hereof in writing), to purchase from the Company up to 158,000
fully paid and nonassessable shares of Common Stock of the Company, as more
fully described below. The shares of Common Stock issuable pursuant to this
Section 1 (the "Shares") shall also be subject to adjustment pursuant to Section
8 hereof.
2. Purchase Price. The purchase price for the Shares shall be $9.00 per
share. Such price shall be subject to adjustment pursuant to Section 8 hereof
(such price, as adjusted from time to time, is herein referred to as the
"Exercise Price").
3. Exercise Period. This Warrant is immediately exercisable and it shall
remain exercisable until and including May 30, 2000; provided, however, that in
the event of (a) the sale of all or substantially all the assets of the Company,
or (b) the merger of the Company into or consolidation with any other entity,
this Warrant shall, on the date of such event, no longer be exercisable and
become null and void. In the event of a proposed transaction of the kind
described above, the Company shall notify the holder of the Warrant at least
fifteen (15) days prior to the consummation of such event or transaction.
4. Method of Exercise. While this Warrant remains outstanding and
exercisable in accordance with Section 3 above, the holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:
(i) the surrender of the Warrant, together with a duly executed
copy of the form of subscription attached hereto, to the Secretary of the
Company at its principal offices; and
(ii) the payment to the Company of an amount equal to the
aggregate Exercise Price for the number of Shares being purchased.
5. Net Exercise. In lieu of exercising this Warrant by paying the exercise
price in cash, the holder of this Warrant may elect to receive shares equal to
the value of this Warrant (or the portion thereof being canceled) by surrender
of this Warrant at the principal office of the Company together with notice of
such election, in which event the Company shall issue to the holder hereof a
number of shares of Common Stock computed using the following formula:
Y (A-B)
-------
X= A
Where
X-- The number of shares of Common Stock to be issued to the
holder of this Warrant.
Y-- The number of shares of Common Stock purchasable under this
Warrant.
A-- The fair market value of one share of the Company's Common
Stock.
B-- The Exercise Price (as adjusted to the date of such
calculations).
For purposes of this Paragraph 5, the fair market value of Common Stock
shall mean the average of the closing bid and asked prices of the Common Stock
quoted in the over-the-counter market in which the Common Stock is traded or the
closing price quoted on the Nasdaq Stock Market or on any exchange on which the
Common Stock is listed, whichever is applicable, as published in the Western
Edition of The Wall Street Journal for the ten trading days prior to the date of
determination of fair market value (or such shorter period of time during which
such stock was traded over-the-counter or on such exchange). If the Common Stock
is not traded on the over-the-counter market or on an exchange, the fair market
value shall be the price per share that the Company could obtain from a willing
buyer for shares of Common Stock sold by the Company from authorized but
unissued shares, as such price shall be determined in good faith by the
Company's Board of Directors.
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6. Certificates for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued as soon as practicable thereafter, and in any event
within thirty (30) days of the delivery of the subscription notice.
7. Issuance of Shares. The Company covenants that the Shares, when issued
pursuant to the exercise of this Warrant, will be duly and validly issued, fully
paid and nonassessable and free from all taxes, liens, and charges with respect
to the issuance thereof.
8. Adjustment of Exercise Price and Number of Shares. The number of and
kind of securities purchasable upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the Company
shall at any time prior to the expiration of this Warrant subdivide its Common
Stock, by split-up or otherwise, or combine its Common Stock, or issue
additional shares of its Common Stock as a dividend with respect to any shares
of its Common Stock, the number of Shares issuable on the exercise of this
Warrant shall forthwith be proportionately increased in the case of a
subdivision or stock dividend, or proportionately decreased in the case of a
combination. Appropriate adjustments shall also be made to the purchase price
payable per share, but the aggregate purchase price payable for the total number
of Shares purchasable under this Warrant (as adjusted) shall remain the same.
Any adjustment under this Section 8(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In case of any
reclassification, capital reorganization, or change in the Common Stock of the
Company (other than as a result of a subdivision, combination, or stock dividend
provided for in Section 8(a) above), then, as a condition of such
reclassification, reorganization, or change, lawful provision shall be made, and
duly executed documents evidencing the same from the Company or its successor
shall be delivered to the holder of this Warrant, so that the holder of this
Warrant shall have the right at any time prior to the expiration of this Warrant
to purchase, at a total price equal to that payable upon the exercise of this
Warrant, the kind and amount of shares of stock and other securities and
property receivable in connection with such reclassification, reorganization, or
change by a holder of the same number of shares of Common Stock as were
purchasable by the holder of this Warrant immediately prior to such
reclassification, reorganization, or change. In any such case appropriate
provisions shall be made with respect to the rights and interest of the holder
of this Warrant so that the provisions hereof shall thereafter be applicable
with respect to any shares of stock or other securities and property deliverable
upon exercise hereof, and appropriate adjustments shall be made to the purchase
price per share payable hereunder, provided the aggregate purchase price shall
remain the same.
(c) Notice of Adjustment. When any adjustment is required to be made in
the number or kind of shares purchasable upon exercise of the Warrant, or in the
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Exercise Price, the Company shall promptly notify the holder of such event and
of the number of shares of Common Stock or other securities or property
thereafter purchasable upon exercise of this Warrant.
9. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Exercise Price then in effect.
10. No Stockholder Rights. Prior to exercise of this Warrant, the holder
shall not be entitled to any rights of a stockholder with respect to the Shares,
including (without limitation) the right to vote such Shares, receive dividends
or other distributions thereon, exercise preemptive rights or be notified of
shareholder meetings, and such holder shall not be entitled to any notice or
other communication concerning the business or affairs of the Company.
11. Successors and Assigns. The terms and provisions of this Warrant and
the Stock Purchase Agreement shall inure to the benefit of, and be binding upon,
the Company and the holders hereof and their respective successors and assigns.
12. Amendments and Waivers. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the holders of the shares of Common Stock issued or
issuable upon exercise of this Warrant. Any waiver or amendment effected in
accordance with this Section shall be binding upon each holder of any Shares
purchased under this Warrant at the time outstanding (including securities into
which such Shares have been converted), each future holder of all such Shares,
and the Company.
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13. Transfer Procedure. Subject to the provisions of applicable securities
laws, and the written consent of the Company, the holder hereof may transfer all
or part of this Warrant or the Shares issuable upon exercise of this Warrant by
setting forth the name, address and taxpayer identification number of the
transferee and surrendering this Warrant to the Company for reissuance to the
transferee(s) (and the holder if applicable).
14. Governing Law. This Warrant shall be governed by the laws of the State
of California as applied to agreements among California residents made and to be
performed entirely within the State of California.
SOUTHWALL TECHNOLOGIES, INC.
By: /s/ Martin M. Schwartz
------------------------------------------
Martin M. Schwartz, President and Chief
Executive Officer
Address: Southwall Technologies, Inc.
1029 Corporation Way
Palo Alto, CA 94303
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EXHIBIT B
ARTICLE 1
REPRESENATIONS AND WARRANTS OF
THE COMPANY
The Company hereby represents and warrants that, except as set forth on a
Schedule of Exceptions (the "Schedule of Exceptions"), which exceptions shall be
deemed to be representations and warranties as if made hereunder:
1.1 Organization. The Company is a duly organized and validly existing
corporation in good standing under the laws of the state of Delaware and is duly
qualified or registered to do business as a foreign corporation and is in good
standing in each jurisdiction which requires such qualification or registration
wherein it owns or leases any material properties or conducts any material
business, except where the failure so to qualify or register would not, in the
aggregate, have a material adverse effect on the Company. The Company has the
corporate power and authority to own its properties and conduct its business as
currently conducted.
1.2 Capitalization.
(a) The Company has duly authorized capital stock consisting of (i)
20,000,000 shares of Common Stock, $0.001 par value, of which 6,538,589 shares
were issued and outstanding on February 28, 1997 and 378,472 shares were held in
treasury, and (ii) 5,000,000 shares of Preferred Stock, none of which are issued
and outstanding on the date hereof or held in treasury. All such outstanding
shares of Common Stock are duly authorized, validly issued, fully paid and
nonassessable.
(b) The Company has the following outstanding securities which are
convertible into Common Stock as of March 31, 1997: the Convertible Subordinated
Note due May 31, 1999 to Monsanto Company, or its successors or assigns (the
"Monsanto Note"). The Monsanto Note is in the amount of US$2,650,000 and
convertible, prior to repayment, into shares of Southwall common stock at a
conversion price of US$10.00 per share, subject to certain anti-dilution
adjustments.
(c) The Company has adopted the following plans: (i) the Restated 1987
Stock Option Plan; (ii) the 1987 Employee Stock Purchase Plan; (iii) the 1997
Stock Incentive Plan; and (iv) the 1997 Employee Stock Purchase Plan. The
following information is provided as of March 31, 1997. With respect to the
Restated 1987 Stock Option Plan, a total of 2,275,000 shares have been reserved
for issuance, 563,050 shares have been issued and 1,659,237 shares remain
subject to outstanding options. With respect to the 1987 Employee Stock Purchase
Plan, 150,000 shares have been reserved for issuance, 125,213 shares have been
issued and no shares remain available for issuance because such plan terminated
in accordance with its terms, as of March 18, 1997. The 1997 Stock Incentive
Plan which supersedes the Restated 1987 Stock Option Plan was adopted by the
Board on March 20, 1997 and remains
subject to stockholder approval and the 1997 Annual Meeting; 400,000 shares have
been reserved for issuance, and no options have been granted and no shares have
been issued. With respect to the 1997 Employee Stock Purchase Plan, which the
Board adopted on March 20, 1997 and which remaining subject to stockholder
approval at the 1997 Annual Meeting, 100,000 shares have been reserved for
issuance, and no shares have been issued. All such plans have been described in
a list previously delivered to Teijin (the "Stock Plans").
(d) All of the issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as described in this Section 1.2 or set forth in a list previously
delivered to Teijin, there is no other outstanding voting stock or other
outstanding rights to acquire voting stock. Except as set forth herein there are
no existing voting trusts, voting agreements or similar agreements between the
Company and any of its shareholders.
(e) Copies of the Company's Certificate of Incorporation and the
Company's Bylaws have been delivered by the Company to Teijin and are complete
and correct. The Company will furnish upon the request of Teijin true and
correct copies of any amendments to the foregoing instruments until this
Agreement is terminated.
1.3 Subsidiaries. The only direct or indirect subsidiaries of the Company
are those named in Exhibit 21 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 or a list previously furnished to
Teijin, and the information relating to the organization of such subsidiaries,
set forth in such list is true and correct. Except as set forth in the SEC
Documents or a list furnished to Teijin, the Company is, directly or indirectly,
the record and beneficial owner of all of the outstanding shares of the
subsidiaries, free and clear of any claim, lien, encumbrance or agreement with
respect thereto, and no equity securities of such subsidiaries are required to
be issued by reason of any warrants, rights, options, calls, commitments or
other agreements.
1.4 Authorization and Approval. The Company has full corporate power and
authority to enter into and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement by the Company have been duly authorized by all requisite
corporate action. This Agreement constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
subject to laws of general application relating to bankruptcy, insolveney and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies, and to limitations of public
policy as they may apply to Section 1.4 of Exhibit C to this Agreement. The
Company is not a party to, subject to, or bound by any agreement or any
judgment, order, writ, injunction, or decree of any court, governmental body, or
arbitrator which would conflict with or be breached by the execution, delivery
or performance by the Company of this Agreement or which would prevent the
carrying out of this Agreement. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under any
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provision of the Certificate of Incorporation or Bylaws of the Company or any
mortgage, indenture, lease or other agreement or instrument, permit, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or its properties or assets, the effect of which would
have a material adverse effect on the Company as a whole or would materially
impair or restrict the Company's power to perform its obligations as
contemplated hereby. The Shares, when sold and delivered by the Company and paid
for by Teijin pursuant to this Agreement, will have been duly and validly
issued, will be fully paid and nonassessable, and will have the rights,
preferences, privileges and restrictions described in the Certificate of
Incorporation. The Common Stock issuable upon exercise, of the Warrants has been
duly and validly reserved, and, when issued in compliance with the provisions of
this Agreement and the Warrant, will be validly issued and will be fully paid
and nonassessable. The issuance and sale of shares of the Shares and Warrant to
Teijin under Article III of the Agreement hereof will not give rise to any
preemptive rights or rights of first refusal on behalf of any person or group.
1.5 SEC Filings and Financial Statements. The Company has heretofore
furnished to Teijin copies of its Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, and all other registration statements, reports and
proxy statements filed by the Company with the Securities and Exchange
Commission ("SEC") on or after January 1, 1996 ("SEC Documents"). Each of the
SEC Documents was prepared and filed in substantial compliance with the
provisions of the Securities Act, the Exchange Act and the rules and regulations
thereunder. Each of the SEC Documents was complete and correct in all material
respects as of its date, and, as of its date, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances in which made, not misleading. The consolidated financial
statements and the notes thereto contained in the SEC Documents are correct and
complete and fairly present the consolidated financial position of the Company
and its subsidiaries on the respective dates thereof and the results of
operations for the periods then ended, and the balance sheets and notes thereto
contained therein show and properly reflect all material liabilities of the
Company and its consolidated subsidiaries on the respective dates thereof,
except for various claims and lawsuits against the Company now pending, the
total liability from which would not, in the judgment of the Company, materially
adversely affect the business, properties, or financial condition of the Company
and its subsidiaries, taken as a whole. Each such financial statement complies
as to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, and
was prepared in conformity with generally accepted accounting principles
consistently applied (except, in the case of unaudited statements, as permitted
by the SEC for its Quarterly Reports on Form 10-Q).
1.6 Litigation. There is no action, suit, proceeding or investigation
pending or to Southwall's knowledge threatened against the Company that
questions the validity of this Agreement, or the right of the Company to enter
into such agreement, or to consummate the transactions contemplated hereby or
thereby, or that might result, either individually or in the aggregate, in any
material adverse changes in the assets, condition, affairs or prospects of the
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Company, financially or otherwise, or any change in the current equity ownership
of the Company,
1.7 No Pending Transactions. The Company is not a party to or bound by any
agreement (i) to merge or consolidate with, or acquire all or substantially all
of the property and assets of, any other person, (ii) to sell, lease, or
exchange all or any substantial part of its property and assets to any other
person, or (iii) except as otherwise disclosed to Teijin or as contemplated by
this Agreement, to issue, grant or sell any voting stock or rights to acquire
voting stock in any transaction where Teijin would, upon completion of the
transaction, own five percent (5%) or more of all outstanding Voting Stock.
1.8 No Material Adverse Changes. Except as otherwise disclosed herein or in
the SEC Documents, since December 31, 1996, there has not been any material
adverse change in the financial condition or in the operations, properties,
assets or liabilities of the Company and its subsidiaries, taken as a whole,
whether or not arising in the ordinary course of business.
1.9 Dividends. Since December 31, 1996, the Company has not made any
declaration, setting aside or payment to the holders of its Common Stock of any
dividends or other distributions in respect of the Common Stock or agreed to
take any such action (other than repurchases under employee stock plans).
1.10 Intellectual Property Rights. Except as disclosed in the SEC Documents
filed prior to the execution of this Agreement, to its knowledge the Company and
its subsidiaries own or possess adequate rights to use all material patents,
trademarks, trade names, service marks, trade secrets, copyrights and other
proprietary industrial property rights as are necessary in connection with the
business of the Company, the lack of which would have a material adverse effect
on the Company and its subsidiaries taken as a whole, and the Company does not
have any knowledge of any conflict with the rights of the Company and its
subsidiaries therein or any knowledge of any conflict by them with the rights of
others therein which would have a material adverse effect on the Company and its
subsidiaries taken as a whole.
1.11 Compliance with Laws. To the Company's best knowledge, the business of
the Company and its subsidiaries is not being conducted in material violation of
any applicable law, rule or regulation (including environmental regulations),
judgment, decree or order of any governmental entity which is material to the
conduct of the Company's business, except for any violations which, individually
or in the aggregate, will not have a material adverse effect on the business
condition of the Company and its subsidiaries taken as a whole. There are no
judgments or outstanding orders, injunctions, decrees, stipulations or awards
(whether rendered by a court or administrative agency or by arbitration) against
the Company or any subsidiary or against any of the respective properties or
business which will, individually or in the aggregate, have a material adverse
effect on the business condition of the Company and its subsidiaries taken as a
whole.
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1.12 Disclosure.
(a) No representation or warranty made by the Company in this
Agreement, and no statement contained in any certificate, list or other
instrument specified in this Agreement (when read together and taken as a
whole), contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances under which they are made, not misleading.
(b) Notwithstanding the foregoing, Teijin shall be deemed to have
knowledge of all information set forth in the SEC Documents. Any facts disclosed
in the SEC Documents or in response to any particular representation contained
herein shall be deemed to have been disclosed to Teijin in connection with all
other applicable representations contained herein.
ARTICLE II
COVENANTS OF THE COMPANY
Until the termination of this Agreement or until Teijin shall no longer
hold 5% of the outstanding Common Stock of the Company, the Company covenants
and agrees as follows:
2.1 Rule 144. With a view to making available to Teijin the benefits of
Rule 144 promulgated under the Securities Act, any other similar rules or
regulations of the SEC which may at any time permit Teijin to sell or distribute
without registration the Shares and shares of Common Stock issued upon exercise
of the Warrant, the Company agrees to use its best efforts to file with the SEC
in a timely manner all reports and other documents required to be filed under
the Exchange Act.
2.2 Future SEC Filings. The Company shall promptly provide to Teijin copies
of all SEC Documents (excluding exhibits) filed with the SEC after the Closing
Date.
2.3 Stock Exchange Listing. The Company will use its best efforts to obtain
the listing on the Nasdaq National Market of the Shares and the shares of Common
Stock which Teijin may acquire upon exercise of the Warrant.
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EXHIBIT C
ARTICLE I
REGISTRATION RIGHTS
1.1 Rights to Demand Registration.
(a) If at any time and from time to time, Teijin shall request the
Company in writing to register under the Securities Act the Shares or any shares
of Common Stock issued upon exercise of the Warrant and held by Teijin (the
shares subject to such request herein referred to as the "Registrable Shares"),
the Company shall use all reasonable efforts to cause the Registrable Shares
specified in such request (which must be at least such percentage of the
aggregate shares of Common Stock then outstanding as is reasonably anticipated
to result in an offering with aggregate gross proceeds to Teijin in excess of
$7,500,000, or such lesser percentage if it constitutes all shares of voting
stock held by Teijin at such time) to be registered as soon as reasonably
practicable so as to permit the sale thereof and in connection therewith prepare
and file, on such appropriate form as the Company in its discretion shall
determine, a registration statement under the Securities Act to effect such
registration and seek to have such registration statement become effective as
promptly as practicable; provided, however, that each such request shall:
(i) specify the number of Registrable Shares intended to be
offered and sold,
(ii) express the present intention of Teijin to offer or cause
the offering of such Registrable Shares for distribution,
(iii) describe the nature or method of the proposed offer and
sale thereof, and
(iv) contain the undertaking of Teijin to provide all such
information and materials and take all such action as may be required in order
to permit the Company to comply with all applicable requirements of the SEC and
to obtain any desired acceleration of the effective date of such registration
statement.
(b) Upon any registration becoming effective pursuant to this Section
1.1, the Company shall use its best efforts to keep such registration statement
current for a period of 90 days. Notwithstanding the foregoing, (i) the Company
shall not be obligated to cause any special audit to be undertaken in connection
with any such registration, (ii) the Company shall be entitled to postpone for a
reasonable period of time, but not in excess of 120 calendar days, the filing of
any registration statement otherwise required to be prepared and filed by it if
the Company at the time it receives a request for registration, reasonably
believes in good faith, and discloses to Teijin the reasons for such belief,
that it would be disadvantageous to
the Company for such filing to be made at the time requested by Teijin in which
event the Company may delay the preparation and filing of a registration
statement for a period of up to 120 days and (iii) the Company shall not be
obligated to file a registration statement pursuant to this Section 1.1 during
the 90-day period following the effectiveness of any registration statement
filed by the Company in connection with an underwritten primary offering of its
securities. The obligation of the Company to register any Registrable Shares on
demand by Teijin in accordance with this Section 1.1 shall expire after
registration statements filed by reason of such demands have become effective on
four separate occasions, and in no event shall Teijin be entitled to request
more than two demand registration statements hereunder in any 12-month period.
The Company shall not be obligated to file any registration statement if the
number of shares of Common Stock to be registered for sale would exceed ten
percent (10%) of the aggregate shares of Common Stock then outstanding. In
connection with any demand offering under this section 1.1 involving an
underwriting of shares of the Company's capital stock, the Company shall select
the underwriters subject to the reasonable consent of Teijin.
1.2 The Company's Obligations. As to each offering of Common Stock covered
by a registration statement referred to in Section 1.1, the Company shall:
(a) Use its best effort to have such registration statement declared
effective as promptly as reasonably practicable on or after such time and date
as specified by Teijin and will promptly notify Teijin and its underwriters, if
any, and confirm such advice in writing (i) when such registration statement has
become effective, (ii) when any post-effective amendment to any such
registration statement becomes effective and (iii) of any request by the SEC for
any amendment or supplement to such registration statement or any prospectus
relating thereto or for additional information;
(b) Furnish to Teijin or the underwriters such number of copies of any
prospectus (including any preliminary prospectus) in conformity with the
requirements of the Securities Act, as Teijin may reasonably request in order to
effect the offering and sale of the shares of Common Stock being offered and
sold by Teijin, but only while the Company is required under the provisions
hereof to cause the registration statement to remain current;
(c) Use the best efforts to register or qualify not later than the
effective date of such registration statement the shares of Common Stock held by
Teijin registered thereunder under the "blue sky" laws of such states as Teijin
may reasonably request; provided, however, that the Company shall not be
obligated to qualify as a foreign corporation or as a dealer in securities or to
execute or file any general consent to service of process under the laws of any
such state where it is not at such time so qualified or subject; and
(d) For a period of at least 90 days from the effective date of the
registration statement, keep such registration statement in effect and current
and from time to time amend or supplement the registration statement and the
prospectus in connection therewith in compliance with the Securities Act and the
rules and regulations adopted thereunder to permit the sale or distribution of
the shares with respect to which such registration statement shall have become
effective. If at any time the SEC should institute or threaten to institute any
proceedings
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for the purpose of issuing, or should issue a stop order suspending the
effectiveness of any such registration statement, the Company will promptly
notify Teijin and will use its best efforts to prevent the issuance of any such
stop order or to obtain the withdrawal thereof as soon as possible. The Company
will advise Teijin promptly of any order or communication of any public board or
body addressed to the Company suspending or threatening to suspend the
qualification of any of the shares of Common Stock for sale in any Jurisdiction.
1.3 Expenses. The out-of-pocket costs and expenses incurred in connection
with any registration pursuant to Section 1.1 shall be borne by Teijin, provided
that Teijin shall not be required to reimburse the Company for compensation of
the Company's officers and employees, regular audit expenses, and normal
corporate costs. The costs and expenses of any such registration shall include,
without limitation, the reasonable fees and expenses of the Company's counsel
and its accountants and all other out-of-pocket costs and expenses of the
Company incident to the preparation, printing and filing under the Securities
Act of the registration statement and all amendments and supplements thereto and
the cost of furnishing copies of each preliminary prospectus, each final
prospectus and, each amendment or supplement thereto to underwriters, dealers
and other purchasers of the securities so registered, the costs and expenses
incurred in connection with the qualification of such securities so registered
under the "blue sky" laws of various jurisdictions, the fees and expenses of the
Company's transfer agent and all other costs and expenses of complying with the
foregoing provisions of this Article I.
1.4 Indemnification.
(a) In the case of any offering registered pursuant to Section 1.1, the
Company hereby indemnifies and agrees to hold harmless Teijin, any underwriter
(as defined in the Securities Act) of shares offered by Teijin, and each person,
if any, who controls Teijin or any such underwriter within the meaning of
Section 15 of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which any such persons may be subject, under
the Securities Act or otherwise, and to reimburse any of such persons for any
legal or other expenses reasonably incurred by them in connection with
investigating any claims or defending against any actions, insofar as such
losses, claims, damages or liabilities arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement under which such Registrable Shares were registered under
the Securities Act pursuant to this Article I, any prospectus contained therein,
if used during the period appropriate for such prospectus, or any amendment or
supplement thereto, or the omission or alleged omission to state therein (if so
used) a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, except insofar as such losses, claims, damages or liabilities arise
out of or are (x) based upon any such untrue statement or omission or alleged
untrue statement or omission made in reliance upon information furnished to the
Company in writing by Teijin or any underwriter for Teijin specifically for use
therein, or (y) made in any preliminary prospectus, and the prospectus contained
in the registration statement, as declared effective or in the form filed by the
Company with the SEC pursuant to Rule 424 under the Securities Act shall have
corrected such statement or omission and a copy of such prospectus shall not
have been sent or otherwise delivered to such person at or prior to the
confirmation of such sale to such person.
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1.5 Participation. The Company will permit counsel and other
representatives of Teijin to participate in meetings in connection with the
preparation of each registration statement referred to in Section 1.1. Before
filing the registration statement or amendments or supplements thereto, the
Company shall furnish to Teijin copies of all such documents proposed to be
filed. The Company shall promptly deliver to Teijin copies of the registration
statement and amendments thereto as filed with the SEC and upon the
effectiveness of the registration statement such number of copies of the
prospectus included in such registration statement as Teijin may reasonably
request.
1.6 Proposed Distribution. As to each registration statement referred to in
Section 1.1, Teijin will provide the Company with a description of the proposed
method or methods of distribution of securities from time to time contemplated
by Teijin, and the Company shall include such description in the registration
statement and file any and all amendments and supplements necessary in
connection therewith.
1.7 Prior Registration Rights. Notwithstanding the foregoing, however, the
registration rights granted to Teijin in this Article I are subject to the
registration rights granted by the Company to certain investors under agreements
entered into by the Company prior to the date of this Agreement. The Company has
made available to Teijin copies of such prior registration rights.
1.8 Termination of Registration Rights. Teijin shall not be entitled to
exercise any right provided for in this Article 1 after the two (3) year period
following the issuance of the shares.
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