Exhibit 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of June 1, 2003,
by and among MRV Communications, Inc., a Delaware corporation, with headquarters
located at 00000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000 (the "COMPANY"), and the
investors listed on the Schedule of Buyers attached hereto (individually, a
"BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("REGULATION D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 ACT");
B. The Company has authorized convertible notes of the Company
substantially in the form attached as Exhibit A (together with any convertible
notes issued in exchange therefor or replacement thereof in accordance with the
terms thereof, the "CONVERTIBLE NOTES"), which shall be convertible into shares
of the Company's common stock, par value $0.0017 per share (the "COMMON STOCK")
(as converted, the "CONVERSION SHARES"), in accordance with the terms of the
Convertible Notes.
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, Convertible Notes in an aggregate principal amount of
$23,000,000 in the respective amounts set forth opposite each Buyer's name on
the Schedule of Buyers (the "NOTES"); and
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit B (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF NOTES.
a. Purchase of Notes. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 5 and 6, the Company shall issue and sell to
each Buyer and each Buyer severally agrees to purchase from the Company the
Notes in the principal amount set forth opposite such Buyer's name on the
Schedule of Buyers (the "CLOSING"). The purchase price (the "PURCHASE PRICE") of
the Notes at the Closing shall be equal to $1.00 for each $1.00 of principal
amount of the Notes purchased (representing an aggregate Purchase Price of
$23,000,000 for the aggregate principal amount of $23,000,000 of Notes to be
purchased at the Closing).
b. The Closing Date. The date and time of the Closing (the "CLOSING
DATE") shall be as soon as practicable following the satisfaction (or waiver) of
the conditions to the Closing set forth in Sections 5 and 6, but not later than
10:00 a.m. Central Time, on June 6, 2003,
subject to satisfaction or waiver of such conditions (or such later date as is
mutually agreed to by the Company and the Buyers). The Closing shall occur on
the Closing Date at the offices of Xxxxxx Xxxxxx Xxxxx Xxxxxxxx, 000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000-0000.
c. Form of Payment. On the Closing Date, (i) each Buyer shall pay
the Purchase Price to the Company for the Notes to be issued and sold to such
Buyer at such Closing, by wire transfer of immediately available funds in
accordance with the Company's written wire instructions, less any amount
withheld for expenses pursuant to Section 4(h), and (ii) the Company shall
deliver to each Buyer, Notes (in the principal amounts as such Buyer shall
request) (the "NOTE CERTIFICATES") representing such principal amount of the
Notes which such Buyer is then purchasing hereunder, duly executed on behalf of
the Company and registered in the name of such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
a. Investment Purpose. Such Buyer (i) is acquiring the Notes, and
(ii) upon conversion of the Notes, will acquire the Conversion Shares then
issuable (the Note, the Conversion Shares and the Interest Shares (as defined in
the Notes) collectively are referred to herein as the "SECURITIES"), for its own
account and not with a view towards, or for resale in connection with, the
public sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act; provided, however, that by making the
representations herein, such Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of the United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
such Buyer to acquire the Securities.
d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Sections 3 and 8(l) below. Such Buyer understands that its investment in the
Securities involves a high degree of
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risk. Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that, except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) such
Buyer provides the Company with reasonable assurance that such Securities can be
sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933
Act, as amended (or a successor rule thereto) ("RULE 144"); (ii) any sale of the
Securities made in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 0000 Xxx) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register the Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder. Notwithstanding the foregoing, the
Securities may be pledged in connection with a bona fide margin account or other
loan or financing arrangement secured by the Securities, subject to the
provisions of Section 4(l) hereof.
g. Legends. Such Buyer understands that the certificates or other
instruments representing the Notes and, until such time as the sale of the
Conversion Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the stock certificates representing the
Conversion Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
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SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act (provided that such
holder provides the Company with reasonable assurances that such securities will
be sold in accordance with the plan of distribution set forth in the applicable
registration statement and in compliance with the prospectus delivery
requirement under the 1933 Act or pursuant to Rule 144, assuming the that such
holder can comply with Rule 144), (ii) in connection with a sale transaction,
such holder provides the Company with an opinion of counsel, in a generally
acceptable form, to the effect that a public sale, assignment or transfer of the
Securities may be made without registration under the 1933 Act, (iii) such
holder provides the Company with reasonable assurances that the Securities can
be sold pursuant to Rule 144 without any restrictions as to the number of
securities acquired as of a particular date that can then be immediately sold or
(iv) such holder provides the Company reasonable assurances that the Securities
have been or are being sold pursuant to Rule 144.
h. Authorization; Enforcement; Validity. Such Buyer is a validly
existing corporation, partnership, limited liability company or other entity and
has the requisite corporate, partnership, limited liability company or other
organizational power and authority to purchase the Securities pursuant to this
Agreement. This Agreement and the Registration Rights Agreement have been duly
and validly authorized, executed and delivered on behalf of such Buyer and are
valid and binding agreements of such Buyer enforceable against such Buyer in
accordance with their respective terms, subject as to enforceability to general
principles of equity and to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that jurisdiction
specified in its address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and its
"SUBSIDIARIES" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest) are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power and authority to own their properties and to
carry on their business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Agreement, "MATERIAL
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ADVERSE EFFECT" means any material adverse effect on the business, properties,
assets, operations, results of operations, financial condition or prospects of
the Company and its Subsidiaries, if any, taken as a whole, or on the
transactions contemplated hereby or by the agreements and instruments to be
entered into in connection herewith, or on the authority or ability of the
Company to perform its obligations under the Transaction Documents (as defined
below); provided, however, that none of the following alone shall be deemed, in
and of itself, to constitute a Material Adverse Effect: (i) a change in the
market price or trading volume of the Company's common stock or (ii) a change in
general economic conditions or change affecting the industry in which the
Company operates generally (as opposed to a Company-specific change) so long as
such change does not have a disproportionate effect on the Company and its
Subsidiaries taken as a whole. The Company has no Subsidiaries except as set
forth in Schedule 3(a).
b. Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the Notes
and each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement (collectively,
the "TRANSACTION DOCUMENTS"), and to issue the Securities in accordance with the
terms hereof and thereof. The execution and delivery of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation the issuance of
the Notes, the reservation for issuance and the issuance of the Conversion
Shares issuable upon conversion thereof, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its stockholders. The Transaction
Documents have been duly executed and delivered by the Company and constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
c. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 160,000,000 shares of Common Stock, of
which as of the date hereof, 104,371,649 shares are issued and 103,066,549
shares are outstanding, 17,385,418 shares are reserved for issuance pursuant to
the Company's stock option, restricted stock and stock purchase plans and
1,922,070 shares are issuable and reserved for issuance pursuant to securities
(other than the Notes) exercisable or exchangeable for, or convertible into,
shares of Common Stock and (ii) 1,000,000 shares of Preferred Stock, $0.01 par
value, of which as of the date hereof, no shares are issued and outstanding. All
of such outstanding or issuable shares have been, or upon issuance will be,
validly issued and are, or upon issuance will be, fully paid and nonassessable.
Except as disclosed in Schedule 3(c), (A) no shares of the Company's capital
stock are subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company; (B) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (C) there are no material amounts
outstanding under, and there will be no material amounts due upon termination
of, any credit agreement or credit facility; (D) there are no financing
statements securing obligations of any material amounts,
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either individually or in the aggregate, filed in connection with the Company or
any of its Subsidiaries; (E) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exercisable for, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exercisable for, any shares of capital
stock of the Company or any of its Subsidiaries; (F) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act (except the
Registration Rights Agreement); (G) there are no outstanding securities or
instruments of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (H) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; and (I) the Company does not have
any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to each Buyer true and
correct copies of the Company's Certificate of Incorporation, as amended and as
in effect on the date hereof (the "CERTIFICATE OF INCORPORATION"), and the
Company's Bylaws, as amended and as in effect on the date hereof (the "BYLAWS"),
and the terms of all securities convertible into, or exercisable or exchangeable
for, Common Stock and the material rights of the holders thereof in respect
thereto.
d. Issuance of Securities. The Notes are duly authorized and, upon
issuance in accordance with the terms hereof, shall be (i) free from all taxes,
liens and charges with respect to the issuance thereof and (ii) entitled to the
rights set forth in the Notes. At least 9,913,794 shares of Common Stock
(subject to adjustment pursuant to the Company's covenant set forth in Section
4(f) below) have been duly authorized and reserved for issuance upon conversion
of the Notes. Upon conversion in accordance with the Notes, the Conversion
Shares will be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Stock. Assuming the
accuracy of the representations and warranties of the Buyers set forth in
Section 2 hereof, the issuance by the Company of the Securities is exempt from
registration under the 1933 Act.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the reservation for issuance and
issuance of the Conversion Shares) will not (i) result in a violation of the
Certificate of Incorporation or the Bylaws; (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party; (iii) result in a violation
of any law, rule, regulation, order, judgment or decree (including, assuming the
accuracy of the representations and warranties of the Buyers set forth in
Section 2 hereof, federal and state securities laws and regulations and
including the rules and regulations of
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the Principal Market (as defined below)) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected (except, with respect to clause (ii), for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Except as disclosed in Schedule 3(e), neither the Company nor
its Subsidiaries is in violation of any term of its Certificate of Incorporation
or Bylaws or their organizational charter or bylaws, respectively. Except as
disclosed in Schedule 3(e), neither the Company nor any of its Subsidiaries is
in violation of any term of or in default under any contract, agreement,
mortgage, indebtedness, indenture, instrument, judgment, decree or order or any
statute, rule or regulation applicable to the Company or its Subsidiaries. The
business of the Company and its Subsidiaries is not being conducted, and shall
not be conducted, in violation of any law, ordinance or regulation of any
governmental entity. Except as specifically contemplated by this Agreement and
as required under the 1933 Act, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents in accordance with the terms hereof or
thereof. Except as disclosed in Schedule 3(e), all consents, authorizations,
orders, filings and registrations which the Company is required to obtain as
described in the preceding sentence have been obtained or effected on or prior
to the date hereof. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company is not
in violation of the listing requirements of the Principal Market (as defined in
Section 4(g)), including, without limitation, the requirements set forth in Rule
4350(i)(1)(D) of Nasdaq (as defined in Section 4(g)) and has no actual knowledge
of any facts which would lead to delisting or suspension of the Common Stock by
the Principal Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since December 31, 2001, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 ACT") (all of the
foregoing filed prior to the date hereof (including all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein) being hereinafter referred to as the "SEC
DOCUMENTS"). A complete and accurate list of the SEC Documents is set forth in
Schedule 3(f), true and complete copies of which are publicly available through
the SEC's XXXXX filing system. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents. None of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial
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position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d), contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they are or were made,
not misleading. Neither the Company nor any of its Subsidiaries or any of their
officers, directors, employees or agents have provided the Buyers with any
material, nonpublic information. Other than as specifically contemplated by the
Announcing Form 8-K (as defined below), the Company is not required to file and
will not be required to file any agreement, note, lease, mortgage, deed, or
other instrument entered into prior to the date hereof or the Closing and to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound which has not been previously filed as an
exhibit to the Company's reports filed or made with the SEC under the 1934 Act.
The Company meets the requirements for use of Form S-3 for registration of the
resale of the Registrable Securities (as defined in the Registration Rights
Agreement).
g. Absence of Certain Changes. Except as expressly disclosed in the
SEC Documents filed at least ten (10) days prior to the date hereof, since
December 31, 2001 there has been no material adverse change and no material
adverse development in the business, properties, assets, operations, results of
operations, financial conditions or prospects of the Company or its
Subsidiaries. The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law nor does
the Company or any of its Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact which would reasonably lead a creditor to do so.
The Company is not as of the date hereof, and after giving effect to the
transactions contemplated hereby will not be, Insolvent (as defined below). For
purposes of this Section 3(g), "INSOLVENT" means (i) the present fair saleable
value of the Company's assets is less than the amount required to pay the
Company's total indebtedness, contingent or otherwise, (ii) the Company is
unable to pay its debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured, (iii) the Company
intends to incur, or believes that it will incur, debts that would be beyond its
ability to pay as such debts mature or (iv) the Company has unreasonably small
capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted. Except as disclosed
in Schedule 3(g), since December 31, 2002 the Company has not declared or paid
any dividends, sold any assets, individually or in the aggregate, in excess of
$100,000 outside of the ordinary course of business or had capital expenditures,
individually or in the aggregate, in excess of $100,000.
h. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries threatened, against or affecting the Company,
the Common Stock or any of the Subsidiaries or any of the Company's or the
Subsidiaries' officers or directors in their capacities as such except as
expressly set forth in the SEC Documents filed at least ten (10) days prior to
the date hereof or except for such actions, suits, proceedings, inquiries or
investigations as would not , individually or in the aggregate, result in a
Material Adverse Effect. Except as set forth in Schedule 3(h), to
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the knowledge of the Company none of the directors or officers of the Company
have been involved in securities related litigation during the past five years.
i. Acknowledgment Regarding Buyer's Purchase of Notes. The Company
acknowledges and agrees that each of the Buyers is acting solely in the capacity
of an arm's length purchaser with respect to the Company in connection with the
Transaction Documents and the transactions contemplated hereby and thereby. The
Company further acknowledges that each Buyer is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated hereby and thereby
and any advice given by any of the Buyers or any of their respective
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to each Buyer
that the Company's decision to enter into the Transaction Documents has been
based solely on the independent evaluation by the Company and its
representatives.
j. No Undisclosed Events, Liabilities, Developments or
Circumstances. Except for the transactions contemplated by this Agreement, no
event, liability, development or circumstance has occurred or exists, or is
contemplated to occur, with respect to the Company or its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form S-1 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly disclosed.
k. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated, nor will
the Company or any of its Subsidiaries take any action or steps that would
require registration of any of the Securities under the 1933 Act or cause the
offering of the Securities to be integrated with other offerings.
m. Intentionally Omitted.
n. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. None of the
Company's or its Subsidiaries' employees is a member of a union which relates to
such employee's relationship with the Company, neither the Company nor any of
its Subsidiaries is a party to a collective bargaining
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agreement, and the Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer (as defined in Rule 501(f)
of the 0000 Xxx) has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer's employment with the Company. No
executive officer, to the best knowledge of the Company and its Subsidiaries,
is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters. The Company and its Subsidiaries
are in compliance with all federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in
compliance would not result, either individually or in the aggregate, in a
Material Adverse Effect.
o. Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights necessary
to conduct their respective businesses as now conducted. Except as set forth in
Schedule 3(o), none of the Company's and its Subsidiaries' trademarks, trade
names, service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets or other intellectual property rights necessary to
conduct their respective businesses as now conducted have expired or terminated,
or are expected to expire or terminate within two years from the date of this
Agreement, except for such expirations or terminations as would not ,
individually or in the aggregate, result in a Material Adverse Effect. Except as
expressly disclosed in the SEC Documents filed at least ten (10) days prior to
the date hereof or in Schedule 3(o), the Company and its Subsidiaries do not
have any knowledge of any infringement by the Company or its Subsidiaries of
trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, trade secrets
or other intellectual property rights of others, or of any development of
similar or identical trade secrets or technical information by others. Except as
expressly set forth in the SEC Documents filed at least ten (10) days prior to
the date hereof or in Schedule 3(o), there is no claim, action or proceeding
being made or brought against, or to the Company's knowledge, being threatened
against, the Company or its Subsidiaries regarding its trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, trade secrets, or infringement of
other intellectual property rights. The Company and its Subsidiaries are unaware
of any facts or circumstances which might give rise to any of the foregoing. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties.
p. Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as defined below), (ii) have
received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval, except where, in each of the three foregoing cases, the failure to so
comply would not result, either individually or in the aggregate, in a Material
10
Adverse Effect. The term "ENVIRONMENTAL LAWS" means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
into the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
hazardous materials, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.
q. Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 3(q) or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and any of its
Subsidiaries. Any real property and facilities held under lease by the Company
and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and facilities by the
Company and its Subsidiaries.
r. Insurance. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect, taken as a
whole.
s. Regulatory Permits. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
t. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of liability
is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets and liabilities is
compared with the existing assets and liabilities at reasonable intervals and
appropriate action is taken with respect to any differences.
11
u. No Materially Adverse Contracts, Etc. Neither the Company nor any
of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
v. Tax Status. The Company and each of its Subsidiaries (i) has made
or filed all foreign, federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes), (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and for which the Company has made appropriate reserves for on its
books, and (iii) has set aside on its books provisions reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations (referred to in clause (i) above) apply. There
are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
w. Transactions With Affiliates. Except as set forth in Schedule
3(w) and in the SEC Documents filed at least ten (10) days prior to the date
hereof, and other than the grant of stock options disclosed in Schedule 3(c),
none of the officers, directors, or employees of the Company is presently a
party to any transaction with the Company or any of its Subsidiaries (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.
x. Application of Takeover Protections. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation or the laws of
Delaware which is or could become applicable to the Buyers as a result of the
transactions contemplated by this Agreement, including, without limitation, the
Company's issuance of the Securities and the Buyers' ownership of the
Securities.
y. Rights Agreement. The Company has not adopted a shareholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
z. Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other
12
unlawful expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.
aa. Subsidiary Rights. Other than restrictions that are not
material, the Company or one of its Subsidiaries has the unrestricted right to
vote, and (subject to limitations imposed by applicable law) to receive
dividends and distributions on, all capital securities of its Subsidiaries as
owned by the Company or such Subsidiary.
bb. No Other Agreements. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Sections 5
and 6 of this Agreement.
b. Form D and Blue Sky. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Securities for sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the Buyers on
or prior to the Closing Date. The Company shall make all filings and reports
relating to the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States following the
Closing Date.
c. Reporting Status. Until the later of (i) the date which is one
year after the date as of which the Investors (as that term is defined in the
Registration Rights Agreement) may sell all of the Conversion Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto) and (ii) the date on which no Notes remain outstanding (the "REPORTING
PERIOD"), the Company shall file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the sale
of the Notes for general corporate purposes and working capital. The Company
shall not use the proceeds from the sale of the Notes in violation of any
applicable law.
e. Financial Information. The Company agrees to send the following
to each Investor (as that term is defined in the Registration Rights Agreement)
during the Reporting Period: (i) within two (2) days after the filing thereof
with the SEC, a copy of its Annual Reports
13
on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form
8-K and any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act, provided that if any such report is not filed with the
SEC through XXXXX then the Company shall deliver a copy of such report to each
Investor by facsimile on the same day it is filed with the SEC; (ii) on the same
day as the release thereof, facsimile copies of all press releases issued by the
Company or any of its Subsidiaries; and (iii) copies of any notices and other
information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 100% of the number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares upon conversion of all
outstanding Notes (without regard to any limitations on conversions).
g. Listing. The Company shall promptly secure the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents. The Company shall
maintain the Common Stock's authorization for quotation on the Nasdaq Stock
Market ("NASDAQ"), provided that the Company shall use its reasonable best
efforts to maintain the Common Stock's authorization for quotation on the Nasdaq
National Market (the "PRINCIPAL MARKET"). Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock from the Principal Market or
Nasdaq. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(g).
h. Expenses. Subject to Section 8(k) below, the Company shall
reimburse the Buyers for the Buyers' expenses (including attorneys' fees and
expenses in connection herewith and pursuant to Section 5 of the Registration
Rights Agreement) in due diligence and negotiating and preparing the Transaction
Documents and consummating the transactions contemplated thereby up to an
aggregate of $60,000. Any amounts requested by a Buyer prior to the Closing for
reimbursement of expenses pursuant to this Section 4(h) shall be withheld by
such Buyer from its Purchase Price to be paid at the Closing. Any amounts
requested by a Buyer after the Closing for reimbursement of expenses pursuant to
this Section 4(h) shall be paid by the Company to such Buyer promptly.
i. Disclosure of Transactions and Other Material Information. The
Company shall issue a press release publicly announcing the transactions
contemplated by the Agreement, and the principal terms thereof, by 8:00 a.m.
(New York Time) on June 2, 2003. The Company shall issue a press release
publicly announcing the Closing by 8:00 a.m. (New York Time) on first Business
Day following the Closing Date. No later than 8:00 a.m. (New York Time) on June
3, 2003, the Company shall file a Form 8-K with the SEC describing the terms of
the transactions contemplated by the Transaction Documents and the scheduled
occurrence of the Closing and including as exhibits to such Form 8-K this
Agreement (including the schedules hereto), the Form of Note and the
Registration Rights Agreement, in the form
14
required by the 1934 Act (the "ANNOUNCING FORM 8-K"). From and after the filing
of the Announcing Form 8-K with the SEC, no Buyer shall be in possession of any
material nonpublic information received from the Company, any of its
Subsidiaries or any of its respective officers, directors, employees or agents
that is not disclosed in the Announcing Form 8-K. The Company shall not, and
shall cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents not to, provide any Buyer with any
material nonpublic information regarding the Company or any of its Subsidiaries
from and after the filing of the Announcing Form 8-K with the SEC without the
express written consent of such Buyer. In the event of a breach of the foregoing
covenant by the Company, any of its Subsidiaries, or any of its or their
respective officers, directors, employees and agents, in addition to any other
remedy provided herein or in the Transaction Documents, a Buyer shall have the
right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material nonpublic information without the
prior approval by the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. No Buyer shall have any
liability to the Company, its Subsidiaries, or any of its or their respective
officers, directors, employees, shareholders or agents for any such disclosure.
Subject to the foregoing, neither the Company nor any Buyer shall issue any
press releases or any other public statements with respect to the transactions
contemplated hereby or disclosing the name of any Buyer; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
(i) as required pursuant to this Section 4(i) and (ii) as is required by
applicable law and regulations (provided that each Buyer shall be consulted by
the Company in connection with any such press release or other public disclosure
prior to its release and shall be provided with a copy thereof).
j. Transactions With Affiliates. So long as (i) any Notes are
outstanding or (ii) any Buyer owns Conversion Shares with a market value equal
to or greater than $500,000 the Company shall not, and shall cause each of its
Subsidiaries not to, enter into, amend, modify or supplement any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, persons who were officers or directors at any time during
the previous two years, stockholders who beneficially own 5% or more of the
Common Stock, or affiliates of the Company or its Subsidiaries or with any
individual related by blood, marriage or adoption to any such individual or with
any entity in which any such entity or individual owns a 5% or more beneficial
interest (each a "RELATED PARTY"), except for (a) customary employment
arrangements and benefit programs on reasonable terms, (b) any agreement,
transaction, commitment or arrangement on an arms-length basis on terms no less
favorable than terms which would have been obtainable from a person other than
such Related Party, or (c) any agreement, transaction, commitment or arrangement
which is approved by a majority of the disinterested directors of the Company.
For purposes hereof, any director who is also an officer of the Company or any
Subsidiary shall not be a disinterested director with respect to any such
agreement, transaction, commitment or arrangement. "AFFILIATE" for purposes
hereof means, with respect to any person or entity, another person or entity
that, directly or indirectly, (i) has a 5% or more equity interest in that
person or entity, (ii) has 5% or more common ownership with that person or
entity, (iii) controls that person or entity, (iv) is controlled by that person
or entity or (v) shares common control with that person or entity. "CONTROL" or
"CONTROLS" for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.
15
k. Corporate Existence. So long as any Buyer beneficially owns any
Notes, the Company shall maintain its corporate existence and shall not sell all
or substantially all of the Company's assets, except in the event of a merger or
consolidation or sale or transfer of all or substantially all of the Company's
assets, where the surviving or successor entity in such transaction (i) assumes
the Company's obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded corporation
whose common stock is quoted on or listed for trading on Nasdaq or NYSE.
l. Pledge of Securities. The Company acknowledges and agrees that
the Securities may be pledged by an Investor (as defined in the Registration
Rights Agreement) in connection with a bona fide margin agreement or other loan
secured by the Securities. The pledge of Securities shall not be deemed to be a
transfer, sale or assignment of the Securities hereunder, and no Investor
effecting any such pledge of Securities shall be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document, including without
limitation, Section 2(f) of this Agreement; provided that an Investor and its
pledgee shall be required to comply with the provisions of Section 2(f) in order
to effect a sale, transfer or assignment of Securities to such pledgee. The
Company hereby agrees to execute and deliver such documentation as a pledgee of
the Securities may reasonably request in connection with a pledge of the
Securities to such pledgee by an Investor.
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company to issue and sell the Notes to each
Buyer at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion by providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.
(ii) Such Buyer shall have delivered to the Company the
Purchase Price (less any amounts withheld by such Buyer pursuant to
Section 4(h)) for the Notes being purchased by such Buyer at the Closing
by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(iii) The representations and warranties of such Buyer shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that
speak as of a specific date), and such Buyer shall have performed,
satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or
complied with by such Buyer at or prior to the Closing Date.
16
6. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Notes from
the Company at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written
notice thereof:
(i) The Company shall have executed each of the Transaction
Documents and delivered the same to such Buyer.
(ii) The Common Stock (x) shall be designated for quotation or
listed on the Principal Market and (y) shall not have been suspended by
the SEC or the Principal Market from trading on the Principal Market nor
shall suspension by the SEC or the Principal Market have been threatened
either (A) in writing by the SEC or the Principal Market or (B) by falling
below the minimum listing maintenance requirements of the Principal
Market; and the Conversion Shares issuable upon conversion of the Notes
shall be listed upon the Principal Market.
(iii) The representations and warranties of the Company shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed,
satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or
complied with by the Company at or prior to the Closing Date. Such Buyer
shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the Closing Date, to the foregoing effect and
as to such other matters as may be reasonably requested by such Buyer,
including, without limitation, an update as of the Closing Date of the
representation contained in Section 3(c) above.
(iv) Such Buyer shall have received the opinion of outside
counsel for the Company reasonably acceptable to the Buyers, dated as of
the Closing Date, in form, scope and substance reasonably satisfactory to
such Buyer and in substantially the form of Exhibit C.
(v) The Company shall have executed and delivered to such
Buyer the Note Certificates (in such denominations as such Buyer shall
request) for the Notes being purchased by such Buyer at the Closing.
(vi) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b) above and in a form reasonably
acceptable to such Buyer (the "RESOLUTIONS").
(vii) As of the Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Notes, at least 9,913,794 shares of Common
Stock.
17
(viii) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company
issued by the Secretary of State of Delaware, and a certificate evidencing
the good standing of the Company as a foreign corporation in California
issued by the Secretary of State of California, each as of a date within
ten (10) days of the Closing Date.
(ix) The Company shall have delivered to such Buyer a
secretary's certificate, dated as of the Closing Date, certifying as to
(A) the Resolutions, (B) the Certificate of Incorporation, certified as of
a date within 10 days of the Closing Date, by the Secretary of State of
the State of Delaware and (C) the Bylaws, each as in effect at the
Closing.
(x) The Company shall have made all filings under all
applicable federal and state securities laws necessary to consummate the
issuance of the Securities pursuant to this Agreement in compliance with
such laws, except for the filing with the SEC of a Form D as required
under Regulation D.
(xi) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of
Common Stock outstanding as of a date within five (5) days of the Closing
Date.
(xii) The Company shall have delivered to such Buyer such
other documents relating to the transactions contemplated by this
Agreement as such Buyer or its counsel may reasonably request.
7. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities and all of their stockholders,
officers, directors, employees and direct or indirect investors and any of the
foregoing persons' agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "INDEMNITEES") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (c) any cause of action, suit or claim brought
or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(d) any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or (e) the
status of such Buyer or holder of the
18
Securities as an investor in the Company. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law. Except as
otherwise set forth herein, the mechanics and procedures with respect to the
rights and obligations under this Section 7 shall be the same as those set forth
in Sections 6(a) and (d) of the Registration Rights Agreement, including,
without limitation, those procedures with respect to the settlement of claims
and the Company's rights to assume the defense of claims.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
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e. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between each Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the Buyers which purchased a majority of the aggregate principal
amount of the Notes on the Closing Date, or if prior to the Closing, by the
Buyers listed on the Schedule of Buyers as being obligated to purchase a
majority of the aggregate principal amount of the Notes. Any such amendment
shall bind all holders of the Notes. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the Notes then
outstanding. No provision of this Agreement may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought. No
consideration shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents or holders of the Notes, as the case may be.
f. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day (as defined in
the Notes) after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
MRV Communications, Inc.
00000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxx
With a copy to:
Xxxxxxxxxxx and Xxxxxxxx LLP
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxx, Esq.
20
If to the Transfer Agent:
American Stock Transfer & Trust Company
00 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxx
If to a Buyer, to it at the address and facsimile number set forth on the
Schedule of Buyers, with copies to such Buyer's representatives as set forth on
the Schedule of Buyers, or, in the case of a Buyer or any other party named
above, at such other address and/or facsimile number and/or to the attention of
such other person as the recipient party has specified by written notice given
to each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C) by a
nationally recognized overnight delivery service shall be rebuttable evidence of
personal service, receipt by facsimile or deposit with a nationally recognized
overnight delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the holders of a majority of the aggregate principal of the Notes
then outstanding, including by merger or consolidation, except pursuant to a
Change of Control (as defined in Section 4(b) of the Notes) with respect to
which the Company is in compliance with Section 4(k) of this Agreement and
Section 4 of the Notes. A Buyer may assign some or all of its rights hereunder
without the consent of the Company; provided, however, that any such assignment
shall not release such Buyer from its obligations hereunder unless such
obligations are assumed by such assignee and the Company has consented to such
assignment and assumption, which consent shall not be unreasonably withheld.
Notwithstanding anything to the contrary contained in the Transaction Documents,
the Buyers shall be entitled to pledge the Securities in connection with a bona
fide margin account or other loan or financing arrangement secured by the
Securities, subject to the provisions of Section 4(l) hereof.
h. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section 8(k),
the representations and warranties of the Buyers and the Company contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 8,
and the indemnification provisions set forth in Section 7, shall survive the
Closing. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
21
j. Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
k. Termination. In the event that the Closing shall not have
occurred with respect to a Buyer on or before five (5) Business Days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 5 and 6 (and the nonbreaching party's failure
to waive such unsatisfied condition(s)), the nonbreaching party shall have the
option to terminate this Agreement with respect to such breaching party at the
close of business on such date without liability of any party to any other
party; provided, however, that if this Agreement is terminated pursuant to this
Section 8(k), the Company shall remain obligated to reimburse any nonbreaching
Buyers for the expenses described in Section 4(h) above.
l. Placement Agent. The Company acknowledges that it has not engaged
a placement agent in connection with the sale of the Notes. The Company shall be
responsible for the payment of any placement agent's fees or broker's
commissions relating to or arising out of the transactions contemplated hereby.
The Company shall pay, and hold each Buyer harmless against, any liability, loss
or expense (including, without limitation, attorneys' fees and out of pocket
expenses) arising in connection with any such claim.
m. No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
n. Remedies. Each Buyer and each holder of the Securities shall have
all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.
o. Payment Set Aside. To the extent that the Company makes a payment
or payments to the Buyers hereunder or pursuant to the Registration Rights
Agreement or the Notes or the Buyers enforce or exercise their rights hereunder
or thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, by a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
* * * * * *
22
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY: BUYERS:
MRV COMMUNICATIONS, INC. DEUTSCHE BANK, AG LONDON BRANCH
By: /S/ Xxxx Xxxxx By: /S/ Xxxxx Xx
---------------------------------- ---------------------------------
Name: X. Xxxxx Name: Xxxxx Xx
----------------------------- ----------------------------
Title: CEO Title: Authorized Signatory
---------------------------- ---------------------------
June 1, 2003
23
SCHEDULE OF BUYERS
INITIAL
PRINCIPAL
INVESTOR ADDRESS AMOUNT OF BUYER'S LEGAL REPRESENTATIVES'
INVESTOR'S NAME AND FACSIMILE NUMBER NOTES ADDRESS AND FACSIMILE NUMBER
-------------------- ----- ----------------------------
Deutsche Bank, AG c/o Deutsche Bank AG $23,000,000 Xxxxxx Xxxxxx Zavis
London Branch 00 Xxxx 00xx Xxxxxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000 000 X. Xxxxxx Xxxxxx
Attn: Xxxx Xxxxx Chicago, Illinois
Xxxxx Xx 0661-3693
Phone: 000-000-0000 Attention: Xxxxxxx X.
Fax: 000-000-0000 Chaffee, Esq.
Residence: New York Xxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
SCHEDULES
Schedule 3(a) Subsidiaries
Schedule 3(c) Capitalization
Schedule 3(e) Conflicts
Schedule 3(f) SEC Documents
Schedule 3(g) Material Changes
Schedule 3(h) Litigation
Schedule 3(o) Intellectual Property
Schedule 3(q) Liens
Schedule 3(w) Certain Transactions
EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Company Counsel Opinion
60181210
MRV COMMUNICATIONS, INC.
Schedule 3(a)
Subsidiaries of MRV
Jurisdiction of
Subsidiary Name Organization
--------------- ------------
AB Kneper (Alcadon Syd AB) Sweden
Alca AB Sweden
Alcacom AB Sweden
Alcadon AB Sweden
Alcadon AS Norway
Alcadon A/S Denmark
All Optical, Inc. Delaware
All Optical Ltd. Israel
Appointech, Inc. Republic of China
Arch-O Italy
AstroTerra Corporation California
Broadband Highway, Inc. Delaware
Charlotte's Networks,Inc. Delaware
Charlotte's Web Ltd. Israel
Cescomm USA, Inc. Delaware
Cimi Networks, Inc. Delaware
Creative Electronic Systems SA Switzerland
Dune Networks, Inc. Delaware
EDSLan SpA Italy
Elcoma AG Switzerland
FOCI Fiber Optic Communications, Inc. Republic of China
Giga Solutions SA France
HellTec Switzerland
Hyperchannel Ltd. United Kingdom
Interdata S.A. France
Israel Telecom Ltd. Israel
iTouch Communications, Inc. Delaware
iTouch, Inc. Massachusetts
J3Tel SA France
Jolt Ltd. Israel
Lan Baradan S.r.L. Italy
Luminent, Inc. Delaware
Luminent Korea Korea
Luminent USA, Inc. Delaware
Maadne Investment Ltd. Cyprus
MRV Communications GmbH Germany
MRV International, Ltd. Israel
NBase Communications, Ltd. Israel
NBase Fibronics Ltd. Israel
Netsoft Solutions Ireland
Optical Access GmbH Germany
Optical Access, Inc. Delaware
Optical Access OAL, Ltd. Israel
Optical Access, S.r.L. Italy
Optical Crossing, Inc. Delaware
Optronics International Corp. Republic of China
Page 1 of 2
Schedule 3(a)
Subsidiaries of MRV
Jurisdiction of
Subsidiary Name Organization
--------------- ------------
Pedrena Enterprises B.V. Netherlands
RDS Communications AB Sweden
RedC Optical Networks, Inc. Delaware
RedC Optical Networks, Ltd. Israel
Seicom GmbH Germany
Tecnonet SpA Italy
Tecnodati S.r.L. Italy
Tele Est S.r.L. Italy
Telesys S.r.L. Italy
TurnKey Communications AG Switzerland
TurnKey Services AG Switzerland
Zuma Networks, Inc. Delaware
Page 2 of 2
MRV COMMUNICATIONS, INC.
Schedule 3(c)
Capitalization
3(c)(B)
In June 1998, the Company issued $100.0 million principal amount of 5%
convertible subordinated notes (the Notes) due June 15, 2003. The Notes were
offered in a 144A private placement to qualified institutional investors at the
stated amount, less a selling discount of 3%. Since issuance, the Company has
repurchased the Notes with cash and the Company's common stock. As of May 29,
2003, approximately $26.0 million in Notes were outstanding.
3(c)(C)
Short-term obligations consist of secured and unsecured lines of credit,
short-term loans and notes entered into with certain financial institutions. As
of March 31, 2003, these short-term obligations totaled $5.3 million. Certain
assets of the Company's subsidiaries have been pledged as collateral on these
borrowings. The weighted average interest rate on these obligations at was
approximately 4%. These obligations are incurred and settled in the local
currencies of the respective subsidiaries.
As of March 31, 2003, the Company had total long-term debt totaling
$544,000.
Through the Company's foreign subsidiaries, the Company has agreements
with financial institutions to sell certain receivables. At December 31, 2002,
the Company is contingently liable for approximately $16.1 million relating to
such receivables sold with recourse.
3(c)(E)
Stock options and warrants issued to employees under approved stock
incentive plans are as follows:
Number of
Shares
------
Outstanding 12,889,894
Available for grant 4,495,524
----------
Total authorized but unissued 17,385,418
==========
3(c)(F)
Through a subsidiary in Switzerland, the Company is obligated to purchase
stock options held by the employees of the subsidiary representing approximately
19.5% of the subsidiary's outstanding capital. The remaining obligation is
approximately CHF 900,000.
Page 1 of 1
MRV COMMUNICATIONS, INC.
Schedule 3(c)
Capitalization as of May 29, 2003
Number of
Shares
------
PREFERRED STOCK, $0.01 par value
Authorized 1,000,000
Issued and outstanding --
COMMON STOCK, $0.0017 par value
Authorized 160,000,000
Issued 104,371,649
Less: held in treasury (1,305,100)
-----------
TOTAL OUTSTANDING 103,066,549
Dilutable Securities:
5% Convertible subordinated notes 1,922,070
Employee stock options and warrants:
Outstanding 12,889,894
Available for grant 4,495,524
-----------
Total authorized but unissued 17,385,418
TOTAL OUTSTANDING ASSUMING FULL DILUTION
122,374,037
===========
SCHEDULE 3(E)
CONFLICTS
Not applicable
MRV COMMUNICATIONS, INC.
Schedule 3(f)
SEC Documents
From January 1, 2002 through May 29, 2003
Filing
Form Description Date
---- ----------- ----
10-Q Q1 2003 quarterly report. 5/15/2003
8-K Q1 2003 earnings release. 4/30/2003
10-K 2002 annual report. 3/28/2003
SC 13G/A Statement of acquisition of beneficial ownership by individuals. 1/10/2003
8-K/A Amendment to the current report for FOCI and QOI divestiture originally filed October 23, 2002. 12/4/2002
10-Q Q3 2002 quarterly report. 11/14/2002
ARS Annual report to security holders pursuant to annual shareholder meeting held December 12, 2002. 11/12/2002
DEF 14A 2001 definitive proxy statement 11/12/2002
8-K Current report for FOCI and QOI divestiture originally filed October 23, 2002. 10/23/2002
10-Q/A Amendment 1 to Q2 2002 quarterly report. 8/20/2002
10-Q Q2 2002 quarterly report. 8/14/2002
8-K Current report for change in certifying accountants. 6/18/2002
10-Q Q1 2002 quarterly report. 5/13/2002
10-K/A Amendment 1 to 2001 annual report 3/22/2002
S-8 Xxxxx Xxxxxx stock option agreement 3/22/2002
10-K 2001 annual report. 3/21/2002
SC 13G/A Statement of acquisition of beneficial ownership by individuals. 2/14/2002
8-K Current report for 2001 earnings release 2/13/2002
SC 13G/A Statement of acquisition of beneficial ownership by individuals. 2/12/2002
S-8 Luminent Inc. amended and restated 2000 stock option plan and Xxxx Xxxxxxx stock option agreement. 2/1/2002
S-8 MRV Communications, Inc. 2002 international stock option plan 2/1/2002
S-8 1997 incentive and nonstatutory stock option plan. 2/1/2002
S-8 2002 nonstatutory stock option plan for employees of Luminent, Inc. 2/1/2002
424B3 Prospectus related to Form S-3/A filed October 10, 2002 1/17/2002
S-3/A Resell amendment 1/10/2002
8-K Current report announcing completion of short-form merger with Luminent, Inc. on December 28, 2001 1/8/2002
Page 1 of 1
SCHEDULE 3(G)
MATERIAL CHANGES
Not applicable
SCHEDULE 3 (H)
LITIGATION
Not applicable
SCHEDULE 3 (O)
INTELLECTUAL PROPERTY
Patent/TM/App
Title Country Date Number
----- ------- ---- ------
Method and Apparatus for a Connectorized US Filed 06/12/00 US app 9/592,605
Transmitter for Long Distance High
Performance Communication
Method and Apparatus for Wireless Traffic US Filed 05/31/200 Us app 09/585,239
Driver
Memes Based Over the Air Optical Data US Filed 06/09/2000 US prov app 60/210,613
Transmission System
Control System for Over the Air Optical US Filed 09/29/00 US prov app 60/210,614
Data Transmission System
DIRECTIP US Filed 02/13/97 US tm. 2,203,250
OPTISWITCH MASTER US Filed 06/30/00 US tm app 76/081,987
OPTIWAVE US Filed 06/07/00 US tm app 76/065,059
IPMASTER US Filed 06/07/00 US tm app 76/065,068
FTTX US Filed 03/15/00 US tm app 76/000,915
OPTISWITCH US Filed 03/16/00 US tm app 76/000,914
NET2LINUX US Filed 01/31/00 US tm app 75/906,269
AMATIS US Filed 01/07/00 US tm app 56/892630
E-SWITCH US Filed 09/03/99 US tm app 76/792,414
ACCELEROUTER US Filed 03/10/99 (US) US tm 2,380.832
Reg 08/29/00 (US) WO tm 1,305,267
FUIC 01/01/99 (US)
Filed 10/02/99 (WO)
Multiple Transmitter Laser Link US Issued 07/07/98 US 5,777,768
Filed 08/29/96
Priority US 09/01/95
US Prov. 60/003397
System for Directing a Laser Beam Toward US Issued 07/18/00 US 6,091,074
an Active Area Filed 05/11/98
Directional Optics for a System for Directing US Issued 09/12/00 US 6,118,131
a Laser Beam Toward an Active Area Filed 07/01/98
CIP App 09/075,602
Buffered Laser Communications Link US Allowed 6/14/00 US app 08/990.850
Filed 12/15/97
Alignment System for Laser Communication US Filed 03/11/99 US app 09/266.457
Beam
Subterranean Optical Communications US Filed 06/11/99 US app 09/330,379
Laser/Microwave Dual Mode US Filed 07/29/99 US app 09/364,101
System and Methods for Aligning a Laser US Filed 08/03/99 US app 09,368,107
Single Optical Fiber Transceiver US Filed 10/14/99 US app 09/418,100
Duel Optical Fiber Transceiver US Filed 10/14/99 US app 09/418,096
Aerial Optical Communications System US Filed 09/19/2000 not yet assigned
ASTROFIBER US Filed 04/25/00 US tm app
Wireless Communication System US Issued 10/6/98 US 5,818,619
Filed 06/13/96
Priority IL 06/15/95
Wireless Communication System UK Issued 02/18/98 UK 2,302,467 B
Priority 08/16/95 (?)
Title Country Date Patent/TM/AppNumber
----- ------- ---- -------------------
Wireless Communication System IL Filed 06/15/98 IL 114,176
Renewed 08/31/00
Wireless Communication System IL Issued 12/31/95 IL 103,289
Filed 09/25/92
Wireless Communication System US Issued 07/08/97 US 5,646,761
Filed 09/05/95
Cont of 08/126800,
Filed 09/24/93)
System and method for wirelessly US Issued 09/29/98 US 5,815,298
Filed 08/25/96
Priority IL 07/25/95
Method and Apparatus for Combining Data IL Issued 08/04/96 IL 114,234AO
Received by a Plurality of Reveivers Filed 6/20/95
(unconfirmed)
System and method for wirelessly IL Issued 09/16/98 IL 114,727
communicating a sound signal Filed 07/25/95
Wireless Optical Communications Without US Filed 09/16/98 US app 60/100,632
Electronics
Wireless Optical Communications Without WO Published 03/23/00 WIPO app 16489A2
Electronics Priority 09/16/98
US Prov 60/100632
VIRTUAL FIBER IL Filed 12/1897 IL tm 116,500
Published 12/31/98
Registered 04/14/99
Communication Laser Alignment Assembly US Aug. 16, 1988 4,764,983
Apparatus and Method for Alignment of Fixed US Nov. 7, 1989 4,879,764
Communication Laser Stations
Laser Beam Data Verification System US Nov. 21, 1989 4,882,774
Title Country Date Patent/TM/AppNumber
----- ------- ---- -------------------
Laser Signal Mixer Circuit US Sept. 25, 1990 4,959,827
Laser Alignment Apparatus US Sept. 12, 1995 5,450,245
Laser Communication System US April 28, 1987 4,662,004
Booster for Rapid Network US January 21, 1999 09/234,304
Acceleration
Packet Routing Using Direct IP US February 10, 1997 60/037,890
Method and Apparatus for a Wave US Not filed
Length Division Multiplexing Optical
Power Monitor
A Signal Allocation Scheme for a US In Process
Laser/Microwave Dual Mode
Communications System
Laser/microwave dual mode US December 3, 2002 6,490,066
communications system
Systems and methods for aligning a US December 10, 2002 6,493,485
laser beam with an optical fiber
Title Country Date Patent/TM/AppNumber
----- ------- ---- -------------------
Wireless optical communications US 6,366,723
without electronics
Multiple transmitter laser link US
Optical Isolator with low polarization mode dispersion US
Reflective Parallel Fiber Optic Circulator US
Optical Circulator US
Optical Fiber Polisher US
Used on Solid State CCD Camera Optical US
Photometric Filter
TRADEMARKS
Title Date TM/Application #
----- ---- ----------------
Fiber Driver(tm) April 23, 0000 00000000
In-Reach December 29, 2000 76187919
MegaVision October 13, 2000 76194912
MegaVision Web January 16, 2001 76194912
OptiSwitch March 15, 2000 76000914
OptiSwitch Master June 30, 2000 76081987
TereScope October 13, 2000 76147967
SCHEDULE 3 (Q)
LIENS
Not applicable
SCHEDULE 3 (W)
TRANSACTIONS WITH AFFILIATES
Not applicable
EXHIBIT A
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF
COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD
CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTION 2(C)(VII) HEREOF. THE
PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN THE AMOUNTS SET FORTH
ON THE FACE HEREOF PURSUANT TO SECTION 2(C)(VII) HEREOF.
CONVERTIBLE NOTE
___________, 2003 $23,000,000
FOR VALUE RECEIVED, MRV COMMUNICATIONS, INC., a Delaware corporation (the
"COMPANY"), hereby promises to pay to the order of Deutsche Bank, AG London
Branch or registered assigns (the "HOLDER") the principal amount of Twenty Three
Million United States Dollars ($23,000,000), and interest thereon, when due,
whether upon maturity, acceleration, redemption or otherwise, in accordance with
the terms of this Note. Unless otherwise defined or provided herein, capitalized
terms used in this Note shall have the meanings ascribed thereto in Section 26.
(1) Payments.
(a) Principal. If any Principal remains outstanding on the Maturity
Date, then the Holder shall surrender this Note, duly endorsed for cancellation,
to the Company and such Principal shall be redeemed as of the Maturity Date by
payment on the Maturity Date to the Holder of an amount equal to the sum of (A)
such Principal plus (B) the Additional Amount with respect to such Principal
plus (C) any unpaid Default Interest (as defined below) or other amounts due
under this Note. Except as specifically set forth in this Note, the Company does
not have any right, option, or obligation to pay any portion of the Principal at
any time prior to the Maturity Date.
(b) Interest. Interest on this Note ("INTEREST") shall accrue at a
rate of 5.0% per annum commencing on the Issuance Date and shall be computed on
the basis of a 365-day year and actual days elapsed and shall be payable
quarterly in arrears on the first day of each Calendar Quarter beginning on July
1, 2003 (each an "INTEREST DATE"). Interest shall be payable in cash.
(c) General. All payments of principal and Interest on, and any
other amounts due under, this Note (to the extent not converted into Shares in
accordance with the terms hereof) shall be made in lawful money of the United
States of America by wire transfer of immediately available funds to such
account as the Holder may from time to time designate by written notice in
accordance with the provisions of this Note. Whenever any amount expressed to be
due by the terms of this Note is due on any day that is not a Business Day, the
same shall instead be due on the next succeeding day that is a Business Day.
Unless otherwise provided in this Note, any amount due under this Note and not
paid when due shall bear interest at the rate of 10.0% per annum (or, if lower,
the maximum amount allowed by applicable law) from such due date until the same
is paid in full ("DEFAULT INTEREST").
(2) Conversion of this Note. This Note shall be converted into Shares on
the terms and conditions set forth in this Section 2.
(a) Holder's Conversion Right. Subject to the provisions of Section
5 and Section 10, at any time or times on or after the Issuance Date, the Holder
shall be entitled to convert all or any part of the Principal into fully paid
and nonassessable Shares in accordance with Section 2(c), at the Conversion Rate
(as defined below). The Company shall not issue any fraction of a Share upon any
conversion. If the issuance would result in the issuance of a fraction of a
Share, then the Company shall round such fraction of a Share up or down to the
nearest whole share. Upon any such conversion, the Company shall pay to the
Holder the Additional Amount relating to the Principal so converted.
(b) Conversion Rate. The number of Shares issuable upon conversion
of any portion of this Note pursuant to Section 2(a) shall be determined
according to the following formula (the "CONVERSION RATE"):
Conversion Amount
-----------------
Conversion Price
(c) Mechanics of Conversion. The conversion of this Note shall be
conducted in the following manner:
(i) Holder's Delivery Requirements. To convert a Conversion
Amount into Shares on any date (the "CONVERSION DATE"), the Holder shall
(A) transmit by facsimile (or otherwise deliver), for receipt on or prior
to 7:00 p.m. New York Time on such date, a copy of an executed conversion
notice in the form attached hereto as Exhibit I (the "CONVERSION NOTICE")
to the Company and
2
(B) if required by Section 2(c)(vii), surrender to a nationally recognized
overnight delivery service for delivery to the Company as soon as
practicable following such date the original Note being converted (or an
indemnification undertaking with respect to this Note in the case of its
loss, theft or destruction).
(ii) Company's Response. Upon receipt or deemed receipt by the
Company of a copy of a Conversion Notice, the Company (I) shall as soon as
practicable, but no later than the next Business Day, send, via facsimile,
a confirmation of receipt of such Conversion Notice to the Holder and the
Company's designated transfer agent (the "TRANSFER AGENT"), which
confirmation shall constitute an instruction to the Transfer Agent to
process such Conversion Notice in accordance with the terms herein; (II)
on or before the second (2nd) Business Day following the date of receipt
or deemed receipt by the Company of such Conversion Notice (such second
(2nd) Business Day, the "SHARE DELIVERY DATE") (A) provided that the
Transfer Agent is participating in The Depository Trust Company ("DTC")
Fast Automated Securities Transfer Program and provided that the Holder is
eligible to receive Shares through DTC, shall credit such aggregate number
of Shares to which the Holder shall be entitled to the Holder's or its
designee's balance account with DTC through its Deposit Withdrawal Agent
Commission system or (B) if the Transfer Agent is not participating in the
DTC Fast Automated Securities Transfer Program, if the Holder is not
eligible to received Shares through DTC or if requested by the Holder,
shall issue and deliver to the address as specified in the Conversion
Notice, a certificate, registered in the name of the Holder or its
designee, for the number of Shares to which the Holder shall be entitled;
and (III) on the Share Delivery Date shall pay in cash the Additional
Amount relating to the Principal so converted. If this Note is submitted
for conversion, as may be required by Section 2(c)(vii), and the principal
amount represented by this Note is greater than the principal amount being
converted, then the Company shall, as soon as practicable and in no event
later than three (3) Business Days after receipt of this Note (such third
(3rd) Business Day, the "NOTE DELIVERY DATE") and at its own expense,
issue and deliver to the Holder a new Note representing the Principal not
converted.
(iii) Dispute Resolution. In the case of a dispute as to the
determination of the Conversion Price or the arithmetic calculation of the
Conversion Rate, the Company shall instruct the Transfer Agent to issue to
the Holder the Shares representing the number of Shares that is not
disputed and shall transmit an explanation of the disputed determinations
or arithmetic calculations to the Holder via facsimile within one (1)
Business Day of receipt or deemed receipt of the Holder's Conversion
Notice or other date of determination. If the Holder and the Company are
unable to agree upon the determination of the Conversion Price or
arithmetic calculation of the Conversion Rate within one (1) Business Day
of such disputed determination or arithmetic calculation being transmitted
to the Holder, then the Company shall within one (1) Business Day
3
submit via facsimile (A) the disputed determination of the Conversion
Price to an independent, reputable investment bank selected by the Company
and approved by the holders of Notes representing a majority of the
aggregate principal amount of the Notes then outstanding or (B) the
disputed arithmetic calculation of the Conversion Rate to the Company's
independent, outside accountant. The Company shall cause the investment
bank or the accountant, as the case may be, to perform the determinations
or calculations and notify the Company and the Holder of the results no
later than 48 hours from the time it receives the disputed determinations
or calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
error.
(iv) Record Holder. The person or persons entitled to receive
the Shares issuable upon a conversion of this Note shall be treated for
all purposes as the legal and record holder or holders of such Shares on
the Conversion Date.
(v) Company's Failure to Timely Convert.
(A) Cash Damages. If within three (3) Business Days
after the Company's receipt of the facsimile copy of a Conversion Notice or
deemed receipt of a Conversion Notice the Company shall fail to issue and
deliver a certificate to the Holder for, or credit the Holder's balance account
with DTC with, the number of Shares to which the Holder is entitled upon the
Holder's conversion of any Conversion Amount, or if the Company fails to issue
and deliver a new Note representing the Principal to which such Holder is
entitled on or before the Note Delivery Date pursuant to Section 2(c)(ii), then
in addition to all other available remedies that the Holder may pursue hereunder
and under the Securities Purchase Agreement (including indemnification pursuant
to Section 7 thereof), the Company shall pay additional damages to the Holder
for each day after the Share Delivery Date such conversion is not timely
effected and/or each day after the Note Delivery Date such Note is not delivered
in an amount equal to 0.5% of the sum of (a) the product of (I) the number of
Shares not issued to the Holder on or prior to the Share Delivery Date and to
which the Holder is entitled and (II) the Weighted Average Price of the Common
Stock on the Share Delivery Date, and (b) in the event the Company has failed to
deliver a Note to the Holder on or prior to the Note Delivery Date, the product
of (y) the number of Shares issuable upon conversion of the Principal
represented by the Note as of the Note Delivery Date and (z) the Weighted
Average Price of the Common Stock on the Note Delivery Date.
(B) Void Conversion Notice. If for any reason the Holder
has not received all of the Shares prior to the tenth (10th) Business Day after
the Share Delivery Date with respect to a conversion of this Note, then the
Holder, upon written notice to the Company (a "VOID CONVERSION NOTICE"), may
void its Conversion Notice with respect to, and retain or have returned, as the
case may be, any portion of this Note that has not been converted pursuant to
the Holder's Conversion Notice. Upon delivery of a Void Conversion Notice, cash
amounts shall stop accruing under Section 2(c)(v)(A) on the Shares subject to
such
4
Void Conversion Notice, provided that the voiding of the Holder's
Conversion Notice shall not affect the Company's obligations to make any
payments that have accrued prior to the date of such Void Conversion Notice
pursuant to Section 2(c)(v)(A) or otherwise.
(C) Redemption. If for any reason the Holder has not
received all of the Shares prior to the tenth (10th) Business Day after the
Share Delivery Date with respect to a conversion of this Note (a "CONVERSION
FAILURE"), then the Holder, upon written notice to the Company, may require that
the Company redeem, in accordance with Section 3, all of the Principal,
including the Principal previously submitted for conversion and with respect to
which the Company has not delivered shares of Common Stock; provided that in the
event the Holder has delivered to the Company a Void Conversion Notice with
respect to a Conversion Failure, the Company shall not be required to redeem the
amount of principal specified in and represented by such Void Conversion Notice.
(vi) Pro Rata Conversion. In the event the Company receives a
Conversion Notice from more than one holder of the Notes for the same
Conversion Date and the Company can convert some, but not all, of such
Notes, then, subject to Section 10, the Company shall convert from each
holder of the Notes electing to have Notes converted at such time a pro
rata amount of such holder's Note submitted for conversion based on the
principal amount of the Note submitted for conversion on such date by such
holder relative to the principal amount of the Notes submitted for
conversion on such date.
(vii) Book-Entry. Notwithstanding anything to the contrary set
forth herein, upon conversion of this Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender this Note
to the Company unless all of the Principal is being converted. The Holder
and the Company shall maintain records showing the principal amount
converted or redeemed and the dates of such conversions or redemptions or
shall use such other method, reasonably satisfactory to the Holder and the
Company, so as not to require physical surrender of this Note upon each
such conversion or redemption. In the event of any dispute or discrepancy,
such records of the Company establishing the Principal to which the Holder
is entitled shall be controlling and determinative in the absence of
error. Notwithstanding the foregoing, if this Note is converted or
redeemed as aforesaid, the Holder may not transfer this Note unless the
Holder first physically surrenders this Note to the Company, whereupon the
Company will forthwith issue and deliver upon the order of the Holder a
new Note of like tenor, registered as the Holder may request, representing
in the aggregate the remaining Principal represented by this Note. The
Holder and any assignee, by acceptance of this Note, acknowledge and agree
that, by reason of the provisions of this paragraph, following conversion
or redemption of any portion of this Note, the Principal of this Note may
be less than the principal amount stated on the face hereof. Each Note
shall bear the following legend:
5
ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS
NOTE, INCLUDING SECTION 2(c)(vii) HEREOF. THE PRINCIPAL AMOUNT OF THIS
NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT STATED ON THE FACE HEREOF
PURSUANT TO SECTION 2(c)(vii) HEREOF.
(d) Taxes. The Company shall pay any and all taxes that may be
payable with respect to the issuance and delivery of Shares upon the conversion
of this Note.
(e) Adjustments to Conversion Price. The Conversion Price will
be subject to adjustment from time to time as provided in this Section 2(e).
(i) Adjustment of Conversion Price upon Subdivision or
Combination of Common Stock. If the Company at any time after the Issuance Date
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
outstanding Shares into a greater number of shares, the Conversion Price in
effect immediately prior to such subdivision will be proportionately reduced. If
the Company at any time after the Issuance Date combines (by combination,
reverse stock split or otherwise) its outstanding Shares into a smaller number
of shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased.
(ii) Notices.
(A) Upon any adjustment of the Conversion Price pursuant
to clause (i) of this Section 2(e), the Company will give written notice thereof
to the Holder, setting forth in reasonable detail, and certifying, the
calculation of such adjustment.
(B) The Company will give written notice to the Holder
at least ten (10) Business Days prior to the date on which the Company closes
its books or takes a record (I) with respect to any dividend or distribution
upon the Common Stock, (II) with respect to any pro rata subscription offer to
holders of Common Stock or (III) for determining rights to vote with respect to
any Organic Change (as defined in Section 4(a)), dissolution or liquidation,
provided that such information shall be made known to the public prior to or in
conjunction with such notice being provided to the Holder.
(C) The Company will also give written notice to the
Holder at least ten (10) Business Days prior to the date on which any Organic
Change (as defined in Section 4(a)), dissolution or liquidation will take place,
provided that such information shall be made known to the public prior to or in
conjunction with such notice being provided to the Holder.
6
(iii) Adjustment of Conversion Price by the Company. To the
extent permitted by applicable law, the Company at any time shall have the right
to reduce the Conversion Price (a "COMPANY REDUCTION") by any amount for any
period of time; provided that the conditions of this Section 2(e)(iii) are
satisfied. The Company may exercise its right to Company Reduction by delivering
to each holder of the Notes written notice (a "COMPANY REDUCTION NOTICE") at
least 15 Business Days prior to the first day of the Company Reduction Period
(as defined below). The Company Reduction Notice shall state the reduced
Conversion Price (the "ALTERNATIVE CONVERSION PRICE") and the period (the
"COMPANY REDUCTION PERIOD") during which the Alternative Conversion Price will
be in effect, which Company Reduction Period must be at least 15 Business Days
in duration. A Company Reduction Notice shall be irrevocable. The Conversion
Price shall be adjusted upon the expiration of the Company Reduction Period to
the Conversion Price that otherwise would then be in effect if the Company
Reduction had not occurred. Notwithstanding anything to the contrary in this
Section 2(e)(iii), the Alternative Conversion Price shall at no time be greater
than the Conversion Price that otherwise would be in effect during such Company
Reduction Period if such Company Reduction had not occurred. The Company must
publicly disclose the contents of the Company Reduction Notice prior to or
contemporaneously with delivery thereof to the Holder.
(iv) Restriction on Issuances by the Company. The Company
shall be restricted from issuing certain types of securities as provided in this
Section 2(e)(iv).
(A) The Company agrees that, except for Exempted
Issuances, so long as this Note is outstanding, it shall not in any manner issue
or sell (1) any Shares for a consideration per share less than a price equal to
the Conversion Price in effect immediately prior to such time; (2) any Options
where the lowest price per share for which one Share is issuable upon the
exercise of any such Option or upon conversion, exchange or exercise of any
Convertible Securities issuable upon exercise of such Option is less than the
Conversion Price in effect immediately prior to such time; or (3) any
Convertible Securities where the lowest price per share for which one Share is
issuable upon the conversion, exchange or exercise thereof is less than the
Conversion Price in effect immediately prior to such time.
(B) For purposes of this Section 2(e)(iv)(A), the
"lowest price per share for which one Share is issuable upon the exercise of any
such Option or upon conversion, exchange or exercise of any Convertible
Securities issuable upon exercise of such Option" shall be equal to the sum of
the lowest amounts of consideration (if any) received or receivable by the
Company with respect to any one Share upon granting or sale of the Option, upon
exercise of the Option and upon conversion, exchange or exercise of any
Convertible Security issuable upon exercise of such Option, and the "lowest
price per share for which one Share is issuable upon conversion, exchange or
exercise" of any Convertible Security shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to any one Share upon the issuance or sale of the Convertible Security
and upon the conversion, exchange or exercise of such Convertible Security.
7
(C) For purposes of Section 2(e)(iv)(A), if the
terms of any Option or Convertible Security are changed or amended in any
manner, then such Option or Convertible Security shall be deemed to have been
issued as of the date of such change.
(D) In case any Option is issued in connection
with the issue or sale of other securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options will be deemed to have been
issued for a consideration of $0.01. If any Shares, Options or Convertible
Securities are issued or sold or deemed to have been issued or sold for cash,
the consideration received therefor will be deemed to be the net amount received
by the Company therefor. If any Shares, Options or Convertible Securities are
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company will be the fair value of
such consideration, except where such consideration received by the Company
consists of marketable securities, in which case the amount of consideration
received by the Company will be the Weighted Average Price of such securities on
the date of receipt of such securities. If any Shares, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Shares, Options or Convertible Securities, as the case may be. The fair
value of any consideration other than cash or securities will be determined
jointly by the Company and the holders of Notes representing a majority of the
aggregate principal amount of the Notes then outstanding. If such parties are
unable to reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the "VALUATION EVENT"), the fair value of such
consideration will be determined within five (5) Business Days after the tenth
(10th) day following the Valuation Event by an independent, reputable appraiser
jointly selected by the Company and the holders representing a majority of the
aggregate principal amount of the Notes then outstanding. The determination of
such appraiser shall be final and binding upon all parties absent error and the
fees and expenses of such appraiser shall be borne by the Company.
(F) The Company agrees that, so long as this Note
is outstanding, it shall not in any manner issue or sell any Options or
Convertible Securities that are convertible into or exchangeable or exercisable
for Shares at a price that varies or may vary with the market price of the
Shares, including by way of one or more resets to a fixed price or the issuance
of additional securities with out the payment of additional consideration.
(3) Redemption at Option of Holder.
(a) Redemption Option Upon Event of Default. In addition to
all other rights of the Holder contained herein, after an Event of Default (as
defined below), the Holder shall have the right, at the Holder's option, to
require the Company to redeem all or a portion of the Principal at a price
("REDEMPTION PRICE") equal to the sum of (x) 100% of such Principal plus (y) the
Additional Amount with respect to such Principal plus (z) any unpaid Default
Interest or other amounts due under this Note.
8
(b) Event of Default. An "EVENT OF DEFAULT" shall be deemed to have
occurred at such time as any of the following events:
(i) the failure of the Registration Statement (as defined in
the Registration Rights Agreement) to be declared effective by the SEC on
or prior to the date that is 30 days after the Effectiveness Deadline (as
defined in the Registration Rights Agreement);
(ii) while the Registration Statement is required to be
maintained effective pursuant to the terms of the Registration Rights
Agreement, the effectiveness of the Registration Statement lapses for any
reason (including, without limitation, the issuance of a stop order) or is
unavailable to the Holder for sale of all of the Registrable Securities
(as defined in the Registration Rights Agreement) in accordance with the
terms of the Registration Rights Agreement, and such lapse or
unavailability continues for a period of five (5) consecutive trading days
or for more than an aggregate of ten (10) trading days in any 365-day
period (other than days during an Allowable Grace Period (as defined in
the Registration Rights Agreement));
(iii) the suspension from trading or failure of the Common
Stock to be listed on the Nasdaq Stock Market for a period of five (5)
consecutive trading days or for more than an aggregate of ten (10) trading
days in any 365-day period;
(iv) the Company's or the Transfer Agent's notice to any
holder of the Notes, including by way of public announcement, at any time,
of its intention not to comply with a request for conversion of any Notes
into Shares that is tendered in accordance with the provisions of the
Notes;
(v) a Conversion Failure (as defined in Section 2(c)(v)(C));
(vi) upon the Company's receipt or deemed receipt of a
Conversion Notice, the Company shall not be obligated to issue Shares upon
such conversion due to the provisions of Section 10;
(vii) the Company breaches any representation, warranty,
covenant or other term or condition of the Securities Purchase Agreement,
the Registration Rights Agreement, this Note or any other agreement,
document, certificate or other instrument delivered in connection with the
transactions contemplated thereby and hereby, except to the extent that
such breach would not have a Material Adverse Effect (as defined in
Section 3(a) of the Securities Purchase Agreement) and except, in the case
of a breach of a covenant or other
9
term that is curable, only if such breach continues for a period of at
least ten (10) days;
(viii) default in payment of any principal amount of, Interest
on or other amount due under this Note when and as due;
(ix) the Company breaches any of the covenants set forth in
Section 2(e)(iv) hereof;
(x) failure by the Company for ten (10) days after notice to
it to comply with any other provision of this Note in all material
respects;
(xi) any default in payment of at least $3,000,000,
individually or in the aggregate, under or acceleration prior to maturity
of, or any event or circumstances arising such that, any person is
entitled, or could, with the giving of notice and/or lapse of time and/or
the fulfillment of any condition and/or the making of any determination,
become entitled, to require repayment before its stated maturity of, or to
take any step to enforce any security for, any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any indebtedness for money borrowed of at least
$3,000,000 by the Company or for money borrowed the repayment of at least
$3,000,000 of which is guaranteed by the Company, whether such
indebtedness or guarantee now exists or shall be created hereafter;
(xi) if the Company pursuant to or within the meaning of any
Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry
of an order for relief against it in an involuntary case; (C) consents to
the appointment of a Custodian of it or any of its Subsidiaries (as
defined in the Securities Purchase Agreement) for all or substantially all
of its property; (D) makes a general assignment for the benefit of its
creditors; or (E) admits in writing that it is generally unable to pay its
debts as the same become due; or
(xii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (1) is for relief against the
Company in an involuntary case; (2) appoints a Custodian of the Company or
any subsidiary for all or substantially all of its property; or (3) orders
the liquidation of the Company or any subsidiary.
(c) Mechanics of Redemption at Option of Holder. Within one (1) day
after the occurrence of an Event of Default, the Company shall deliver written
notice thereof via facsimile and overnight courier ("NOTICE OF EVENT OF
DEFAULT") to the Holder. At any time after the earlier of the Holder's receipt
of a Notice of Event of Default and the Holder becoming aware of an Event of
Default, the Holder may require the Company to redeem up to all of the Principal
by delivering written notice thereof via facsimile and overnight courier
("NOTICE OF REDEMPTION AT OPTION OF HOLDER") to the Company, which Notice of
Redemption at Option of
10
Holder shall indicate (i) the Principal that the Holder is electing to have the
Company redeem from it and (ii) the applicable Redemption Price, as calculated
pursuant to Section 3(a) except that in the case of an Event of Default arising
from events described in clauses (xi) and (xii) of Section 3(b), this Note shall
become due and payable without further action or notice.
(d) Payment of Redemption Price. Upon the Company's receipt of a
Notice(s) of Redemption at Option of Holder from any other holder of the Notes,
the Company shall promptly notify the Holder by facsimile of the Company's
receipt of such notice(s). Each holder that has sent such a notice shall, if
required pursuant to Section 2(c)(vii), promptly submit to the Company such
holder's Note that such holder has elected to have redeemed. The Company shall
deliver the applicable Redemption Price to the Holder within five (5) Business
Days after the Company's receipt of a Notice of Redemption at Option of Holder;
provided that the Holder's Note shall have been so delivered to the Company (if
required). If the Company is unable to redeem all of the Notes submitted for
redemption, the Company shall (i) redeem a pro rata amount from each holder of
the Notes based on the principal amount of the Notes submitted for redemption by
such holder relative to the aggregate principal amount of the Notes submitted
for redemption by all holders of the Notes and (ii) in addition to any remedy
the Holder may have under this Note and the Securities Purchase Agreement, pay
to the Holder interest at the rate of the lesser of 2.0% per month (prorated for
partial months) or the highest lawful maximum interest rate in respect of the
unredeemed Principal until paid in full.
(e) Void Redemption. In the event that the Company does not pay the
Redemption Price within the time period set forth in Section 3(d), at any time
thereafter and until the Company pays such unpaid Redemption Price in full, the
Holder shall have the option (the "VOID OPTIONAL REDEMPTION OPTION") to, in lieu
of redemption, require the Company to promptly return to the Holder any or all
of the Notes representing the Principal that was submitted for redemption by the
Holder under this Section 3 and for which the Redemption Price (together with
any interest thereon) has not been paid, by sending written notice thereof to
the Company via facsimile (the "VOID OPTIONAL REDEMPTION NOTICE"). Upon the
Company's receipt of such Void Optional Redemption Notice, (i) the Notice of
Redemption at Option of Holder shall be null and void with respect to the
Principal subject to the Void Optional Redemption Notice, and (ii) the Company
shall immediately return any Note subject to the Void Optional Redemption
Notice.
(f) Disputes; Miscellaneous. In the event of a dispute as to the
determination of the arithmetic calculation of the Redemption Price, such
dispute shall be resolved pursuant to Section 2(c)(iii) above with the term
"Redemption Price" being substituted for the term "Conversion Rate." A holder's
delivery of a Void Optional Redemption Notice and exercise of its rights
following such notice shall not affect the Company's obligations to make any
payments that have accrued prior to the date of such notice (other than the
payment of the Redemption Price in respect of the redemption so voided). In the
event of a redemption pursuant to this Section 3 of less than all of the
Principal, the Company shall promptly cause to be issued and delivered to the
Holder a Note representing the remaining Principal that has not been redeemed,
if necessary.
11
(4) Other Rights of Holders.
(a) Reorganization, Reclassification, Consolidation, Merger or
Sale. Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Company's assets to another
Person or other transaction that is effected in such a way that holders of
Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock is referred to herein as "ORGANIC CHANGE." Prior to the
consummation of any (i) sale of all or substantially all of the Company's assets
to an acquiring Person or (ii) other Organic Change following which the Company
is not a surviving entity, the Company will secure from the Person purchasing
such assets or the successor resulting from such Organic Change (in each case,
the "ACQUIRING ENTITY") a written agreement (in form and substance satisfactory
to the holders representing a majority of the Notes then outstanding) to deliver
to the Holder in exchange for this Note, a security of the Acquiring Entity
evidenced by a written instrument substantially similar in form and substance to
this Note and satisfactory to the holders representing a majority of the
principal amount then outstanding under the Notes. Prior to the consummation of
any other Organic Change, the Company shall make appropriate provision (in form
and substance satisfactory to the holders representing a majority of the Notes
then outstanding) to ensure that the Holder will thereafter have the right to
acquire and receive in lieu of or in addition to (as the case may be) the Shares
immediately theretofore acquirable and receivable upon the conversion of this
Note (without regard to any limitations on conversion) such shares of stock,
securities or assets that would have been issued or payable in such Organic
Change with respect to or in exchange for the number of Shares that would have
been acquirable and receivable upon the conversion of this Note as of the date
of such Organic Change (without taking into account any limitations or
restrictions on the convertibility of this Note).
(b) Optional Redemption Upon Change of Control. In addition to
the rights of the Holder under Section 4(a), upon a Change of Control (as
defined below) of the Company the Holder shall have the right, at the Holder's
option, to require the Company to redeem all or a portion of the Principal at a
price equal to the greater of (A) the sum of (x) 105% of the Principal plus (y)
the Additional Amount with respect to such Principal, and (B) the product of (I)
the Conversion Rate on the date the Holder gives a Notice of Redemption Upon
Change of Control (as defined below), multiplied by (II) the arithmetic average
of the Weighted Average Prices of the Common Stock during the five (5) trading
days immediately preceding such date ("CHANGE OF CONTROL REDEMPTION PRICE"). No
sooner than forty (40) nor later than thirty (30) Business Days prior to the
consummation of a Change of Control, but not prior to the public announcement of
such Change of Control, the Company shall deliver written notice thereof via
facsimile and overnight courier (a "NOTICE OF CHANGE OF CONTROL") to the Holder.
At any time during the period beginning after receipt of a Notice of Change of
Control (or, in the event a Notice of Change of Control is not delivered at
least thirty (30) Business Days prior to a Change of Control, at any time on or
after the date which is thirty (30) Business Days prior to a Change of Control)
and ending on and including the date that is ten (10) Business Days prior to the
date of such Change of Control, the Holder may require the Company to redeem all
or a
12
portion of the Principal by delivering written notice thereof via facsimile and
overnight courier (a "NOTICE OF REDEMPTION UPON CHANGE OF CONTROL") to the
Company, which Notice of Redemption Upon Change of Control shall indicate (i)
the Principal that the Holder is submitting for redemption, and (ii) the
applicable Change of Control Redemption Price, as calculated pursuant to this
Section 4(b). Upon the Company's receipt of a Notice(s) of Redemption Upon
Change of Control from any holder of the Notes, the Company shall promptly, but
in no event later than one (1) Business Day following such receipt, notify the
Holder by facsimile of the Company's receipt of such Notice(s) of Redemption
Upon Change of Control. The Company shall deliver the Change of Control
Redemption Price simultaneously with the consummation of the Change of Control;
provided that, if required by Section 2(c)(vii), this Note shall have been so
delivered to the Company. The Company shall not enter into any binding agreement
or other arrangement with respect to a Change of Control unless the Company
provides that the payments provided for in this Section 4(b) shall have priority
to payments to stockholders in connection with such Change of Control and the
Company complies with such provision. For purposes of this Section 4(b), "CHANGE
OF CONTROL" means (i) the consolidation, merger or other business combination of
the Company with or into another Person (other than (A) a consolidation, merger
or other business combination in which holders of the Company's voting power
immediately prior to the transaction continue after the transaction to hold,
directly or indirectly, the voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or their
equivalent if other than a corporation) of such entity or entities, or (B)
pursuant to a migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Company), (ii) the sale or transfer of all
or substantially all of the Company's assets, or (iii) the consummation of a
purchase, tender or exchange offer made to and accepted by the holders of more
than the 50% of the outstanding Shares.
(c) Purchase Rights. If at any time the Company grants, issues
or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of Common
Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights that
such holder could have acquired if the Holder had held the number of Shares
acquirable upon complete conversion of this Note (without taking into account
any limitations or restrictions on the convertibility of this Note) immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights.
(5) Limitations on Conversion. The Company shall not effect any conversion
of this Note and the Holder shall not have the right to convert Principal in
excess of that portion of the Principal that, upon giving effect to such
conversion, would cause the aggregate number of Shares beneficially owned by the
Holder and its affiliates to exceed 4.99% of the total outstanding Shares
following such conversion. For purposes of the foregoing proviso, the aggregate
number of Shares beneficially owned by the Holder and its affiliates shall
include the Shares issuable upon conversion of this Note with respect to which
the determination of such proviso is being made, but shall exclude the Shares
that would be issuable upon (i) conversion of
13
the remaining, nonconverted principal of the Notes beneficially owned by the
Holder and its affiliates and (ii) exercise, conversion or exchange of the
unexercised, unconverted or unexchanged portion of any other securities of the
Company (including, without limitation, any warrants or convertible preferred
stock) subject to a limitation on conversion, exercise or exchange analogous to
the limitation contained herein beneficially owned by the Holder and its
affiliates. Except as set forth in the preceding sentence, for purposes of this
Section 5, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended (the "1934 ACT"). For
purposes of this Section 5, in determining the number of outstanding Shares the
Holder may rely on the number of outstanding Shares as reflected in (1) the
Company's most recent Form 10-Q or Form 10-K, as the case may be, (2) a more
recent public announcement by the Company or (3) any other notice by the Company
or its transfer agent setting forth the number of Shares outstanding. Upon the
written request of the Holder, the Company shall promptly, but in no event later
than two (2) Business Days following the receipt of such request, confirm in
writing to the Holder the number of Shares then outstanding. In any case, the
number of outstanding Shares shall be determined after giving effect to the
conversion, exercise or exchange of securities of the Company, including the
Notes, since the date as of which such number of outstanding Shares was
reported.
(6) Reservation of Shares.
(a) Reservation. The Company shall, so long as any of
the Notes are outstanding, take all action necessary to reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Notes, such number of Shares as shall
from time to time be sufficient to effect the conversion of all of the principal
amount then outstanding under the Notes; provided that the number of Shares so
reserved shall at no time be less than 100% of the number of Shares for which
the Notes are at any time convertible (without regard to any limitations on
conversions) (the "REQUIRED RESERVE AMOUNT"). The initial number of Shares
reserved for conversions of the Notes and each increase in the number of shares
so reserved shall be allocated pro rata among the holders of the Notes based on
the principal amount of the Notes held by each holder at the time of issuance of
the Notes or increase in the number of reserved Shares, as the case may be. In
the event the Holder shall sell or otherwise transfer any portion of the
Holder's Notes, each transferee shall be allocated a pro rata portion of the
number of Shares reserved for such transferor. Any Shares reserved and allocated
to any Person that ceases to hold any Notes shall be allocated to the remaining
holders of the Notes, pro rata based on the principal amount of the Notes then
held by such holders.
(b) Insufficient Authorized Shares. If at any time while
any of the Notes remain outstanding the Company does not have a sufficient
number of authorized and unreserved Shares to satisfy its obligation to reserve
for issuance upon conversion of the Notes at least a number of Shares equal to
the Required Reserve Amount (an "AUTHORIZED SHARE FAILURE"), then the Company
shall immediately take all action necessary to increase the Company's authorized
Shares to an amount sufficient to allow the Company to reserve the Required
Reserve Amount for the Notes then outstanding. Without limiting the generality
of the
14
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than 60 days after the
occurrence of such Authorized Share Failure, the Company shall hold a meeting of
its stockholders for the authorization of an increase in the number of
authorized Shares. In connection with such meeting, the Company shall provide
each stockholder with a proxy statement and shall use its best efforts to
solicit its stockholders' approval of such increase in authorized Shares and to
cause its Board of Directors to recommend to the stockholders that they approve
such proposal.
(7) Voting Rights. Holders of the Notes shall have no
voting rights, except as required by law and as expressly provided in this Note.
(8) Other Indebtedness. Payments of principal and other
payments due under this Note shall not be subordinated to any obligations of the
Company. For so long as this Note is outstanding, the Company shall not, and
shall not permit any of its Subsidiaries (as defined in the Securities Purchase
Agreement) to, (a) create, issue, incur, assume, guarantee or suffer to exist
any Indebtedness (as defined below) or any Lien (as defined below), except (i)
Indebtedness of the Company secured by a purchase money security interest and
monetary obligations under any leasing or similar arrangement, in each case,
incurred in the Company's ordinary course of business, (ii) up to an aggregate
of $10,000,000 of unsecured Indebtedness (excluding the Notes), and (iii)
Indebtedness under its outstanding 5% Convertible Subordinated Notes due June
15, 2003, pursuant to the terms thereof on the date of the Securities Purchase
Agreement (but not any extension, amendment, refinancing, renewal or replacement
of such Indebtedness); or (b) issue any capital stock of the Company redeemable
prior to the Maturity Date. For purposes of this Note: (x) "INDEBTEDNESS" of any
Person means, without duplication (A) all indebtedness for borrowed money, (B)
all obligations issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all indebtedness referred to in
clauses (A) through (E) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any mortgage, lien, pledge, change, security interest or other encumbrance upon
or in any property or assets (including accounts and contract rights) owned by
any Person, even though the Person that owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (G) all
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (A) through (F) above; (y) "LIEN" means any
mortgage, deed of trust, pledge, lien (statutory or otherwise), security
interest, charge or other encumbrance or security or preferential arrangement of
any nature, on any property of the Company or its Subsidiaries, including,
without limitation, any conditional sale or title retention arrangement, any
capitalized lease and any assignment,
15
deposit arrangement or financing lease intended as, or having the effect of,
security; and (z) "CONTINGENT OBLIGATION" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.
Notwithstanding anything to the contrary in this Note or the Securities Purchase
Agreement, nothing in this Note is intended to restrict the right of the Company
to pay or redeem at maturity its outstanding 5% Convertible Subordinated Notes
due June 15, 2003 (but not any extension, amendment, refinancing, renewal or
replacement thereof), pursuant to the terms thereof on the date of the
Securities Purchase Agreement, and any such payment or redemption shall not in
any manner constitute an Event of Default under this Note.
(9) Participation; Restrictions. In the case of any dividends
paid and distributions made to the holders of Common Stock (other than dividends
or distributions to which the provisions of Section 2(e)(i) are applicable), the
Holder shall be entitled to additional payments in amounts equal to the
dividends or distributions such holder would have received if the Holder had
converted this Note in full into Shares (without taking into account any
limitations or restrictions on the convertibility of this Note) immediately
prior to the record date for such dividend or distribution, or, if no such
record date is taken, immediately prior to the date as of which the record
holders of Common Stock are to be determined for such dividend or distribution.
Payments made pursuant to the previous sentence shall be made concurrently with
the dividend or distribution to the holders of Common Stock. While this Note is
outstanding, the Company shall not, directly or indirectly, redeem, repay, or
purchase any of the Company's capital stock without the prior express written
consent of the Holder (except for Approved Repurchases and the repayment or
redemption of the Notes in accordance with the terms thereof). While this Note
is outstanding, the Company shall not enter into any agreement which would limit
or restrict the Company's ability to perform under, or take any other voluntary
action to avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed by it under, this Note, the Securities
Purchase Agreement and the Registration Rights Agreement. While this Note is
outstanding, the Company shall not declare or pay any dividend on any of the
Company's capital stock, other than dividends of Common Stock with respect to
its Common Stock.
(10) Limitation on Number of Conversion Shares. The Company
shall not be obligated to issue any Shares upon conversion of the Notes if the
issuance of such Shares would exceed that number of Shares which the Company may
issue upon conversion of the Notes (the "EXCHANGE CAP") without breaching the
Company's obligations under the rules and regulations of the Principal Market,
except that such limitation shall not apply in the event that the Company
obtains the approval of its stockholders as required by the applicable rules of
the Principal Market (or any successor rule or regulation) for issuances of
Shares in excess of such amount. Until such approval is obtained, no purchaser
of the Notes pursuant to the Securities Purchase Agreement (the "PURCHASERS")
shall be issued, upon conversion of the Notes, Shares in an
16
amount greater than the product of (i) the Exchange Cap amount then in effect
multiplied by (ii) a fraction, the numerator of which is the principal amount of
the Notes issued to such Purchaser pursuant to the Securities Purchase Agreement
and the denominator of which is the aggregate principal amount of all the Notes
issued to the Purchasers pursuant to the Securities Purchase Agreement (the "CAP
ALLOCATION AMOUNT"). In the event that any Purchaser shall sell or otherwise
transfer any of such Purchaser's Notes, the transferee shall be allocated a pro
rata portion of such Purchaser's Cap Allocation Amount. In the event that any
holder of the Notes shall convert and exercise, as the case may be, all of such
holder's Notes into a number of Shares which, in the aggregate, is less than
such holder's Cap Allocation Amount, then the difference between such holder's
Cap Allocation Amount and the number of Shares actually issued to such holder
shall be allocated to the respective Cap Allocation Amounts of the remaining
holders of Notes on a pro rata basis in proportion to the number of Shares then
issuable under the Notes then held by each such holder.
(11) Vote to Change the Terms of the Notes. The written
consent of the Company and the holders representing a majority of the principal
amount then outstanding under the Notes shall be required for any change to the
Notes (including this Note) and upon receipt of such consent, each Note shall be
deemed amended thereby.
(12) Lost or Stolen Notes. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Note, and, in the case of loss, theft or destruction, of
an indemnification undertaking by the Holder to the Company and, in the case of
mutilation, upon surrender and cancellation of this Note, the Company shall
execute and deliver a new Note of like tenor and date; provided, however, the
Company shall not be obligated to re-issue a Note if the Holder
contemporaneously requests the Company to convert this Note into Shares as
permitted hereunder.
(13) Remedies, Characterizations, Other Obligations, Breaches
and Injunctive Relief. The remedies provided in this Note shall be cumulative
and in addition to all other remedies available under this Note, at law or in
equity (including a decree of specific performance and/or other injunctive
relief), no remedy contained herein shall be deemed a waiver of compliance with
the provisions giving rise to such remedy and nothing herein shall limit the
Holder's right to pursue actual damages for any failure by the Company to comply
with the terms of this Note. The Company covenants to the Holder that there
shall be no characterization concerning this instrument other than as expressly
provided herein. Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the Holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
17
(14) Specific Shall Not Limit General; Construction. No
specific provision contained in this Note shall limit or modify any more general
provision contained herein. This Note shall be deemed to be jointly drafted by
the Company and all Purchasers and shall not be construed against any person as
the drafter hereof.
(15) Failure or Indulgence Not Waiver. No failure or delay on
the part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.
(16) Notice. Whenever notice is required to be given under
this Note, unless otherwise provided herein, such notice shall be given in
accordance with Section 8(f) of the Securities Purchase Agreement.
(17) Transfer of this Note. The Holder may assign or transfer
some or all of its rights hereunder, subject to compliance with the 1933 Act (as
defined in the Securities Purchase Agreement) and the provisions of Section 2(f)
of the Securities Purchase Agreement without the consent of the Company.
(18) Payment of Collection, Enforcement and Other Costs. If:
(a) this Note is placed in the hands of an attorney for collection or
enforcement or is collected or enforced through any legal proceeding; or (b) an
attorney is retained to represent the Holder in any bankruptcy, reorganization,
receivership of the Company or other proceedings affecting Company creditors'
rights and involving a claim under this Note, then the Company shall pay the
costs incurred by the Holder for such collection, enforcement or action,
including but not limited to reasonable attorneys' fees and disbursements.
(19) Cancellation. After all principal and other amounts at
any time owed under this Note have been paid in full or converted into Shares in
accordance with the terms hereof, this Note shall automatically be deemed
canceled, shall be surrendered to the Company for cancellation and shall not be
reissued.
(20) Note Exchangeable for Different Denominations. This Note
is exchangeable, upon the surrender hereof by the Holder at the principal office
of the Company, for a new Note or Notes containing the same terms and conditions
and representing in the aggregate the Principal, and each such new Note will
represent such portion of such Principal as is designated by the Holder at the
time of such surrender. The date the Company initially issues this Note will be
deemed to be the "Issuance Date" hereof regardless of the number of times a new
Note shall be issued.
(21) Waiver of Notice. To the extent permitted by law, the
Company hereby waives demand, notice, protest and all other demands and notices
in connection with the
18
delivery, acceptance, performance, default or enforcement of this Note and the
Securities Purchase Agreement.
(22) Governing Law. This Note shall be construed and enforced
in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal
laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other
country or jurisdiction) that would cause the application of the laws of any
jurisdiction or country other than the State of New York. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Note and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
(23) Reissuance of Notes. Subject to Section 2(c)(vii), in the
event of a conversion or redemption pursuant to this Note of less than all of
the Principal, the Company shall promptly cause to be issued and delivered to
the Holder, upon tender by the Holder of this Note, a new Note of like tenor
representing the remaining Principal that has not been so converted or redeemed.
The date the Company issued this Note shall be the "Issuance Date" hereof
regardless of the number of times a new Note shall be issued.
(24) Effect of Redemption or Conversion. Upon payment of the
Redemption Price, the Change of Control Redemption Price, or the amount provided
for in Section 1(a), each in accordance with the terms hereof with respect to
any portion of the principal of this Note, or delivery of Shares upon conversion
of any portion of the principal of this Note in accordance with the terms
hereof, such portion of the principal of this Note shall be deemed paid in full
and shall no longer be deemed outstanding for any purpose.
(25) Payment Set Aside. To the extent that the Company makes a
payment or payments to the Holder hereunder or the Holder enforces or exercises
its rights hereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
by a
19
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, U.S. state or federal law, common law or
equitable cause of action), then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
(26) Certain Defined Terms. For purposes of this Note, the
following terms shall have the following meanings:
"ADDITIONAL AMOUNT" means the result of the following
formula: (.05)(N/365) (P).
"APPROVED REPURCHASES" means repurchases by the Company
of the outstanding Shares for a purchase price of not more
than $5,000,000 in the aggregate; pursuant to a stock
repurchase program that was approved by the Board of Directors
of the Company and was publicly announced on June 13, 2002.
"APPROVED STOCK PLAN" means any employee benefit plan
that has been approved by the Board of Directors of the
Company prior to the date of the Securities Purchase
Agreement, pursuant to which the Company's securities may be
issued to any consultant, employee, officer or director for
services provided to the Company.
"BANKRUPTCY LAW" means Title 11, U.S. Code, or any
similar federal or state law for the relief of debtors.
"BUSINESS DAY" means any day other than Saturday, Sunday
or other day on which commercial banks in the city of New York
are authorized or required by law to remain closed.
"CALENDAR QUARTER" means each of (w) the period
beginning on and including January 1 and ending on and
including March 31, (x) the period beginning on and including
April 1 and ending on and including June 30, (y) the period
beginning on and including July 1 and ending on and including
September 30, and (z) the period beginning on and including
October 1 and ending on and including December 31.
"COMMON STOCK" means (A) the Company's common stock,
$0.0017 par value per share, and (ii) any capital stock
resulting from a reclassification of such common stock.
"CONVERSION AMOUNT" means the principal amount of this
Note to be converted, redeemed or otherwise with respect to
which this determination is being made.
20
"CONVERSION PRICE" means, as of any Conversion Date or
other date of determination, $2.32, subject to adjustment as
provided herein.
"CONVERTIBLE SECURITIES" means any stock or securities
(other than Options) directly or indirectly convertible into
or exchangeable or exercisable for Shares.
"CUSTODIAN" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
"DOLLARS" or "$" means United States Dollars.
"EXEMPTED ISSUANCES" means: (A) the grant or sale of
Options to employees, directors and consultants under any
employee benefit plan approved by the Board of Directors of
the Company after the Issuance Date, provided that any such
Option has an exercise price per Share at least equal to the
fair market value of the Common Stock on the date of such
grant or sale (as reasonably determined by the Board of
Directors of the Company) and that the aggregate number of
Shares covered by any such Options granted or sold in any
12-month period does not exceed 1.5% of the number of
outstanding Shares on the day immediately preceding the
commencement of such 12-month period; (B) the grant or sale of
Options to employees, directors and consultants under an
Approved Stock Plan, and in effect on the date of the
Securities Purchase Agreement; (C) Shares issued or deemed to
have been issued upon the conversion, exchange or exercise of
any Option or Convertible Security outstanding on the date
prior to the Issuance Date and set forth in Schedule 3(c) of
the Securities Purchase Agreement, provided that the terms of
such Option or Convertible Security are not amended on or
after the Issuance Date; and (D) Shares issued or deemed to
have been issued by the Company upon conversion of the Notes.
"ISSUANCE DATE" means the original date of issuance of
this Note pursuant to the Securities Purchase Agreement,
regardless of any exchange or replacement hereof.
"MATURITY DATE" means the date which is the five (5)
year anniversary of the Issuance Date, as extended at the
option of the Holder in the event that an Event of Default
shall have occurred and be continuing or any event shall have
occurred and be continuing which with the passage of time and
failure to cure would result in an Event of Default.
"N" means the number of days from, but excluding, the
last Interest Date with respect to which has been paid by the
Company on this Note (or the Issuance Date, in the event no
Interest has been paid on this Note) through
21
and including the Conversion Date, the Maturity Date or other
date of determination, as the case may be, for which such
determination is being made.
"NOTES" means the convertible notes originally issued by
the Company pursuant to the Securities Purchase Agreement and
all convertible notes issued in exchange therefore or
replacement thereof.
"OPTIONS" means any rights, warrants or options to
subscribe for or purchase Shares or Convertible Securities.
"P" means the principal amount of this Note to be
converted, redeemed or otherwise with respect to which the
determination of the Additional Amount is being made.
"PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any
department or agency thereof or any other legal entity.
"PRINCIPAL" means the outstanding principal amount of
this Note as of any date of determination.
"PRINCIPAL MARKET" means the Nasdaq National Market, if
the Common Stock is traded thereon; the Nasdaq SmallCap Market
if the Common Stock is traded thereon; or, if the Common Stock
is not traded on the Nasdaq Stock Market, then principal
securities exchange or trading market for the Common Stock.
"REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement among the Company and the
initial holder of the Notes relating to the filing of a
registration statement covering the resale of the Shares
issuable upon conversion of the Notes, as such agreement may
be amended from time to time as provided in such agreement.
"SEC" means the United States Securities and Exchange
Commission.
"SECURITIES PURCHASE AGREEMENT" means the securities
purchase agreement dated June 1, 2003 among the Company and
the buyers named therein pursuant to which this Note was
originally issued, as such agreement may be amended from time
to time as provided therein.
"SHARES" means shares of Common Stock.
22
"WEIGHTED AVERAGE PRICE" means, for any security as of
any date, the dollar volume-weighted average price for such
security on the Principal Market during the period beginning
at 9:30 a.m. New York Time (or such other time as the
Principal Market publicly announces is the official open of
trading), and ending at 4:00 p.m. New York Time (or such other
time as the Principal Market publicly announces is the
official close of trading) as reported by Bloomberg Financial
Markets ("Bloomberg") through its "Volume at Price" functions,
or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the
over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30 a.m. New
York Time (or such other time as the Principal Market publicly
announces is the official open of trading), and ending at 4:00
p.m. New York Time (or such other time as the Principal Market
publicly announces is the official close of trading) as
reported by Bloomberg, or, if no dollar volume-weighted
average price is reported for such security by Bloomberg for
such hours, the average of the highest closing bid price and
the lowest closing ask price of any of the market makers for
such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Weighted Average Price cannot be
calculated for such security on such date on any of the
foregoing bases, the Weighted Average Price of such security
on such date shall be the fair market value as mutually
determined by the Company and the holders of Notes
representing a majority of the aggregate principal amount of
the Notes then outstanding. If the Company and the holders of
the Notes representing a majority of the aggregate principal
amount of the Notes then outstanding are unable to agree upon
the fair market value of the Common Stock, then such dispute
shall be resolved pursuant to Section 2(c)(iii) with the term
"Weighted Average Price" being substituted for the term
"Conversion Price." All such determinations to be
appropriately adjusted for any stock dividend, stock split,
stock combination or other similar transaction during any
period during which the Weighted Average Price is being
determined.
* * * * * *
23
IN WITNESS WHEREOF, the Company has caused this Note to be signed by
-----------------, its -------------------------------, as of
-------------------, 2003.
MRV COMMUNICATIONS, INC.
By:
---------------------------------
Name:
Title:
EXHIBIT I
MRV COMMUNICATIONS, INC.
CONVERSION NOTICE
Reference is made to the Convertible Note (the "NOTE") of MRV
Communications, Inc., a Delaware corporation (the "COMPANY"). In accordance with
and pursuant to the Note, the undersigned hereby elects to convert the
Conversion Amount (as defined in the Note) of the Note indicated below into
shares of Common Stock, par value $0.0017 per share (the "COMMON STOCK"), of the
Company, as of the date specified below.
Date of Conversion:
----------------------------------------------------
Aggregate Conversion Amount to be converted:
---------------------------
Please confirm the following information:
Conversion Price:
------------------------------------------------------
Number of shares of Common Stock to be issued:
-------------------------
Please issue the Common Stock into which the Note is being converted in the
following name and to the following address:
Issue to:
--------------------------------------------------------------
Facsimile Number:
------------------------------------------------------
Authorization:
---------------------------------------
By:
-----------------------------------------
Title:
--------------------------------------
Dated:
-----------------------------------------------
DTC Participant Number and Name (if electronic book entry transfer):
---
Account Number (if electronic book entry transfer):
--------------------
ACKNOWLEDGMENT
The Company hereby acknowledges this Conversion Notice and hereby
directs [TRANSFER AGENT] to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated ___________ ___,
200_ from the Company and acknowledged and agreed to by [TRANSFER AGENT].
MRV COMMUNICATIONS, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
EXHIBIT C
Based on the foregoing and subject to other limitations, assumptions and
qualifications set forth below, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and qualified to do
business and in good standing as a foreign corporation in the State of
California. The Company has the requisite corporate power and authority to
conduct the business, and to own, lease and operate its properties, as described
in the Company's Annual Report on Form 10-K for the year ended December 31,
2002.
2. The Company (a) has the corporate power to execute, deliver and perform
its obligations under the Transaction Documents, (b) has taken all corporate
action necessary to authorize the execution, delivery and performance of the
Transaction Documents, and (c) has duly executed and delivered the Transaction
Documents. Each of the Transaction Documents is a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
3. The issuance and sale of the Convertible Notes have been duly
authorized. As of the date hereof, the Conversion Shares are duly authorized
and, when issued in accordance with the terms of the Securities Purchase
Agreement and the Convertible Notes, the Conversion Shares will be validly
issued, fully paid and non-assessable. The stockholders of the Company have no
preemptive rights with respect to the issuance of the Conversion Shares under
any statute or the Company's Certificate of Incorporation or By-laws.
4. As of the date hereof, the authorized capital stock of the Company
consists of (i) 160,000,000 shares of Common Stock, par value $0.0017 per share,
and (ii) 1,000,000 shares of Preferred Stock, par value $0.01 per share, of
which no shares are issued and outstanding.
5. Subject to the accuracy of the Buyers' representations in Section 2 of
the Securities Purchase Agreement, it is not necessary to register the Notes or
the Conversion Shares under the Securities Act of 1933 in connection with the
offer and issuance of the Conversion Shares to the Buyer under the circumstances
contemplated by the Stock Purchase Agreement.
6. Except for the notification of the Nasdaq National Market, the filing
with the SEC of a Form D as required under Regulation D and the filing with the
SEC of a registration statement as required by the Registration Rights
Agreement, the execution and delivery by the Company of the Transaction
Documents, and the performance by the Company of its obligations under the
Transaction Documents, do not require the Company to obtain any approval by or
make any filing with any governmental authority under the General Corporation
Law of the State of Delaware or any statute, rule, or regulation of the State of
California or the United States.
7. The execution, delivery and performance by the Company of the
Transaction Documents, the consummation by the Company of the transactions
contemplated thereby and the compliance by the Company with the terms thereof do
not (a) violate or constitute a default
under (i) the Certificate of Incorporation or the By-laws of the Company, or
(ii) any agreement, note, lease, mortgage, deed or other instrument listed as an
exhibit to the Company's Annual Report on Form 10-K for the year ended December
31, 2002, its Quarterly Report on Form 10-Q for the quarter ended March 31,
2003, or any other filing by the Company with the SEC since December 31, 2002;
or (b) result in any violation of the General Corporation Law of the State of
Delaware or any applicable statute, rule, or regulation of the State of
California or the United States.
8. To our knowledge, at the date of this opinion letter, there is no
action or proceeding pending before any court, governmental agency or
arbitrator, or overtly threatened in writing, against the Company, except as
disclosed in the Company's filings with the Securities and Exchange Commission
filed at least 10 days prior to the date of the Purchase Agreement. In rendering
the foregoing opinion, please note that we have not conducted a docket search in
any jurisdiction with respect to litigation that may be pending against the
Company or any of its Subsidiaries or officers or directors, nor have we
undertaken any further inquiry, beyond obtaining the Officers Certificate.
9. The Company is not an "investment company" or an entity controlled by
an "investment company," as such terms are defined in the Investment Company Act
of 1940.
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of June 1,
2003 by and among MRV Communications, Inc., a Delaware corporation, with
headquarters located at 00000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000 (the
"COMPANY"), and the undersigned buyers (each, a "BUYER" and collectively, the
"BUYERS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyers convertible notes
of the Company ( the "NOTES"), which will be convertible into shares of the
Company's common stock, $0.0017 par value per share (the "COMMON STOCK") (as
converted, the "CONVERSION SHARES"), in accordance with the terms of the Notes;
B. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 ACT"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Buyers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTOR" means a Buyer, any permitted transferee or
assignee thereof to whom a Buyer assigns its rights under this Agreement and who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9 and any transferee or assignee thereof to whom a transferee or
assignee assigns its rights under this Agreement and who agrees to become bound
by the provisions of this Agreement in accordance with Section 9.
b. "PERSON" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a governmental or any department or agency thereof.
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis ("RULE 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means (i) the Conversion Shares
issued or issuable upon conversion of the Notes and (ii) any shares of capital
stock issued or issuable with respect to the Conversion Shares or the Notes as a
result of any stock split, stock dividend, recapitalization, exchange or similar
event or otherwise, without regard to any limitations on conversions of Notes.
e. "REGISTRATION STATEMENT" means a registration statement or
registration statements of the Company filed under the 1933 Act covering the
Registrable Securities.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration.
(i) Mandatory Registration. The Company shall
prepare, and, as soon as practicable but in no event later than 30 days
after the Closing Date (as defined in the Securities Purchase
Agreement) (the "FILING DEADLINE"), file with the SEC a Registration
Statement on Form S-3 covering the resale of all of the Registrable
Securities. In the event that Form S-3 is unavailable for such a
registration, the Company shall use such other form as is available for
such a registration, subject to the provisions of Section 2(d). The
Registration Statement prepared pursuant hereto shall register for
resale at least that number of shares of Common Stock equal to 100% of
the number of Conversion Shares issuable upon conversion of all the
outstanding Notes (without regard to any limitations on the conversion
thereof) as of the second trading day immediately preceding the date
the Registration Statement is initially filed with the SEC, subject to
adjustment as provided in Section 2(e). The Company shall use its best
efforts to have the Registration Statement declared effective by the
SEC as soon as practicable, but in no event later than the date which
is 90 days after the Closing Date (the "EFFECTIVENESS DEADLINE").
b. Allocation of Registrable Securities. The initial number of
Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such
Investor's Registrable Securities, each transferee shall be allocated a pro rata
portion of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities covered by such Registration Statement
shall be allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement.
2
c. Legal Counsel. Subject to Section 5 hereof, the Buyers
holding a majority of the Registrable Securities shall have the right to select
one legal counsel to review and oversee any offering pursuant to this Section 2
("LEGAL COUNSEL"), which shall be Xxxxxx Xxxxxx Xxxxx Xxxxxxxx or such other
counsel as thereafter designated by the holders of a majority of the Registrable
Securities. The Company shall reasonably cooperate with Legal Counsel in
performing the Company's obligations under this Agreement.
d. Ineligibility for Form S-3. In the event that Form S-3 is
not available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form reasonably acceptable to the holder of a
majority of the Registrable Securities and (ii) undertake to register the
Registrable Securities on Form S-3 as soon as such form is available, provided
that the Company shall maintain the effectiveness of the Registration Statement
then in effect until such time as a Registration Statement on Form S-3 covering
the Registrable Securities has been declared effective by the SEC.
e. Sufficient Number of Shares Registered. In the event the
number of shares available under a Registration Statement filed pursuant to
Section 2(a) is insufficient to cover all of the Registrable Securities required
to be covered by such Registration Statement or an Investor's allocated portion
of the Registrable Securities pursuant to Section 2(b), the Company shall amend
the Registration Statement, or file a new Registration Statement (on the short
form available therefor, if applicable), or both, so as to cover at least 100%
of the number of such Registrable Securities as of the trading day immediately
preceding the date of the filing of such amendment or new Registration
Statement, in each case, as soon as practicable, but in any event not later than
fifteen (15) days after the necessity therefor arises. The Company shall use its
best efforts to cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof. For purposes of
the foregoing provision, the number of shares available under a Registration
Statement shall be deemed "insufficient to cover all of the Registrable
Securities" if at any time the number of Registrable Securities issued or
issuable upon conversion of the Notes covered by such Registration Statement is
greater than the number of shares of Common Stock available for resale under
such Registration Statement. The calculation set forth in the foregoing sentence
shall be made without regard to any limitations on the conversion of the Notes
and such calculation shall assume that the Notes are then convertible into
shares of Common Stock at the then prevailing Conversion Rate (as defined in the
Notes), if applicable.
f. Effect of Failure to File and Obtain and Maintain
Effectiveness of Registration Statement. If (i) a Registration Statement
covering all the Registrable Securities and required to be filed by the Company
pursuant to this Agreement is not (A) filed with the SEC on or before the Filing
Deadline or (B) declared effective by the SEC on or before the Effectiveness
Deadline or (ii) on any day after the Registration Statement has been declared
effective by the SEC sales of all the Registrable Securities required to be
included on such Registration Statement cannot be made (other than during an
Allowable Grace Period (as defined in Section 3(t))) pursuant to the
Registration Statement (including, without limitation, because of a failure to
keep the Registration Statement effective, to disclose such information as is
necessary for sales to be made pursuant to the Registration Statement or to
register sufficient shares of
3
Common Stock), then, as partial relief for the damages to any holder by reason
of any such delay in or reduction of its ability to sell the underlying shares
of Common Stock (which remedy shall not, except as described below in this
Section 2(f), be exclusive of any other remedies under the Transaction
Documents, available at law or in equity), the Company shall pay to each holder
of Notes an amount in cash equal to the product of (i) the principal amount of
the Notes held by each holder multiplied by (ii) the product of (A) 0.000667
multiplied by (B) the sum (without duplication) of (x) the number of days after
the Filing Deadline that such Registration Statement is not filed with the SEC,
plus (y) the number of days after the applicable Effectiveness Deadline that the
Registration Statement is not declared effective by the SEC, plus (z) the number
of days after the Registration Statement has been declared effective by the SEC
that such Registration Statement is not available (other than during an
Allowable Grace Period) for the sale of at least all the Registrable Securities
required to be included on such Registration Statement pursuant to Section 2(e).
The payments to which a holder shall be entitled pursuant to this Section 2(f)
are referred to herein as "REGISTRATION DELAY PAYMENTS." Registration Delay
Payments shall be paid on the earlier of (I) the last day of the calendar month
during which such Registration Delay Payments are incurred and (II) the third
Business Day after the event or failure giving rise to the Registration Delay
Payments is cured. In the event the Company fails to make Registration Delay
Payments in a timely manner, such Registration Delay Payments shall bear
interest at the rate of 2.0% per month (prorated for partial months) until paid
in full. In the event the Company files, by the Filing Deadline, a Registration
Statement coving all the Registrable Securities and required to be filed
pursuant to this Agreement and the Company uses its reasonable best efforts to
cause such Registration Statement to be declared effective as soon as
practicable, but such Registration Statement is not declared effective on or
before the Effectiveness Deadline, the holders of the Notes shall not be
entitled to any remedies, under the Transaction Documents, at law or in equity,
due to such failure of the Registration Statement to be declared effective,
other than the Registration Delay Payments (including any interest accruing
thereon), for a period of 30 days following the Effectiveness Deadline, after
which period such Registration Delay Payments shall no longer be exclusive of
any other remedies available under the Transaction Documents, at law or in
equity.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to file a
Registration Statement with the SEC pursuant to Section 2(a) or 2(e), the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the applicable Registrable Securities
(but in no event later than the applicable Filing Deadline) and use its best
efforts to cause such Registration Statement relating to the Registrable
Securities to become effective as soon as practicable after such filing (but in
no event later than the applicable Effectiveness Deadline). The Company shall
keep each Registration Statement effective pursuant to Rule 415 at all times
until the earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or successor thereto) promulgated under the
1933 Act or (ii) the date on which the Investors shall have sold all the
Registrable Securities
4
covered by such Registration Statement (the "REGISTRATION PERIOD"). Such
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading. The term "best efforts" shall mean, among other
things, that the Company shall submit to the SEC, within two (2) Business Days
(as defined in the Notes) after the Company learns that no review of a
particular Registration Statement will be made by the staff of the SEC or that
the staff has no further comments on the Registration Statement, as the case may
be, a request for acceleration of effectiveness of such Registration Statement
to a time and date not later than 48 hours after the submission of such request.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company filing a report on Form 10-K, Form
10-Q or Form 8-K or any analogous report under the Securities Exchange Act of
1934, as amended (the "1934 ACT"), the Company shall have incorporated such
report by reference into the Registration Statement, if applicable, or shall
file such amendments or supplements with the SEC on the same day on which the
1934 Act report is filed which created the requirement for the Company to amend
or supplement the Registration Statement.
c. The Company shall (A) permit Legal Counsel to review and
comment upon (i) the initial Registration Statement at least five (5) days prior
to its filing with the SEC and (ii) all other Registration Statements and all
amendments and supplements to all Registration Statements (except for Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K and any similar or successor reports) within a reasonable number of days
prior to their filing with the SEC, and (B) not file any document, registration
statement, amendment or supplement described in the foregoing clause (A) in a
form to which Legal Counsel reasonably objects. The Company shall not submit a
request for acceleration of the effectiveness of a Registration Statement or any
amendment or supplement thereto without the prior approval of Legal Counsel,
which consent shall not be unreasonably withheld. The Company shall furnish to
Legal Counsel, without charge, (i) any correspondence from the SEC or the staff
of the SEC to the Company or its representatives relating to any Registration
Statement, (ii) promptly after the same is prepared and filed with the SEC, one
copy of any Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, and all exhibits and (iii) upon the effectiveness of any Registration
Statement, one copy of the prospectus included in such
5
Registration Statement and all amendments and supplements thereto. The Company
shall reasonably cooperate with Legal Counsel in performing the Company's
obligations pursuant to this Section 3.
d. The Company shall furnish to each Investor whose
Registrable Securities are included in any Registration Statement, without
charge, (i) promptly after the same is prepared and filed with the SEC, at least
one copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, all exhibits and each preliminary prospectus, (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the prospectus
included in such Registration Statement and all amendments and supplements
thereto (or such other number of copies as such Investor may reasonably request)
and (iii) such other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to time in order
to facilitate the disposition of the Registrable Securities owned by such
Investor.
e. The Company shall use its best efforts to (i) register and
qualify, unless an exemption from registration and qualification applies, the
resale by the Investors of the Registrable Securities covered by a Registration
Statement under such other securities or "blue sky" laws of all the states of
the United States, (ii) prepare and file in those jurisdictions, such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(e), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction.
The Company shall promptly notify Legal Counsel and each Investor who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
f. The Company shall notify Legal Counsel and each Investor in
writing of the happening of any event, as promptly as practicable after becoming
aware of such event, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission 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 (provided that in no event shall such
notice contain any material, nonpublic information), and promptly prepare a
supplement or amendment to such Registration Statement to correct such untrue
statement or omission, and deliver ten (10) copies of such supplement or
amendment to Legal Counsel and each Investor (or such other number of copies as
Legal Counsel or such Investor may reasonably request). The Company shall also
promptly notify Legal Counsel and each Investor in writing (i) when a prospectus
or any prospectus supplement or post-effective amendment has been filed, and
when a Registration Statement or
6
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and each Investor by facsimile
on the same day of such effectiveness and by overnight mail), (ii) of any
request by the SEC for amendments or supplements to a Registration Statement or
related prospectus or related information, and (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify Legal Counsel and each Investor who
holds Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.
h. At the request of the Investors holding a majority in
interest of the Registrable Securities included in the Registration Statement to
which the request relates, the Company shall furnish to the Investors, on the
date of the effectiveness of the Registration Statement and thereafter from time
to time on such dates as the Investors may reasonably request (i) a letter,
dated such date, from the Company's independent certified public accountants in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
Investors, provided the Investors provide the accountants providing such letter
with such written representations and legal opinions as such accountants may
reasonably request to satisfy the requirements of Statement on Auditing
Standards ("SAS") 72, as amended by SAS-86, and (ii) an opinion, dated as of
such date, of counsel representing the Company for purposes of such Registration
Statement, in form, scope and substance as is customarily given in an
underwritten public offering, addressed to the Investors, provided that the
first such letter and opinion shall be furnished at the expense of the Company
and any subsequent such letter and opinion shall be furnished at the expense of
the Investors.
i. Upon the written request of any Investor, the Company shall
make available for inspection during regular business hours by (i) such
Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents
retained by the Investors (collectively, the "INSPECTORS"), all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall agree to hold in strict confidence
and shall not make any disclosure (except to an Investor) or use of any Record
or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement or is otherwise required
under the 1933 Act, (b) the release of such Records is ordered pursuant to a
final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other
7
agreement of which the Inspector has knowledge. Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential.
j. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
k. The Company shall use its best efforts to secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market, or if, despite the
Company's best efforts to satisfy the preceding clause, the Company is
unsuccessful in satisfying the preceding clause, to secure the inclusion for
quotation on The Nasdaq SmallCap Market for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. ("NASD") as such with respect to such Registrable Securities. The Company
shall pay all fees and expenses in connection with satisfying its obligation
under this Section 3(k).
l. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, facilitate
the timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the Investors may reasonably request and
registered in such names as the Investors may request.
m. The Company shall provide a transfer agent and registrar of
all such Registrable Securities not later than the effective date of the
applicable Registration Statement.
n. If requested by an Investor, the Company shall (i) as soon
as practicable incorporate in a prospectus supplement or post-effective
amendment such information as an Investor requests to be included therein
relating to the sale and distribution of Registrable Securities, including,
without limitation, information with respect to the number of Registrable
Securities being offered or sold, the purchase price being paid therefor and any
other terms of the offering of the Registrable Securities to be sold in such
offering; (ii) as soon as practicable make all required filings of such
prospectus supplement or post-effective amendment after being
8
notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and (iii) as soon as practicable, supplement or make
amendments to any Registration Statement if reasonably requested by an Investor
of such Registrable Securities.
o. The Company shall use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
in the United States as may be necessary to consummate the disposition of such
Registrable Securities.
p. The Company shall make generally available to its security
holders as soon as practical, but not later than 90 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 0000 Xxx) covering a twelve-month period
beginning after, but not later than the first day of the Company's fiscal
quarter next following, the effective date of the Registration Statement.
q. The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.
r. Within two (2) Business Days after a Registration Statement
which covers applicable Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel for the Company to
deliver, to the transfer agent for such Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.
s. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
t. Notwithstanding anything to the contrary in Section 3(f),
at any time after the applicable Registration Statement has been declared
effective by the SEC, the Company may delay the disclosure of material
non-public information concerning the Company the disclosure of which at the
time is not, in the good faith opinion of the Board of Directors of the Company
and its counsel, in the best interest of the Company and, in the opinion of
counsel to the Company, otherwise required (a "GRACE PERIOD"); provided, that
the Company shall promptly (i) notify the Investors in writing of the existence
of material non-public information giving rise to a Grace Period (provided that
in each notice the Company will not disclose the content of such material
non-public information to the Investors) and the date on which the Grace Period
will begin, and (ii) notify the Investors in writing of the date on which the
Grace Period ends; and, provided further, that no Grace Period shall exceed 20
consecutive days and during any 365 day period such Grace Periods shall not
exceed an aggregate of 45 days and the first day of any Grace Period must be at
least two (2) trading days after the last day of any prior Grace Period (an
"ALLOWABLE GRACE PERIOD"). For purposes of determining the length of a Grace
Period above, the Grace Period shall begin on and include the date the holders
receive the notice referred to in clause (i) and shall end on and include the
later of the date the holders receive the notice referred to in clause (ii) and
the date referred to in such notice. The provisions of Section 3(g) hereof
9
shall not be applicable during the period of any Allowable Grace Period. Upon
expiration of the Grace Period, the Company shall again be bound by the first
sentence of Section 3(f) with respect to the information giving rise thereto
unless such material non-public information is no longer applicable.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) Business Days prior to the first
anticipated filing date of a Registration Statement, the Company shall notify
each Investor in writing of the information, if any, the Company requires from
each such Investor if such Investor elects to have any of such Investor's
Registrable Securities included in such Registration Statement (an "INFORMATION
REQUEST"). It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company, in response to an Information Request, such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of 3(f) or receipt of notice that no supplement or amendment is
required. Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to deliver unlegended shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the Investor's receipt of
a notice from the Company of the happening of any event of the kind described in
Section 3(g) or the first sentence of 3(f) and for which the Investor has not
yet settled.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company shall be paid by the Company.
The Company shall also reimburse the Investors for the fees and disbursements of
Legal Counsel, subject to the limitation set forth in Section 4(h) of the
Securities Purchase
10
Agreement, in connection with registration, filing or qualification pursuant to
Sections 2 and 3 of this Agreement.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Investor, the
directors, officers, partners, employees, agents, representatives of, and each
Person, if any, who controls any Investor within the meaning of the 1933 Act or
the 1934 Act (each, an "INDEMNIFIED PERSON"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, reasonable
attorneys' fees, amounts paid in settlement or expenses, joint or several,
(collectively, "CLAIMS") incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or the SEC, whether pending or threatened, whether or
not an indemnified party is or may be a party thereto ("INDEMNIFIED DAMAGES"),
to which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any jurisdiction in
which Registrable Securities are offered ("BLUE SKY FILING"), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which they were made, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus if
used prior to the effective date of such Registration Statement, or contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, not misleading, (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement or (iv) any material violation of this Agreement (the
matters in the foregoing clauses (i) through (iv) being, collectively,
"VIOLATIONS"). Subject to Section 6(c), the Company shall reimburse the
Indemnified Persons, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified
Person arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by such
Indemnified Person for such Indemnified Person expressly for use in connection
with the preparation of the Registration Statement or any such amendment thereof
or supplement thereto, if such prospectus was timely made available by the
Company pursuant to Section 3(d); (ii) with respect to any preliminary
prospectus, shall not inure to the benefit of any such person from whom the
person asserting any such Claim purchased the Registrable Securities that are
the
11
subject thereof (or to the benefit of any person controlling such person) if the
untrue statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or supplemented, if
such prospectus was timely made available by the Company pursuant to Section
3(d), and the Indemnified Person was promptly advised in writing not to use the
incorrect prospectus prior to the use giving rise to a violation and such
Indemnified Person, notwithstanding such advice, used it; (iii) shall not be
available to the extent such Claim is based on a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the
Company, if such prospectus was timely made available by the Company pursuant to
Section 3(d); and (iv) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act (each an
"INDEMNIFIED PARTY"), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(c), such Investor will
reimburse any legal or other expenses reasonably incurred by an Indemnified
Party in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) and the
agreement with respect to contribution contained in Section 7 shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the net proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement
thereof, and
12
the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding a majority in interest of
the Registrable Securities included in the Registration Statement to which the
Claim relates. The Indemnified Party or Indemnified Person shall cooperate fully
with the indemnifying party in connection with any negotiation or defense of any
such action or Claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified Party
or Indemnified Person which relates to such action or Claim. The indemnifying
party shall keep the Indemnified Party or Indemnified Person fully apprized at
all times as to the status of the defense or any settlement negotiations with
respect thereto. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its prior written consent,
provided, however, that the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall, without the prior
written consent of the Indemnified Party or Indemnified Person, consent to entry
of any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such Claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
d. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
e. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
13
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no Person involved in the sale of Registrable Securities which Person is
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 0000 Xxx) in connection with such sale, shall be entitled to contribution
from any Person involved in such sale of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (ii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities pursuant to
such Registration Statement.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits
of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"), the
Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically
assignable by the Investors to any transferee of Registrable Securities having
an aggregate fair market value of at least $1,000,000 on the date of transfer
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such transfer or assignment; (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (a) the name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being transferred
or assigned; (iii) immediately following such transfer or assignment the
14
further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws; (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein; and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who then hold a majority of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the Registrable
Securities. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.
11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities, including, without limitation, by virtue of the fact that such
Person has the right to receive such Registrable Securities. If the Company
receives conflicting instructions, notices or elections from two or more Persons
with respect to the same Registrable Securities, the Company shall act upon the
basis of instructions, notice or election received from the registered owner of
such Registrable Securities.
b. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
MRV Communications, Inc.
00000 Xxxxxxxx Xxxxxx,
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxx
15
With a copy to:
Xxxxxxxxxxx and Xxxxxxxx LLP
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 310-552-5001
Attention: Xxxx Xxxxx, Esq.
If to Legal Counsel:
Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Telephone: 000-000-0000
Facsimile: 312-902-1061
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Xxxx X. Xxxx, Esq.
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached hereto, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers, or, in the case of a Buyer or other party named
above, to such other address and/or facsimile number and/or to the attention of
such other person as the recipient party has specified by written notice given
to each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C) by a
courier or overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or deposit with a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting the City of New York, borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the
16
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
e. This Agreement, the Securities Purchase Agreement and the
Notes constitute the entire agreement among the parties hereto with respect to
the subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the Securities Purchase Agreement and the Notes
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations to be made by the
Investors pursuant to this Agreement shall be made, unless otherwise specified
in this Agreement, by Investors holding a majority of the Registrable
Securities, determined as if all of the Notes then outstanding have been
converted into Registrable Securities without regard to any limitations on
17
conversion of the Notes. Any consent or other determination approved by
Investors holding a majority of the Registrable Securities shall be binding on
all Investors.
k. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any party.
l. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
* * * * * *
18
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
MRV COMMUNICATIONS, INC. DEUTSCHE BANK, AG LONDON BRANCH
By: /S/ Xxxx Xxxxx By: /S/ Xxxxx Xx
----------------------------- ------------------------------
Name: Xxxx Xxxxx Name: Xxxxx Xx
------------------------ ------------------------
Title: CEO Title: Authorized Signatory
---------------------- -----------------------
June 1, 2003
SCHEDULE OF BUYERS
INVESTOR ADDRESS INVESTOR'S LEGAL REPRESENTATIVES'
INVESTOR'S NAME AND FACSIMILE NUMBER ADDRESS AND FACSIMILE NUMBER
--------------- -------------------- ---------------------------------
Deutsche Bank, AG London Branch c/o Deutsche Bank AG Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
00 Xxxx 00xx Xxxxxx 000 X. Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxx Xxxxx Attention: Xxxxxxx X. Xxxxxxx, Esq.
Xxxxx Xx Xxxx X. Xxxx, Esq.
Phone: 000-000-0000 Telephone: (000) 000-0000
Fax: 000-000-0000 Facsimile: (000) 000-0000
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
ATTN:
-------------------------------
RE: MRV COMMUNICATIONS, INC.
Ladies and Gentlemen:
We are counsel to MRV Communications, Inc., a Delaware corporation (the
"COMPANY"), and have represented the Company in connection with that certain
Securities Purchase Agreement (the "PURCHASE AGREEMENT") entered into by and
among the Company and the buyers named therein (collectively, the "HOLDERS")
pursuant to which the Company issued to the Holders convertible notes (the
"NOTES"), convertible into shares of the Company's common stock, $0.0017 par
value per share (the "COMMON STOCK"). Pursuant to the Purchase Agreement, the
Company also has entered into a Registration Rights Agreement with the Holders
(the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company agreed,
among other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon conversion of the Notes, under the Securities Act of 1933, as amended (the
"1933 ACT"). In connection with the Company's obligations under the Registration
Rights Agreement, on ____________ ___, 200_, the Company filed a Registration
Statement on Form S-3 (File No. 333-_____________) (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "SEC") relating to
the Registrable Securities which names each of the Holders as a selling
stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:
----------------------------------
cc: [LIST NAMES OF HOLDERS]
60181216
