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EXHIBIT 10.21
PRIVATE EQUITY LINE OF CREDIT AGREEMENT
BETWEEN
FANCYVIEW INT'L, LTD.
AND
KOMAG, INCORPORATED
PRIVATE EQUITY LINE OF CREDIT AGREEMENT dated as of March 17, 2000 (the
"Agreement"), between Fancyview Int'l, Ltd. a New York corporation (the
"Investor") and Komag, Incorporated, a corporation organized and existing under
the laws of the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Investor from
time to time as provided herein, and Investor shall purchase, up to $20,000,000
(the "Aggregate Purchase Price") of the Common Stock (as defined below); and
WHEREAS, such investments will be made by the Investor as statutory
underwriter of a registered indirect primary offering of such Common Stock by
the Company.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 "Bid Price" shall mean the closing bid price (as reported by
Bloomberg L.P.) of the Common Stock on the Principal Market on the date in
question.
Section 1.2 "Capital Shares" shall mean the Common Stock and any shares
of any other class of common stock whether now or hereafter authorized, having
the right to participate in the distribution of earnings and assets of the
Company.
Section 1.3 "Capital Shares Equivalents" shall mean any securities,
rights, or obligations that are convertible into or exchangeable for or give any
right to subscribe for any Capital Shares
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of the Company or any warrants, options or other rights to subscribe for or
purchase Capital Shares or any such convertible or exchangeable securities.
Section 1.4 "Closing" shall mean one of the closings of a purchase and
sale of the Common Stock pursuant to Section 2.1.
Section 1.5 "Closing Date" shall mean, with respect to a Closing, the
fifth Trading Day following the end of the Valuation Period related to such
Closing, provided all conditions to such Closing have been satisfied on or
before such Trading Day.
Section 1.6 "Commitment Amount" shall mean the up to $20,000,000 which
the Investor has agreed to provide to the Company in order to purchase the Put
Shares pursuant to the terms and conditions of this Agreement.
Section 1.7 "Commitment Period" shall mean the period commencing on the
date of this Agreement and expiring on the earliest to occur of (x) the date on
which the Investor shall have purchased Put Shares pursuant to this Agreement
for an aggregate Purchase Price of $20,000,000, (y) the date this Agreement is
terminated pursuant to Section 2.4, or (z) the date occurring thirty (30) months
from the date of commencement of the Commitment Period.
Section 1.8 "Common Stock" shall mean the Company's common stock, par
value $.01 per share.
Section 1.9 "Condition Satisfaction Date" shall have the meaning set
forth in Section 7.2.
Section 1.10 "Effective Date" shall mean the date of this Agreement.
Section 1.11 "Escrow Agent" shall mean the escrow agent designated in
the Escrow Agreement.
Section 1.12 "Escrow Agreement" shall mean the escrow agreement in the
form attached hereto as Exhibit A.
Section 1.13 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.14 "Investment Amount" shall mean the dollar amount to be
invested by the Investor to purchase Put Shares with respect to any Put Date as
notified by the Company to the Investor, all in accordance with Section 2.2
hereof.
Section 1.15 "Market Price" on any given date shall mean the single
lowest closing bid price (as reported by Bloomberg L.P.) of the Common Stock on
any Trading Day during the Valuation Period relating to such date.
Section 1.16 "Material Adverse Effect" shall mean any effect on the
business, Bid Price, operations, properties, or financial condition of the
Company that is material and adverse to the Company and its subsidiaries, taken
as a whole, and/or any condition, circumstance, or situation that would prohibit
or otherwise interfere with the ability of the Company to enter into
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and perform any of its obligations under this Agreement, the Registration Rights
Agreement or the Escrow Agreement in any material respect.
Section 1.17 "Maximum Put Amount" shall mean the amount shown on the
following table:
MAXIMUM PUT AMOUNT SCHEDULE
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STOCK PRICE <50,000-100,000 100,001-150,000 150,001-200,000 200,001-ABOVE
AVG. 30 DAY AVG. 30 DAY AVG. 30 DAY AVG. 30 DAY
VOLUME VOLUME VOLUME VOLUME
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0.75-3.00 $1,500,000 $2,000,000 $2,000,000 $2,500,000
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3.01-4.50 $2,000,000 $2,000,000 $2,500,000 $2,500,000
------------------------------------------------------------------------------------------------------
4.51-6.00 $2,000,000 $2,500,000 $2,500,000 $3,000,000
------------------------------------------------------------------------------------------------------
6.01-7.50 $2,500,000 $2,500,000 $3,000,000 $3,000,000
------------------------------------------------------------------------------------------------------
7.51-9.00 $2,500,000 $3,000,000 $3,000,000 $3,500,000
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9.01-Above $3,000,000 $3,000,000 $3,500,000 $3,500,000
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Section 1.18 "Minimum Put Amount" shall mean $250,000.
Section 1.19 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.20 "Outstanding" when used with reference to shares of Common
Stock or Capital Shares (collectively the "Shares"), shall mean, at any date as
of which the number of such Shares is to be determined, all issued and
outstanding Shares; provided, however, that "Outstanding" shall not mean any
such Shares then directly or indirectly owned or held by or for the account of
the Company.
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Section 1.21 "Person" shall mean an individual, a corporation, a
partnership, a limited liability company, an association, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.22 "Principal Market" shall mean the NASDAQ National Market,
the NASDAQ Small-Cap Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock. Principal Market shall not include the OTC Bulletin Board
without the express written consent of the Investor.
Section 1.23 "Purchase Price" shall mean with respect to Put Shares,
ninety-four percent (94%) (the "Purchase Price Percentage") of the Market Price
during the Valuation Period related to a Put (or such other date on which the
Purchase Price is calculated in accordance with the terms and conditions of this
Agreement). In the event the Market Price on the date of a Put is $5.00-$7.49
the Purchase Price Percentage shall be ninety-two percent (92%) of the Market
Price during the Valuation Period related to a Put (or such other date on which
the Purchase Price is calculated in accordance with the terms and conditions of
this Agreement). In the event the Market Price on the date of a Put is $7.50 or
greater, the Purchase Price Percentage shall be ninety percent (90%) of the
Market Price during the Valuation Period related to a Put (or such other date on
which the Purchase Price is calculated in accordance with the terms and
conditions of this Agreement). The Purchase Price shall be further reduced by
three percent (3%) for a Put related to a Special Activity if such Put is
exercised pursuant to the seven (7) Trading Day Trading Cushion allowed during a
Special Activity.
Section 1.24 "Put" shall mean each occasion the Company elects to
exercise its right to tender a Put Notice requiring the Investor to purchase
shares of the Company's Common Stock, subject to the terms of this Agreement.
Section 1.25 "Put Date" shall mean the Trading Day during the Commitment
Period that a Put Notice to sell Common Stock to the Investor is deemed
delivered pursuant to Section 2.2(b) hereof.
Section 1.26 "Put Notice" shall mean a written notice to the Investor
setting forth the Investment Amount that the Company intends to sell to the
Investor in the form attached hereto as Exhibit B.
Section 1.27 "Put Shares" shall mean all shares of Common Stock or other
securities issued or issuable pursuant to a Put that has occurred or may occur
in accordance with the terms and conditions of this Agreement.
Section 1.28 "Registrable Securities" shall mean the Put Shares and the
Warrant Shares until (i) all Put Shares and Warrant Shares have been disposed of
pursuant to the Registration Statement, (ii) all Put Shares and Warrant Shares
have been sold under circumstances under which all of the applicable conditions
of Rule 144 (or any similar provision then in force) under the Securities Act
("Rule 144") are met, (iii) all Put Shares and Warrant Shares have been
otherwise transferred to persons who may trade such shares without restriction
under the Securities Act, and the Company has delivered a new certificate or
other evidence of ownership
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for such securities not bearing a restrictive legend or (iv) such time as, in
the opinion of counsel to the Company, all Put Shares and Warrant Shares may be
sold pursuant to Rule 144(k) (or any similar provision then in effect) under the
Securities Act.
Section 1.29 "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the sale and resale of
the Registrable Securities annexed hereto as Exhibit C.
Section 1.30 "Registration Statement" shall mean a registration
statement on Form S-3 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC, such as Form S-1 or SB-2, for which the Company then qualifies and
which counsel for the Company shall deem appropriate, and which form shall be
available for the resale by the Investor of the Registrable Securities to be
registered thereunder in accordance with the provisions of this Agreement, the
Registration Rights Agreement, and in accordance with the intended method of
distribution of such securities), for the registration of the resale by the
Investor of the Registrable Securities under the Securities Act.
Section 1.31 "SEC" shall mean the Securities and Exchange Commission.
Section 1.32 "Securities Act" shall mean the Securities Act of 1933, as
amended.
Section 1.33 "SEC Documents" shall mean the Company's latest Form 10-K
or 10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K filed
thereafter, and the Proxy Statement for its latest fiscal year as of the time in
question until such time as the Company no longer has an obligation to maintain
the effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.
Section 1.34 "Special Activity" shall mean any one time charge the
Company expects to incur for any reason, including, without limitation, in
connection with the acquisition of another business.
Section 1.35 "Trading Cushion" shall mean the mandatory fifteen (15)
Trading Days between Put Dates, unless waived by the Investor. Notwithstanding
the foregoing, in the event the Company gives the Investor fifteen (15) days
notice of Special Activity, the Trading Cushion shall be adjusted to seven (7)
Trading Days for a period of seven (7) consecutive weeks.
Section 1.36 "Trading Day" shall mean any day during which the Principal
Market shall be open for business.
Section 1.37 "Valuation Event" shall mean an event in which the Company
at any time prior to the end of the Commitment Period takes any of the following
actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend on its Capital Shares or makes any other
distribution of its Capital Shares;
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(c) issues any additional Capital Shares ("Additional Capital
Shares"), otherwise than as provided in the foregoing Subsections (a) and (b)
above or (d) and (e) below, at a price per share less, or for other
consideration lower, than the Bid Price in effect immediately prior to such
issuance, or without consideration (other than pursuant to this Agreement);
(d) issues any warrants, options or other rights to subscribe for
or purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the closing price of
the Common Stock in effect immediately prior to such issuance, other than in
connection with sales or issuances of Capital Shares of the Company pursuant to
employee stock option, stock incentive or stock bonus plans;
(e) issues any securities convertible into or exchangeable for
Capital Shares and the consideration per share for which Additional Capital
Shares may at any time thereafter be issuable pursuant to the terms of such
convertible or exchangeable securities shall be less than the Bid Price in
effect immediately prior to such issuance;
(f) makes a distribution of its assets or evidences of
indebtedness to the holders of its Capital Shares as a dividend in liquidation
or by way of return of capital or other than as a dividend payable out of
earnings or surplus legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of all or substantially
all of the Company's assets (other than under the circumstances provided for in
the foregoing subsections (a) through (e); or
(g) takes any action affecting the number of Outstanding Capital
Shares, other than an action described in any of the foregoing Subsections (a)
through (f) hereof, inclusive, which in the opinion of the Company's Board of
Directors, determined in good faith, would have a Material Adverse Effect upon
the rights of the Investor at the time of a Put.
Section 1.38 "Valuation Period" shall mean the period of five (5)
trading days beginning two (2) Trading Days immediately before the Trading Day
on which a Put Notice is deemed to be delivered and ending two (2) Trading Days
immediately following such date; provided, however, that if a Valuation Event
occurs during a Valuation Period, a new Valuation Period shall begin on the
Trading Day immediately after the occurrence of such Valuation Event and end on
the fifth (5th) Trading Day thereafter.
Section 1.39 "Warrants" shall mean the 80,000 Common Stock Purchase
Warrants in the form of Exhibit D hereto to be delivered to the Investor at the
initial Closing.
Section 1.40 "Warrant Shares" shall mean the shares of Common Stock
issuable upon exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 Investments.
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(a) Puts. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article VII hereof), on any
Put Date the Company may make a Put by the delivery of a Put Notice. The number
of Put Shares that the Investor shall receive pursuant to such Put shall be
determined by dividing the Investment Amount specified in the Put Notice by the
Purchase Price for such Valuation Period. The Investment Amount shall be at
least equal to the Minimum Put Amount and not exceed the Maximum Put Amount on
the date of the Put Notice.
(b) Maximum Aggregate Amount of Puts. Anything in this Agreement
to the contrary notwithstanding, unless the Company obtains shareholder approval
of this Agreement pursuant to the applicable corporate governance rules of The
Nasdaq National Market, the Company may not make a Put (or issue any additional
shares under Section 2.5) which results in the issuance of more than 19.9% of
the number of shares of Common Stock issued and outstanding on the effective
date of this Agreement pursuant to all Puts made under the terms of this
Agreement and the exercise of the Warrants.
(c) The Company shall have no obligation to issue any Put Notices
during the Commitment Period.
Section 2.2 Mechanics.
(a) Put Notice. At any time during the Commitment Period, the
Company may deliver a Put Notice to the Investor, subject to the conditions set
forth in Section 7.2; provided, however, that the Investment Amount for each Put
as designated by the Company in the applicable Put Notice shall be neither less
than the Minimum Put Amount nor more than the Maximum Put Amount.
(b) Date of Delivery of Put Notice. A Put Notice shall be deemed
delivered on (i) the Trading Day it is received by facsimile or otherwise by the
Investor if such notice is received prior to 12:00 noon Eastern Time, or (ii)
the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon Eastern Time on a Trading Day or at any time on a day
which is not a Trading Day. No Put Notice may be deemed delivered on a day that
is not a Trading Day.
Section 2.3 Closings. On or before each Closing Date for a Put the
Investor shall deliver the Investment Amount specified in the Put Notice by wire
transfer of immediately available funds to the Escrow Agent. In addition, on or
prior to the Closing Date, each of the Company and the Investor shall deliver to
the Escrow Agent all documents, instruments and writings required to be
delivered or reasonably requested by either of them pursuant to this Agreement
in order to implement and effect the transactions contemplated herein. Upon
receipt of notice from the Escrow Agent that the Escrow Agent has possession of
the Investment Amount, the Company shall, if possible, deliver the Put Shares to
the Investor's account through the Depository Trust Company DWAC system, per
written account instructions delivered by the Investor to the Company, and if
the Company is not eligible to participate in the DWAC system, to deliver to the
Escrow Agent one or more certificates, as requested by the Investor,
representing the Put Shares to be purchased by the Investor pursuant to Section
2.1 herein, registered in the name of the Investor or, at the Investor's option,
registered in the name of such
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account or accounts as may be designated by the Investor. Payment of funds to
the Company and delivery of the certificates to the Investor (unless delivered
by DWAC) shall occur out of escrow in accordance with the Escrow Agreement,
provided, however, that to the extent the Company has not paid the fees,
expenses, and disbursements of the Investor's counsel in accordance with Section
13.7, the amount of such fees, expenses, and disbursements shall be paid in
immediately available funds, at the direction of the Investor, to Investor's
counsel with no reduction in the number of Put Shares issuable to the Investor
on such Closing Date.
Section 2.4 Termination of Investment Obligation(a) The obligation of
the Investor to purchase shares of Common Stock shall terminate permanently
(including with respect to a Closing Date that has not yet occurred) in the
event that (i) there shall occur any stop order or suspension of the
effectiveness of the Registration Statement for an aggregate of thirty (30)
Trading Days during the Commitment Period, for any reason other than deferrals
or suspensions in accordance with the Registration Rights Agreement as a result
of corporate developments subsequent to the Effective Date that would require
such Registration Statement to be amended to reflect such event in order to
maintain its compliance with the disclosure requirements of the Securities Act
or (ii) the Company shall at any time fail to comply with the requirements of
Section 6.2, 6.3 or 6.5 or (iii) the Registration Statement shall not have
become effective by August __, 2000.
(b) The Company may terminate this Agreement if the Investor
fails to honor any Put Notice within two (2) Trading Days of the Closing Date
scheduled for such Put, and the Company notifies Investor of such termination.
The Company may also terminate this Agreement at any time upon 10 days written
notice to the investor. Upon such termination, the Company shall maintain the
Registration Statement in effect for such reasonable period, not to exceed
forty-five (45) days, as the Investor may request in order to dispose of any
remaining Put Shares.
Section 2.5 Additional Shares. In the event that (a) within five (5)
Trading Days of any Closing Date, the Company gives notice to the Investor of an
impending "blackout period" in accordance with Section 3(f) of the Registration
Rights Agreement, and (b) the Bid Price on the Trading Day immediately preceding
such "blackout period" (the "Old Bid Price") is greater than the Bid Price on
the first Trading Day following such "blackout period" (the "New Bid Price") the
Company shall issue to the Investor a number of additional shares (the "Blackout
Shares") equal to the difference between (y) the product of the number of
Registrable Securities purchased by the Investor on such most recent Closing
Date and still held by the Investor during such "blackout period" that are not
otherwise freely tradable during such "blackout period" and the Old Bid Price,
divided by the New Bid Price and (z) the number of Registrable Securities
purchased by the Investor on such most recent Closing Date and still held by the
Investor during such "blackout period" that are not otherwise freely tradable
during such "blackout period". If any such issuance would result in the issuance
of a number of shares which exceeds the number set forth in Section 2.1(b), then
in lieu of such issuance, the Company shall pay Investor the closing ask price
of the Blackout Shares on the first Trading Day following the end of the
blackout period in cash within five Trading Days.
Section 2.6 Liquidated Damages. The parties hereto acknowledge and agree
that the obligation to issue Registrable Securities under Section 2.5 above
shall constitute liquidated
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damages and not penalties. The parties further acknowledge that (a) the amount
of loss or damages likely to be incurred is incapable or is difficult to
precisely estimate, (b) the amounts specified in such Sections bear a reasonable
proportion and are not plainly or grossly disproportionate to the probable loss
likely to be incurred by the Investor in connection with the failure by the
Company to timely cause the registration of the Registrable Securities or in
connection with a "blackout period" under the Registration Rights Agreement, and
(c) the parties are sophisticated business parties and have been represented by
legal and financial counsel and negotiated this Agreement at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company that:
Section 3.1 Intent. The Investor is entering into this Agreement for its
own account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock to or through any person or
entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2 Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it has the capacity to protect
its own interests in connection with this transaction and is capable of
evaluating the merits and risks of an investment in Common Stock. The Investor
acknowledges that an investment in the Common Stock is speculative and involves
a high degree of risk.
Section 3.3 Authority. This Agreement has been duly authorized and
validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4 Not an Affiliate. Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5 Organization and Standing. Investor is a corporation duly
organized, validly existing, and in good standing under the laws of the New
York.
Section 3.6 Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Investor, or, to
the Investor's knowledge, (a) violate any provision of any indenture, instrument
or agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound; (b) conflict with or constitute a material default
thereunder; (c) result in the creation or
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imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by Investor to
any third party; or (d) require the approval of any third-party (which has not
been obtained) pursuant to any material contract, agreement, instrument,
relationship or legal obligation to which Investor is subject or to which any of
its assets, operations or management may be subject.
Section 3.7 Disclosure; Access to Information. Investor has received and
reviewed all documents, records, books and other publicly available information
pertaining to Investor's investment in the Company that have been requested by
Investor. The Company is subject to the periodic reporting requirements of the
Exchange Act, and Investor has reviewed copies of any such reports that have
been requested by it.
Section 3.8 Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
Section 3.9 Financial Capacity. Investor currently has the financial
capacity to meet its obligations to the Company hereunder, and the Investor has
no present knowledge of any circumstances which could cause it to become unable
to meet such obligations in the future.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and Warrants to the Investor that, except as set forth on
the Disclosure Schedule prepared by the Company and delivered to the Investor:
Section 4.1 Organization of the Company. The Company is a corporation
duly incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. As of the date of this Agreement,
the Company is duly qualified and is in good standing as a foreign corporation
to do business in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, other than
those in which the failure so to qualify would not have a Material Adverse
Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate power
and corporate authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, the Escrow Agreement, and the
Warrants and to issue the Put Shares, the Warrants and the Warrant Shares
pursuant to their respective terms, (ii) except as contemplated by Section
2.1(b), the execution, issuance and delivery of this Agreement, the Registration
Rights Agreement, the Escrow Agreement and the Warrants by the Company and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required, and (iii) this Agreement, the Registration Rights Agreement, the
Escrow Agreement and the Warrants have been duly executed and delivered by the
Company and at the initial Closing shall constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability
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may be limited by applicable bankruptcy, insolvency, or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application. The Company has duly and
validly authorized and reserved for issuance shares of Common Stock sufficient
in number for the issuance of the Put Shares and for the exercise of the
Warrants
Section 4.3 Capitalization. As of the January 2, 2000, the authorized
capital stock of the Company consists of 150,000,000 shares of Common Stock,
$0.01 par value per share, of which [65,874,918] shares are issued and
outstanding and 1,000,000 shares of preferred stock, par value $0.01 per share,
none of which shares are issued and outstanding. Except as set forth in the
Disclosure Schedule and as of the date of this Agreement, there are no
outstanding Capital Shares Equivalents nor any agreements or understandings
pursuant to which any Capital Shares Equivalents may become outstanding. Except
as set forth in the Disclosure Schedule or the SEC Documents, as of the date of
this Agreement, the Company is not a party to any agreement granting
registration or anti-dilution rights to any person with respect to any of its
equity or debt securities. All of the outstanding shares of Common Stock of the
Company have been duly and validly authorized and issued and are fully paid and
non-assessable.
Section 4.4 Common Stock. The Company has registered its Common Stock
pursuant to Section 12(b) or (g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company is in
compliance with all requirements for the continued listing or quotation of its
Common Stock, and such Common Stock is currently listed or quoted on, the
Principal Market. As of the date hereof, the Principal Market is the Nasdaq
National Market and the Company has not received any notice regarding, and to
its knowledge there is no threat, of the termination or discontinuance of the
eligibility of the Common Stock for such listing.
Section 4.5 SEC Documents. The Company has not provided to the Investor
any information that, according to applicable law, rule or regulation, should
have been disclosed publicly prior to the date hereof by the Company, but which
has not been so disclosed. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act, and
rules and regulations of the SEC promulgated thereunder and the SEC Documents
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 under which they were made,
not ;misleading. The financial statements of the Company included in the SEC
Documents complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
of the
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Company as of the dates thereof and the results of operations and cash flows for
the periods then ended (subject, in the case of unaudited interim statements, to
normal year-end audit adjustments). Neither the Company nor any of its
subsidiaries has any material indebtedness, obligations or liabilities of any
kind (whether accrued, absolute, contingent or otherwise, and whether due or to
become due) that would have been required to be reflected in, reserved against
or otherwise described in the financial statements or in the notes thereto in
accordance with GAAP, which was not fully reflected in, reserved against or
otherwise described in the financial statements or the notes thereto included in
the SEC Documents or was not incurred in the ordinary course of business
consistent with the Company's past practices since the last date of such
financial statements.
Section 4.6 Valid Issuances. When issued and paid for in accordance with
the terms hereof or of the Warrants, the Put Shares and the Warrant Shares will
be duly and validly issued, fully paid, and non-assessable. Neither the sales of
the Put Shares, the Warrants or the Warrant Shares pursuant to, nor the
Company's performance of its obligations under, this Agreement, the Registration
Rights Agreement, the Escrow Agreement or the Warrants will (i) result in the
creation or imposition by the Company of any liens, charges, claims or other
encumbrances upon the Put Shares, the Warrants or the Warrant Shares or, except
as contemplated herein, any of the assets of the Company, or (ii) entitle the
holders of Outstanding Capital Shares to preemptive or other rights to subscribe
for or acquire the Capital Shares or other securities of the Company. The Put
Shares, the Warrants and the Warrant Shares shall not subject the Investor to
personal liability to the Company or its creditors by reason of the possession
thereof.
Section 4.7 No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of
the Put Shares, the Warrants and the Warrant Shares, do not and will not (i)
result in a violation of the Company's Articles of Incorporation or By-Laws or
(ii) conflict with, or constitute a material default (or an event that 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
material agreement, indenture or instrument, or any "lock-up" or similar
provision of any underwriting or similar agreement to which the Company is a
party, or (iii) result in a violation of any federal, state or local law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or by which any material
property or asset of the Company is bound or affected, nor is the Company
otherwise in violation of, conflict with or default under any of the foregoing
(except in each case for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not have, individually or
in the aggregate, a Material Adverse Effect). The business of the Company is not
being conducted in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations that either singly or in the
aggregate would not have a Material Adverse Effect. The Company is not required
under any Federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the Put Shares or the
Warrants in accordance with the terms hereof (other than any SEC, Principal
Market or state securities filings that may be required to be made by the
Company subsequent to the Effective Date, any registration statement that may be
filed pursuant hereto, and any shareholder approval required by the rules
applicable to companies whose
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common stock trades on the Principal Market); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Investor
herein.
Section 4.8 No Material Adverse Change. Since the date of the most
recently filed Form 10-K or Form 10-Q, no Material Adverse Effect has occurred
or exists with respect to the Company, except as disclosed in the SEC Documents.
Section 4.9 No Undisclosed Events or Circumstances. Since the date of
the most recently filed Form 10-K or Form 10-Q, no event or circumstance has
occurred or exists with respect to the Company or its businesses, properties,
prospects, operations or financial condition, that, under applicable law, rule
or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed
in the SEC Documents.
Section 4.10 Litigation and Other Proceedings. Except as disclosed in
the SEC Documents or the Disclosure Schedule, there are no lawsuits or
proceedings pending or, to the knowledge of the Company, threatened, against the
Company or any subsidiary, nor has the Company received any written or oral
notice of any such action, suit, proceeding or investigation, which could
reasonably be expected to have a Material Adverse Effect. Except as set forth in
the SEC Documents, no judgment, order, writ, injunction or decree or award has
been issued by or, to the knowledge of the Company, requested of any court,
arbitrator or governmental agency which could result in a Material Adverse
Effect.
Section 4.11 No Misleading or Untrue Communication. The Company has not
knowingly made, at any time, any oral communication in connection with the offer
or sale of the same which contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements, in
the light of the circumstances under which they were made, not misleading.
Section 4.12 Insurance. The Company and each subsidiary maintains
property and casualty, general liability, workers' compensation, environmental
hazard, personal injury and other similar types of insurance with financially
sound and reputable insurers that is adequate, consistent with industry
standards and the Company's historical claims experience. The Company has not
received notice from, and has no knowledge of any threat by, any insurer (that
has issued any insurance policy to the Company) that such insurer intends to
deny coverage under or cancel, discontinue or not renew any insurance policy
presently in force.
Section 4.13 Property. Except as disclosed in the Disclosure Schedule
and as of the date of this Agreement and except for real property owned in the
country of Malaysia, neither the Company nor any of its subsidiaries owns any
real property. Each of the Company and its subsidiaries has good and marketable
title to all personal property owned by it, free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not materially interfere with the use made and proposed to
be made of such property by the Company; and to the Company's knowledge any real
property and buildings held under lease by the Company as tenant are held by it
under valid, subsisting and enforceable
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leases with such exceptions as are not material and do not interfere with the
use made and intended to be made of such property and buildings by the Company.
Section 4.14 Intellectual Property. Each of the Company and its
subsidiaries owns or possesses or can obtain on commercially reasonable terms,
adequate and enforceable rights to use all patents, patent applications,
trademarks, trademark applications, trade names, service marks, copyrights,
copyright applications, licenses, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures) and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business as now being conducted.
To the Company's knowledge, except as disclosed in the SEC Documents neither the
Company nor any of its subsidiaries is infringing upon or in conflict with any
right of any other person with respect to any Intangibles. Except as disclosed
in the SEC Documents, to the Company's knowledge, no adverse claims have been
asserted by any person to the ownership or use of any Intangibles.
Section 4.15 Internal Controls and Procedures. The Company maintains
books and records and internal accounting controls which provide reasonable
assurance that (i) all transactions to which the Company or any subsidiary is a
party or by which its properties are bound are executed with management's
authorization; (ii) the recorded accounting of the Company's consolidated assets
is compared with existing assets at regular intervals; (iii) access to the
Company's consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company or any subsidiary
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
generally accepted accounting principles.
Section 4.16 Payments and Contributions. Neither the Company, any
subsidiary, nor, to its knowledge, any of its directors, officers or other
employees has (i) used any Company funds for any unlawful contribution,
endorsement, gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment of Company funds to
any foreign or domestic government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any bribe, rebate, payoff, influence payment, kickback or
other similar payment to any person with respect to Company matters.
Section 4.17 No Misrepresentation. The representations and warranties of
the Company contained in this Agreement, any schedule, annex or exhibit hereto
and any agreement, instrument or certificate furnished by the Company to the
Investor pursuant to this Agreement, do not knowingly contain any untrue
statement of a material fact or knowingly omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
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ARTICLE V
COVENANTS OF THE INVESTOR
Investor covenants with the Company that:
Section 5.1 Compliance with Law. The Investor's trading activities with
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed. Without limiting the generality of the foregoing, the Investor agrees
that it will, whenever required by federal securities laws, deliver the
prospectus included in the Registration Statement to any purchaser of Put Shares
from the Investor.
Section 5.2 Short Sales. The Investor and its affiliates shall not
engage in short sales of the Company's Common Stock as defined under applicable
SEC and NASD regulations during the Commitment Period.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 Registration Rights. The Company shall cause the S-3
Registration Statement underlying the Common Stock to remain effective and in
full force and shall make all necessary amendments to keep such Registration
Statement in effect.
Section 6.2 Listing of Common Stock. The Company hereby agrees to use
its best efforts to maintain the listing of the Common Stock on a Principal
Market, and as soon as practicable (but in any event prior to the commencement
of the Commitment Period) to list the Put Shares. The Company further agrees, if
the Company applies to have the Common Stock traded on any other Principal
Market, it will include in such application the Put Shares and the Warrant
Shares and will take such other action as is necessary or desirable in the
commercially reasonable opinion of the Investor to cause the Common Stock to be
listed on such other Principal Market as promptly as possible. The Company will
take all commercially reasonable action to continue the listing and trading of
its Common Stock on the Principal Market (including, without limitation,
maintaining sufficient net tangible assets) and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the Principal Market and shall provide Investor with copies of any
correspondence to or from such Principal Market which questions or threatens
delisting of the Common Stock, within five Trading Days of the Company's receipt
thereof.
Section 6.3 Exchange Act Registration. The Company will use its
commercially reasonable best efforts to cause its Common Stock to continue to be
registered under Section 12(g) or 12(b) of the Exchange Act, will use its best
efforts to comply in all respects with its reporting and filing obligations
under the Exchange Act, and will not take any action or file any document
(whether or not permitted by Exchange Act or the rules thereunder) to terminate
or suspend such registration or to terminate or suspend its reporting and filing
obligations under said Act.
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Section 6.4 Legends. The certificates evidencing the Common Stock to be
sold to the Investor shall be free of restrictive legends.
Section 6.5 Corporate Existence. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.
Section 6.6 Additional SEC Documents. During the Commitment Period, the
Company will deliver to the Investor, as and when the originals thereof are
submitted to the SEC for filing, copies of all SEC Documents so furnished or
submitted to the SEC, or else notify the Investor that such documents are
available on the ▇▇▇▇▇ system.
Section 6.7 Notice of Certain Events Affecting Registration; Suspension
of Right to Make a Put. The Company will immediately notify the Investor upon
the occurrence of any of the following events in respect of a registration
statement or related prospectus in respect of an offering of Registrable
Securities; (i) receipt of any request for additional information from the SEC
or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement the response to which would require
any amendments or supplements to the registration statement or related
prospectus; (ii) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) except as can be cured or disclosed by filing
of a report on Form 8-K or other SEC document, the happening of any event that
makes any statement made or incorporated by reference in the Registration
Statement or related prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate; and the Company
will promptly make available to the Investor any such supplement or amendment to
the related prospectus. The Company shall not deliver to the Investor any Put
Notice during the continuation of any of the foregoing events.
Section 6.8 Expectations Regarding Put Notices. Within ten (10) days
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investor, in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Put Notices.
Such notification shall constitute only the Company's good faith estimate and
shall in no way obligate the Company to raise such amount, or any amount, or
otherwise limit its ability to deliver Put Notices. The failure by the Company
to comply with this provision can be cured by the Company's notifying the
Investor, in writing, at any time as to its reasonable expectations with respect
to the current calendar quarter.
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Section 6.9 Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity in which the Company is not the survivor (a "Consolidation
Event") unless the resulting successor or acquiring entity (if not the Company)
assumes by written instrument or by operation of law the obligation to deliver
to the Investor such shares of stock and/or securities as the Investor is
entitled to receive pursuant to this Agreement or concurrent with the
effectiveness of such Consolidation Event, this Agreement is terminated.
ARTICLE VII
CONDITIONS TO DELIVERY OF PUTS
AND CONDITIONS TO CLOSING
Section 7.1 Conditions Precedent to the Obligation of the Company to
Issue and Sell Common Stock. The obligation hereunder of the Company to issue
and sell the Put Shares to the Investor incident to each Closing is subject to
the satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) Accuracy of the Investor's Representation and Warranties. The
representations and warranties of the Investor shall be true and correct in all
material respects as of the date of this Agreement and as of the date of each
such Closing as though made at each Closing.
(b) Performance by the Investor. The Investor shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Investor at or prior to such Closing, and Investor shall
provide a certificate to the Company to such effect.
Section 7.2 Conditions Precedent to the Right of the Company to Deliver
a Put Notice and the Obligation of the Investor to Purchase Put Shares. The
right of the Company to deliver a Put Notice and the obligation of Investor
hereunder to acquire and pay for the Put Shares incident to a Closing is subject
to the satisfaction, on both (i) the date of delivery of such Put Notice and
(ii) the applicable Closing Date (each a "Condition Satisfaction Date"), of each
of the following conditions:
(a) Closing Certificate. All representations and warranties of
the Company contained herein shall remain true and correct in all material
respects as of the Closing Date as though made as of such date and the Company
shall have delivered into escrow an Officer's Certificate signed by its Chief
Executive Officer certifying that all of the Company's representations and
warranties herein remain true and correct in all material respects as of the
Closing Date and that the Company has performed all covenants and satisfied all
conditions to be performed or satisfied by the Company prior to such Closing;
(b) Blue Sky. The Company shall have obtained all permits and
qualifications required by any state for the offer and sale of the Common Stock
to the Investor and by the Investor or shall have the availability of exemptions
therefrom;
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(c) Delivery of Put Shares. Delivery into escrow or to DTC of the
Put Shares;
(d) Opinion of Counsel. Receipt by the Investor of an opinion of
counsel to the Company, in the form of Exhibit D hereto; and
(e) Transfer Agent. Delivery to the Company's transfer agent of
instructions to such transfer agent in form and substance reasonably
satisfactory to the Investor.
(f) Registration of the Common Stock with the SEC. The
Registration Statement shall have previously become effective and shall remain
effective and available for making resales of the Put Shares by the Investor on
each Condition Satisfaction Date and (i) neither the Company nor the Investor
shall have received notice that the SEC has issued or intends to issue a stop
order with respect to the Registration Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless the
SEC's concerns have been addressed and the Investor is reasonably satisfied that
the SEC no longer is considering or intends to take such action), and (ii) no
other suspension of the use or withdrawal of the effectiveness of the
Registration Statement or related prospectus shall exist.
(g) Authority. The Company shall have satisfied or be in a
position to satisfy all laws and regulations pertaining to the sale and issuance
of the Put Shares.
(h) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement, the Registration Rights Agreement and
the Escrow Agreement to be performed, satisfied or complied with by the Company
at or prior to each Condition Satisfaction Date.
(i) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits or directly and materially adversely affects any of the transactions
contemplated by this Agreement, and no proceeding shall have been commenced that
may have the effect of prohibiting or adversely affecting any of the
transactions contemplated by this Agreement.
(j) Adverse Changes. Since the date of filing of the Company's
most recent SEC Document, no event that had or is reasonably likely to have a
Material Adverse Effect has occurred.
(k) No Suspension of Trading In or Delisting of Common Stock. The
trading of the Common Stock (including, without limitation, the Put Shares) is
not suspended by the SEC or the Principal Market, and the Common Stock
(including, without limitation, the Put Shares) shall have been approved for
listing or quotation on and shall not have been delisted from the Principal
Market. The issuance of shares of Common Stock with respect to the applicable
Closing, if any, shall not violate the shareholder approval requirements of the
Principal Market. The Company shall not have received any notice threatening to
delist the Common Stock from the Principal Market.
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(l) No Knowledge. The Company has no knowledge of any event more
likely than not to have the effect of causing such Registration Statement to be
suspended or otherwise ineffective (which event is reasonably likely to occur
within the thirty (30) Trading Days following the Trading Day on which such
Notice is deemed delivered).
(m) Trading Cushion. The Trading Cushion shall have elapsed since
the next preceding Put Date.
(n) Other. On each Condition Satisfaction Date, the Investor
shall have received and been reasonably satisfied with such other certificates
and documents as shall have been reasonably requested by the Investor in order
for the Investor to confirm the Company's satisfaction of the conditions set
forth in this Section 7.2.
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
Section 8.1 Due Diligence Review. The Company shall make available for
inspection and review by the Investor, advisors to and representatives of the
Investor (who may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investor pursuant to
the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all SEC Documents and
other filings with the SEC, and all other publicly available corporate documents
and properties of the Company as may be reasonably necessary for the purpose of
such review, and cause the Company's officers, directors and employees to supply
all such publicly available information reasonably requested by the Investor or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
Section 8.2 Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose non-public information to the
Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require the Investor's advisors and
representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investor.
(b) The Company represents that it does not disseminate
non-public information to any investors who purchase stock in the Company in a
public offering, to money managers or to securities analysts, provided, however,
that notwithstanding anything herein to the contrary,
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the Company will, as hereinabove provided, immediately notify the advisors and
representatives of the Investor and, if any, underwriters, of any event or the
existence of any circumstance (without any obligation to disclose the specific
event or circumstance) of which it becomes aware, constituting non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed, or incorporated by reference, in the prospectus included in the
Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein, or
incorporated by reference, in order to make the statements, therein in light of
the circumstances in which they were made, not misleading. Nothing contained in
this Section 8.2 shall be construed to mean that such persons or entities other
than the Investor (without the written consent of the Investor prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
the Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE IX
TRANSFER AGENT INSTRUCTIONS
Section 9.1 Transfer Agent Instructions. Upon each Closing, the Company
will issue to the transfer agent for its Common Stock (and to any substitute or
replacement transfer agent for its Common Stock upon the Company's appointment
of any such substitute or replacement transfer agent) instructions to deliver
the Put Shares without restrictive legends to the Escrow Agent, or if the
Transfer Agent is a participant in the DTC DWAC system, directly to the
Investor.
Section 9.2 No Legend or Stock Transfer Restrictions. No legend shall be
placed on the share certificates representing the Put Shares and no instructions
or "stop transfer orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto.
Section 9.3 Investor's Compliance. Nothing in this Article shall affect
in any way the Investor's obligations under any agreement to comply with all
applicable securities laws upon resale of the Put Shares.
ARTICLE X
CHOICE OF LAW
Section 10.1 Governing Law/Arbitration. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York applicable
to contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any dispute under this Agreement
or any Exhibit attached hereto shall be
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submitted to arbitration under the American Arbitration Association (the "AAA")
in New York City, New York, and shall be finally and conclusively determined by
the decision of a board of arbitration consisting of three (3) members
(hereinafter referred to as the "Board of Arbitration") selected as according to
the rules governing the AAA. The Board of Arbitration shall meet on consecutive
business days in New York City, New York, and shall reach and render a decision
in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the losing party is
required to pay to the other party in respect of a claim filed. In connection
with rendering its decisions, the Board of Arbitration shall adopt and follow
the laws of the State of New York. To the extent practical, decisions of the
Board of Arbitration shall be rendered no more than thirty (30) calendar days
following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all parties
involved in the dispute. The Board of Arbitration shall be authorized and is
directed to enter a default judgment against any party refusing to participate
in the arbitration proceeding within thirty days of any deadline for such
participation. Any decision made by the Board of Arbitration (either prior to or
after the expiration of such thirty (30) calendar day period) shall be final,
binding and conclusive on the parties to the dispute, and entitled to be
enforced to the fullest extent permitted by law and entered in any court of
competent jurisdiction. The prevailing party shall be awarded its costs,
including attorneys' fees, from the non-prevailing party as part of the
arbitration award. Any party shall have the right to seek injunctive relief from
any court of competent jurisdiction in any case where such relief is available.
The prevailing party in such injunctive action shall be awarded its costs,
including attorney's fees, from the non-prevailing party.
ARTICLE XI
ASSIGNMENT
Section 11.1 Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
person except by operation of law. Notwithstanding the foregoing, upon the prior
written consent of the Company, which consent shall not unreasonably be withheld
or delayed in the case of an assignment to an affiliate of the Investor, the
Investor's interest in this Agreement may be assigned at any time, in whole or
in part, to any other person or entity (including any affiliate of the Investor)
who agrees to make the representations and warranties contained in Article III
and who agrees to be bound hereby.
ARTICLE XII
NOTICES
Section 12.1 Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation
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generated by the transmitting facsimile machine, at the address or number
designated below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by reputable courier service, fully prepaid, addressed to
such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If to Komag, Incorporated: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, V.P.
and CFO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
(shall not constitute notice) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investor: FANCYVIEW INT'L, LTD.
Attention: ▇▇. ▇▇▇▇▇▇▇▇ & Partner
▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇-▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
Telephone:
Facsimile: 011-4175-2360-405
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(shall not constitute notice) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
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ARTICLE XIII
MISCELLANEOUS
Section 13.1 Counterparts/ Facsimile/ Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2 Entire Agreement. This Agreement, the Exhibits hereto,
which include, but are not limited to the Escrow Agreement, the Registration
Rights Agreement and the Warrants, set forth the entire agreement and
understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits to this
Agreement are incorporated herein by this reference and shall constitute part of
this Agreement as is fully set forth herein.
Section 13.3 Survival; Severability. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 13.4 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 13.5 Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
Section 13.6 Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Put Shares and (ii) in the case of
any such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form and amount to
the Company (which shall not exceed that required by the Company's transfer
agent in the ordinary course) or (iii) in the case of any such mutilation, on
surrender and cancellation of such certificate, the Company at the Investor's
expense will execute and deliver, in lieu thereof, a new certificate of like
tenor.
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Section 13.7 Fees and Expenses. Each of the Company and the Investors
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the fees, expenses and
disbursements of Investors' counsel in the amount of $10,000 plus $1,500 per
Closing of a Put.
Section 13.8 Brokerage. Each of the parties hereto represents that it
has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other party.
The Company on the one hand, and the Investor, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 13.9 Publicity. The Company agrees that it will not issue any
press release or other public announcement of the transactions contemplated by
this Agreement without the prior consent of the Investor, which shall not be
unreasonably withheld nor delayed by more than two (2) Trading Days from its
receipt of such proposed release; provided, however, that if the Company is
advised by its outside counsel that it is required by law or the applicable
rules of any Principal Market to issue any such press release or public
announcement, then, it may do so without the prior consent of the Investor,
although it shall be required to provide prior notice (which may be by
telephone) to the Investor that it intends to issue such press release or public
announcement. No release shall name the Investor without its express consent.
Section 13.10 Effectiveness of Agreement. This Agreement shall become
effective only upon satisfaction of the conditions precedent to the initial
Closing set forth in Article I of the Escrow Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Line of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
KOMAG, INCORPORATED
By:
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, V.P. and CFO
FANCYVIEW INT'L, LTD.
By:
---------------------------------
Name:
Title:
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