SECURITIES PURCHASE AGREEMENT
Exhibit 99.1
THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of March 15, 2006, 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 Investors
attached hereto as Exhibit A (individually, an “Investor” and collectively, the “Investors”).
BACKGROUND
A. The Company and each Investor are executing and delivering this Agreement in reliance upon
the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended
(the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States
Securities and Exchange Commission (the “SEC”) under the 1933 Act.
B. Each Investor, severally and not jointly, wishes to purchase, and the Company wishes to
sell, upon the terms and conditions stated in this Agreement, (i) that aggregate number of shares
of the Common Stock, par value $0.0017 per share, of the Company (the “Common Stock”), set forth
opposite such Investor’s name in column two (2) on the Schedule of Investors in Exhibit A
(which aggregate amount for all Investors together shall be 19,858,156 shares of Common Stock and
shall collectively be referred to herein as the “Common Shares”).
C. The Common Shares, issued pursuant to this Agreement are collectively are referred to
herein as the “Securities”.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are hereby acknowledged,
the Company and the Investors agree as follows:
ARTICLE I
DEFINITIONS
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the following
terms have the meanings indicated:
“Advice” has the meaning set forth in Section 6.5.
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such terms are used in
and construed under Rule 144 under the Securities Act.
“Agent” has the meaning set forth in Section 3.1(l).
“Agreement” has the meaning set forth in the Preamble.
“Best Efforts” means the efforts that a prudent person desirous of achieving a result would
use in similar circumstances to ensure that such result is achieved as expeditiously as practical;
provided, however, that an obligation to use Best Efforts under this Agreement does not require the
Company to dispose of or make any change to its business, expend any material funds or incur any
other material burden.
“Business Day” means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York or the City of Los Angeles are authorized or required by law to
remain closed.
“Closing” means the closing of the purchase and sale of the Securities pursuant to Section
2.1.
“Closing Date” means the date and time of the Closing and shall be 1:00 p.m., New York City
Time, on March 17, 2006 (or such other date and time as is mutually agreed to by the Company and
each Investor).
“Closing Price” means, for any date, the closing price per share of the Common Stock for such
date (or the nearest preceding date) on the primary Eligible Market or exchange or quotation system
on which the Common Stock is then listed or quoted.
“Company” has the meaning set forth in the Preamble.
“Company Counsel” means Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx, LLP, counsel to the Company.
“Common Shares” means an aggregate of 19,858,156 shares of Common Stock, which are being
issued and sold by the Company to the Investors at the Closing.
“Common Stock” means the common stock of the Company, par value $0.0017 per share.
“Common Stock Equivalents” means, collectively, Options and Convertible Securities.
“Convertible Securities” means any stock or securities (other than Options) convertible
into or exercisable or exchangeable for Common Stock.
“Disclosure Materials” has the meaning set forth in Section 3.1(g).
“Effective Date” means the date that the Registration Statement is first declared effective by
the SEC.
“Effectiveness Period” has the meaning set forth in Section 6.1(b).
“8-K Filing” has the meaning set forth in Section 4.5.
“Eligible Market” means any of the New York Stock Exchange, the American Stock Exchange, The
Nasdaq National Market or The Nasdaq Capital Market.
-2-
“Environmental Laws” has the meaning set forth in Section 3.1(cc).
“Event” has the meaning set forth in Section 6.1(c).
“Event Payments” has the meaning set forth in Section 6.1(c).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Excluded Events” has the meaning set forth in Section 6.1(c)(ii).
“Excluded Investors” means Xxxxx & Co., LLC and its Affiliates.
“Filing Date” means April 17, 2006.
“GAAP” has the meaning set forth in Section 3.1(g).
“Hazardous Materials” has the meaning set forth in Section 3.1(cc).
“Indemnified Party” has the meaning set forth in Section 6.4(c).
“Indemnifying Party” has the meaning set forth in Section 6.4(c).
“Insolvent” has the meaning set forth in Section 3.1(h).
“Intellectual Property Rights” has the meaning set forth in Section 3.1(t).
“Investor” has the meaning set forth in the Preamble.
“Lien” means any lien, charge, claim, security interest, encumbrance, right of first refusal
or other restriction.
“Losses” means any and all losses, claims, damages, liabilities, settlement costs and
expenses, including, without limitation and reasonable attorneys’ fees.
“Material Adverse Effect” means (i) a material adverse effect on the results of operations,
assets, business or financial condition of the Company and the Subsidiaries, taken as a whole on a
consolidated basis, or (ii) materially and adversely impair the Company’s ability to perform its
obligations under any of the Transaction Documents, provided, 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 Common Stock or (ii) changes in general economic conditions
or changes affecting the industry in which the Company operates generally (as opposed to
Company-specific changes) so long as such changes do not have a disproportionate effect on the
Company and its Subsidiaries taken as a whole. .
“Material Permits” has the meaning set forth in Section 3.1(v).
“Options” means any outstanding rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities.
-3-
“Person” means any individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, or joint stock company.
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without
limitation, or a partial proceeding, such as a deposition), whether commenced or threatened in
writing.
“Prospectus” means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the Registration Statement,
and all other amendments and supplements to the Prospectus including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
“Registrable Securities” means the Common Shares issued or issuable pursuant to the
Transaction Documents, together with any securities issued or issuable upon any stock split,
dividend or other distribution, recapitalization or similar event with respect to the foregoing.
“Registration Statement” means each registration statement required to be filed under Article
VI, including (in each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and
all material incorporated by reference or deemed to be incorporated by reference in such
registration statement.
“Regulation D” has the meaning set forth in the Preamble.
“Required Effectiveness Date” means 90 days after the Closing Date, or if the SEC reviews the
Registration Statement, 120 days after the Closing Date, provided that if the 90th day or
120th day, as applicable, falls on a day other than a Business Day, the Required
Effectiveness Date will be first Business Day thereafter.
“Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424, respectively,
promulgated by the SEC pursuant to the Securities Act, as such Rules may be amended from time to
time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same
effect as such Rule.
“SEC” means the Securities and Exchange Commission.
“SEC Reports” has the meaning set forth in Section 3.1(g).
“Securities” has the meaning set forth in the Preamble.
“Securities Act” has the meaning set forth in the Preamble.
“Shares” means shares of the Company’s Common Stock.
-4-
“Short Sales” has the meaning set forth in Section 3.2(h).
“Significant Subsidiary” has the meaning set forth for significant subsidiary in Rule 405
of Regulation C under the Securities Act.
“Subsidiary” means any direct or indirect subsidiary of the Company.
“Trading Day” means (a) any day on which the Common Stock is listed or quoted and traded on
its primary Trading Market, (b) if the Common Stock is not then listed or quoted and traded on any
Eligible Market, then a day on which trading occurs on the The Nasdaq National Market (or any
successor thereto), or (c) if trading ceases to occur on the The Nasdaq National Market (or any
successor thereto), any Business Day.
“Trading Market” means the The Nasdaq National Market or any other Eligible Market, or any
national securities exchange, market or trading or quotation facility on which the Common Stock is
then listed or quoted.
“Transaction Documents” means this Agreement, the schedules and exhibits attached hereto, and
the Transfer Agent Instructions.
“Transfer Agent” means American Stock and Transfer & Trust Co., or any successor transfer
agent for the Company.
“Transfer Agent Instructions” means, with respect to the Company, the Irrevocable Transfer
Agent Instructions, in the form of Exhibit D, executed by the Company and delivered to and
acknowledged in writing by the Transfer Agent
ARTICLE II
PURCHASE AND SALE
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at the Closing
the Company shall issue and sell to each Investor, and each Investor shall, severally and not
jointly, purchase from the Company, such number of Common Shares at the purchase price set forth
opposite such Investor’s name set forth opposite such Investor’s name on Exhibit A hereto under the
headings “Common Shares” and “Purchaser Price,” respectively. The date and time of the Closing and
shall be 1:00 p.m., New York City Time, on the Closing Date. The Closing shall take place at the
offices of the Company’s Counsel.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be delivered to each Investor the
following:
(i) A copy of, and written acknowledgment of receipt by the Company’s transfer agent of,
irrevocable instructions duly signed by an authorized signatory of the Company addressed to the
Company’s transfer agent instructing the transfer agent to deliver,
on an expedited basis, one or more stock certificates, free and clear of all restrictive and
other legends (except as expressly provided in Section 4.1(b) hereof), evidencing such number of
-5-
Common Shares set forth opposite such Investor’s name on Exhibit A hereto under the heading “Common
Shares,” registered in the name of such Investor;
(ii) a legal opinion of Company Counsel, in the form of Exhibit C, executed by such counsel
and delivered to the Investors; and
(iii) duly executed Transfer Agent Instructions acknowledged by the Company’s transfer agent.
(b) At the Closing, each Investor shall deliver or cause to be delivered to the Company the
purchase price set forth opposite such Investor’s name on Exhibit A hereto under the heading
“Purchase Price” in United States dollars and in immediately available funds, by wire transfer to
an account designated in writing to such Investor by the Company for such purpose.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby represents and warrants
to the Investors as follows (which representations and warranties shall be deemed to apply, where
appropriate, to each Subsidiary of the Company):
(a) Subsidiaries. Except for Subsidiaries that have not been disclosed because such omitted
Subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a
Significant Subsidiary of the Company as of December 31, 2005, the Company has no Subsidiaries
other than those listed in Schedule 3.1(a) hereto. Except as disclosed in Schedule 3.1(a) hereto,
the Company owns, directly or indirectly, all of the capital stock or comparable equity interests
of each Subsidiary free and clear of any Lien and all the issued and outstanding shares of capital
stock or comparable equity interest of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights.
(b) Organization and Qualification. Each of the Company and the Subsidiaries is an entity
duly organized, validly existing and is in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite legal authority to own and use
its properties and assets and to carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation of any of the provisions of its respective certificate or
articles of incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not, individually or in the aggregate have
or reasonably be expected to result in a Material Adverse Effect.
(c) Authorization; Enforcement. The Company has the requisite corporate authority to enter
into and to consummate the transactions contemplated by each of the
-6-
Transaction Documents to which
it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of each of the Transaction Documents to which it is a party by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been duly authorized by
all necessary action on the part of the Company and no further consent or action is required by the
Company, its Board of Directors or its stockholders. Each of the Transaction Documents to which it
is a party has been (or upon delivery will be) duly executed by the Company and is, or when
delivered in accordance with the terms hereof, will constitute, the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except as may be limited
by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the enforcement of creditors rights generally, and (ii) the effect of
rules of law governing the availability of specific performance and other equitable remedies.
(d) No Conflicts. The execution, delivery and performance of the Transaction Documents to
which it is a party by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby do not, and will not, (i) conflict with or violate any provision of
the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, (ii) conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice, lapse of time or
both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is bound, or affected,
except to the extent that such conflict, default, termination, amendment, acceleration or
cancellation right would not reasonably be expected to have a Material Adverse Effect, or (iii)
subject to the Company making the filings required a consequence of the transaction contemplated by
the Transaction Documents, result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority to which the Company
or a Subsidiary is subject (including, assuming the accuracy of the representations and warranties
of the Investors set forth in Section 3.2 hereof, federal and state securities laws and regulations
and the rules and regulations of any self-regulatory organization to which the Company or its
securities are subject, including all applicable Trading Markets), or by which any property or
asset of the Company or a Subsidiary is bound or affected, except to the extent that such violation
would not reasonably be expected to have a Material Adverse Effect.
(e) The Securities. The Shares are duly authorized and, when issued and paid for in
accordance with this Agreement will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens and will not be subject to preemptive or similar rights of stockholders.
(f) Capitalization. The aggregate number at February 28, 2006 of shares and type of
all authorized, issued and outstanding classes of capital stock, options and other securities of
the Company (whether or not presently convertible into or exercisable or exchangeable for shares of
capital stock of the Company) is set forth in Schedule 3.1(f) hereto All outstanding
shares of capital stock are duly authorized, validly issued, fully paid and nonassessable and
have been issued in compliance in all material respects with all applicable securities laws.
Except as
-7-
disclosed in Schedule 3.1(f) hereto, the Company did not have outstanding at
February 28, 2006 any other options, warrants, script rights to subscribe to, calls or commitments
of any character whatsoever relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or entered into any agreement giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. The issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any Person (other than
the Investors) and will not result in a right of any holder of securities to adjust the exercise,
conversion, exchange or reset price under such securities. To the knowledge of the Company, except
as disclosed in the SEC Reports and any Schedules filed with the SEC pursuant to Rule 13d-1 of the
Exchange Act by reporting persons or in Schedule 3.1(f) hereto, no Person or group of
related Persons beneficially owns (as determined pursuant to Rule 13d-3 under the Exchange Act), or
has the right to acquire, by agreement with or by obligation binding upon the Company, beneficial
ownership of in excess of 5% of the outstanding Common Stock.
(g) SEC Reports; Financial Statements. Except as set forth on Schedule
3.1(g), the Company has filed all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the 12 months preceding
the date hereof on a timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension . and has filed all
reports required to be filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the two years preceding the date hereof. Such reports
required to be filed by the Company under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, together with any materials filed or furnished by the Company
under the Exchange Act, whether or not any such reports were required being collectively referred
to herein as the “SEC Reports” and, together with this Agreement and the Schedules to this
Agreement, the “Disclosure Materials”). As of their respective dates, the SEC Reports filed by the
Company complied in all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the SEC promulgated thereunder, and none of the SEC
Reports, when filed by the Company, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply in all material respects
with applicable accounting requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial
statements, the notes thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP or may be condensed or summary statements, and fairly present in all
material respects the consolidated financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal, year-end audit
adjustments. All material agreements to which the Company or any Subsidiary is a party or to which
the property or assets of the Company or any Subsidiary are subject are included as part of
or identified in the SEC Reports, to the extent such agreements are required to be included
or identified pursuant to the rules and regulations of the SEC.
-8-
(h) Since the date of the latest audited financial statements included within the SEC Reports,
except as disclosed in the SEC Reports or in Schedule 3.1(h) hereto, (i) there has been no
event, occurrence or development that, individually or in the aggregate, has had or that would
result in a Material Adverse Effect, (ii) the Company has not incurred any material liabilities
other than (A) trade payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings made with the SEC,
(iii) the Company has not altered its method of accounting or the changed its auditors, except as
disclosed in its SEC Reports, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders, in their capacities as such, or
purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock
(except for repurchases by the Company of shares of capital stock held by employees, officers,
directors, or consultants pursuant to an option of the Company to repurchase such shares upon the
termination of employment or services), and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company stock-based plans. The
Company has not taken any steps to seek protection pursuant to any bankruptcy law nor does the
Company 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 to occur at the applicable Closing, will not be Insolvent (as defined below).
For purposes of this Section 3.1(h), “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), (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.
(i) Absence of Litigation. Except as disclosed in the SEC Reports, there is no
action, suit, claim, or proceeding, or, to the Company’s knowledge, 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, threatened against or affecting the Company or any of
its Subsidiaries that could, individually or in the aggregate, have a Material Adverse Effect.
(j) Compliance. Except as described in Schedule 3.1(j), neither the Company
nor any Subsidiary, except in each case as would not, individually or in the aggregate, reasonably
be expected to have or result in a Material Adverse Effect, (i) is in default under or in violation
of (and no event has occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received written notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or instrument to which
it is a party or by which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body,
or (iii) is or has been in violation of any statute, rule or regulation of any governmental
authority.
-9-
(k) Title to Assets. The Company and the Subsidiaries have good and marketable title
to all real property owned by them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property owned by them that is material
to the business of the Company and the Subsidiaries, in each case free and clear of all Liens,
except for Liens that do not, individually or in the aggregate, have or result in a Material
Adverse Effect and Liens for the payment of federal, state or other taxes, the payment of which is
neither delinquent nor subject to penalties. Any real property and facilities held under lease by
the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of
which the Company and the Subsidiaries are in material compliance.
(l) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of
its affiliates, nor any Person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in connection with the
offer or sale of the Securities. The Company shall pay, and hold each Investor harmless against,
any liability, loss or expense (including, without limitation, reasonable attorney’s fees and
out-of-pocket expenses) arising in connection with any such claim for fees arising out of the
issuance of the Securities pursuant to this Agreement. The Company acknowledges that is has
engaged Xxxxx & Co., LLC as its exclusive placement agent (the “Agent”) in connection with the sale
of the Securities. Other than the Agent, the Company has not engaged any placement agent or other
agent in connection with the sale of the Securities.
(m) Private Placement. Neither the Company nor any of its Affiliates nor, any Person
acting on the Company’s behalf has, directly or indirectly, at any time within the past six months,
made any offer or sale of any security or solicitation of any offer to buy any security under
circumstances that would (i) eliminate the availability of the exemption from registration under
Regulation D under the Securities Act in connection with the offer and sale by the Company of the
Securities as contemplated hereby or (ii) cause the offering of the Securities pursuant to the
Transaction Documents to be integrated with prior offerings by the Company for purposes of any
applicable law, regulation or stockholder approval provisions, including, without limitation, under
the rules and regulations of any Trading Market. The Company is not required to be registered as,
and is not an Affiliate of, an “investment company” within the meaning of the Investment Company
Act of 1940, as amended. The Company is not required to be registered as, a United States real
property holding corporation within the meaning of the Foreign Investment in Real Property Tax Act
of 1980.
(n) Form S-3 Eligibility. The Company is eligible to register the Common Shares for
resale by the Investors using Form S-3 promulgated under the Securities Act.
(o) Listing and Maintenance Requirements. The Company has not, in the twelve months
preceding the date hereof, received notice (written or oral) from any Trading Market on which the
Common Stock is or has been listed or quoted to the effect that the Company is not in compliance
with the listing or maintenance requirements of such Trading Market. The Company is in compliance
with all such listing and maintenance requirements.
(p) Registration Rights. Except as described in Schedule 3.1(p), the Company
has not granted or agreed to grant to any Person any rights (including “piggy-back” registration
-10-
rights) to have any securities of the Company registered with the SEC or any other governmental
authority that have not been satisfied or waived.
(q) Application of Takeover Protections. There is no control share acquisition,
business combination, poison pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s charter documents or, except for the provisions
of Section 203 of the Delaware General Corporation Law, the laws of its state of incorporation that
is or could become applicable to any of the Investors as a result of the Investors and the Company
fulfilling their obligations or exercising their rights under the Transaction Documents, including,
without limitation, as a result of the Company’s issuance of the Securities and the Investors’
ownership of the Securities.
(r) Disclosure. The Company confirms that neither it nor any officers, directors or
Affiliates, has provided any of the Investors (other than Excluded Investors) or their agents or
counsel with any information that constitutes or might constitute material, nonpublic information
(other than the existence and terms of the issuance of Securities, as contemplated by this
Agreement). The Company confirms that neither it nor any officers, directors or Affiliates, has
provided any of the Investors (other than Excluded Investors) or their agents or counsel with any
information that constitutes or might constitute material, nonpublic information (other than the
existence and terms of the issuance of Securities, as contemplated by this Agreement). The Company
understands and confirms that each of the Investors will rely on the foregoing representations in
effecting transactions in securities of the Company (other than Excluded Investors). All
disclosure provided by the Company to the Investors regarding the Company, its business and the
transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on the
behalf of the Company are true and correct in all material respects and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were made, not
misleading. To the Company’s knowledge, except for the transactions contemplated by this
Agreement, no event or circumstance has occurred or information exists with respect to the Company
or any of its Subsidiaries or its or their business, properties, operations or financial
conditions, which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or disclosed. The Company
acknowledges and agrees that no Investor (other than Excluded Investors) makes or has made any
representations or warranties with respect to the transactions contemplated hereby other than those
set forth or contemplated in the Transaction Documents.
(s) Acknowledgment Regarding Investors’ Purchase of Securities. Based upon the
assumption that the transactions contemplated by this Agreement are consummated in all material
respects in conformity with the Transaction Documents, the Company acknowledges and agrees that
each of the Investors (other than Excluded Investors) is acting solely in the capacity of an arm’s
length purchaser with respect to the Transaction Documents and the transactions contemplated hereby
and thereby. The Company further acknowledges that no Investor (other than Excluded Investors) is
acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect
to this Agreement and the transactions contemplated hereby and any advice given by any Investor (other than Excluded Investors) or
any of their respective representatives or agents in connection with the Transaction Documents
-11-
and
the transactions contemplated hereby and thereby is merely incidental to the Investors’ purchase of
the Securities. The Company further represents to each Investor that the Company’s decision to
enter into this Agreement has been based solely on the independent evaluation of the transactions
contemplated hereby by the Company and its representatives.
(t) Patents and Trademarks. 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 (“Intellectual Property
Rights”) necessary to conduct their respective businesses now conducted. The Company does not have
any knowledge of any infringement by the Company or its Subsidiaries of Intellectual Property
Rights of others. Except as disclosed in the SEC Reports, there is no claim, action or proceeding
being made or brought, or to the knowledge of the Company, being threatened, against the Company or
its Subsidiaries regarding its Intellectual Property Rights.
(u) Insurance. The Company and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as are prudent and
customary in the businesses and location in which the Company and the Subsidiaries are engaged.
(v) Regulatory Permits. The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in the SEC Reports
(“Material Permits”), except where the failure to possess such permits does not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse Effect, and neither
the Company nor any Subsidiary has received any written notice of proceedings relating to the
revocation or modification of any Material Permit.
(w) Transactions With Affiliates and Employees. Except as set forth or incorporated
by reference in the Company’s SEC Reports, none of the officers, directors or employees of the
Company is presently a party to any transaction that would be required to be reported on Form 10-K
with the Company or any of its Subsidiaries (other than for ordinary course services as employees,
officers or directors), including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any such officer, director or employee or, to the Company’s
knowledge , 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) Internal Accounting Controls. The Company and the 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 accountability,
(iii) access to assets is permitted only in accordance with management’s general or specific
-12-
authorization, and (iv) the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any differences.
(y) Xxxxxxxx-Xxxxx Act. The Company is in compliance in all material respects with
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 and applicable rules and regulations
promulgated by the SEC thereunder, except where such noncompliance would not have, individually or
in the aggregate, a Material Adverse Effect.
(z) Foreign Corrupt Practices. Neither the Company nor any of its Subsidiaries nor,
to the knowledge of the Company, 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 (i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or employee from corporate
funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act
of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback
or other unlawful payment to any foreign or domestic government official or employee.
(aa) Employee Relations. Neither Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or employs any member of a union. The Company believes that
its relations with its employees are as disclosed in the SEC Reports. Except as disclosed in the
SEC Reports, during the period covered by the SEC Reports no executive officer of the Company or
any of its Subsidiaries (as defined in Rule 501(f) of the 0000 Xxx) has notified the Company or any
such Subsidiary that such officer intends to leave the Company or any such Subsidiary or otherwise
terminate such officer’s employment with the Company or any such Subsidiary. To the knowledge of
the Company or any such Subsidiary, no executive officer of the Company or any of its Subsidiaries
is 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 such Subsidiary to any liability with respect to any of the foregoing
matters.
(bb) Labor Matters. The Company and its Subsidiaries are in compliance in all material
respects with all federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of employment and wages and
hours, except where failure to be in compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(cc) Environmental Laws. The Company and its Subsidiaries (i) are in compliance in
all material respects with any and all Environmental Laws (as hereinafter defined), (ii) have
received all permits, licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) are in compliance in all material respects
with all terms and conditions of any such permit, license or approval where, in each of the
foregoing clauses (i), (ii) and (iii), the failure to so comply would be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect. The term
“Environmental Laws” means all federal, state, local or foreign laws relating to pollution or
-13-
protection of human health or the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata), including, without limitation, laws
relating to emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into
the environment, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or
approved thereunder.
(dd) Subsidiary Rights. 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.
(ee) 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, (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 (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply except for taxes accruing after December 31, 2005
that are not yet due. 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.
3.2 Representations and Warranties of the Investors. Each Investor hereby, as to
itself only and for no other Investor, represents and warrants to the Company as follows:
(a) Organization; Authority. Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization with the
requisite corporate, partnership or other power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The purchase by such Investor of the Securities hereunder has been duly
authorized by all necessary action on the part of such Investor. This Agreement has been duly
executed and delivered by such Investor and constitutes the valid and binding obligation of such
Investor, enforceable against it in accordance with its terms, except as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general application relating to
or affecting the enforcement of creditors rights generally, and (ii) the effect of rules of law
governing the availability of specific performance and other equitable remedies.
(b) No Public Sale or Distribution; Investment Intent. Such Investor is (i) acquiring
the Common Shares in the ordinary course of business for its own account and not with a view
towards, or for resale in connection with, the public sale or distribution thereof, except pursuant
to sales registered under the Securities Act or under an exemption from such
registration and in compliance with applicable federal and state securities laws, and such
Investor
-14-
does not have a present arrangement to effect any distribution of the Securities to or
through any person or entity; provided, however, that by making the representations
herein, such Investor 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 Securities Act.
(c) Investor Status. At the time such Investor was offered the Securities, it was,
and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the
Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities
Act. Such Investor is not a registered broker dealer registered under Section 15(a) of the Exchange
Act, or a member of the NASD, Inc. or an entity engaged in the business of being a broker dealer.
Except as otherwise disclosed in writing to the Company on or prior to the date of this Agreement,
such Investor is not affiliated with any broker or dealer registered under Section 15(a) of the
Exchange Act, or a member of the NASD, Inc. or an entity engaged in the business of being a broker
dealer.
(d) Experience of Such Investor. Such Investor, either alone or together with its
representatives has such knowledge, sophistication and experience in business and financial matters
so as to be capable of evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment. Such Investor
understands that it must bear the economic risk of this investment in the Securities indefinitely,
and is able to bear such risk and is able to afford a complete loss of such investment.
(e) Access to Information. Such Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded: (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information (other than material non-public information) about the
Company and the Subsidiaries and their respective financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to evaluate its investment;
and (iii) the opportunity to obtain such additional information that the Company possesses or can
acquire without unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other investigation
conducted by or on behalf of such Investor or its representatives or counsel shall modify, amend or
affect such Investor’s right to rely on the truth, accuracy and completeness of the Disclosure
Materials and the Company’s representations and warranties contained in the Transaction Documents.
Such Investor acknowledges receipt of copies of the SEC Reports.
(f) No Governmental Review. Such Investor 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.
(g) No Conflicts. The execution, delivery and performance by such Investor of this
Agreement and the consummation by such Investor of the transactions contemplated
hereby will not (i) result in a violation of the organizational documents of such Investor or
(ii)
-15-
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 such Investor is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws) applicable to such Investor, except in the case of clauses (ii)
and (iii) above, for such that are not material and do not otherwise affect the ability of such
Investor to consummate the transactions contemplated hereby.
(h) Illegal Transactions. No Investor, directly or indirectly, and no Person
acting on behalf of or pursuant to any understanding with any Investor, has engaged in any
transactions in the securities of the Company (including, without limitation, any Short Sales
involving any of the Company’s securities) since the time that such Investor was first
contacted by the Company, the Agent or any other Person regarding an investment in the Company.
Such Investor covenants that neither it nor any Person acting on its behalf or pursuant to any
understanding with such Investor will engage, directly or indirectly, in any transactions in
the securities of the Company (including Short Sales) prior to the time the transactions
contemplated by this Agreement are publicly disclosed. “Short Sales” include, without
limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the
Exchange Act and all types of direct and indirect stock pledges, forward sale contracts,
options, puts, calls, short sales, swaps, derivatives and similar arrangements (including on a
total return basis), and sales and other transactions through non-U.S. broker-dealers or
foreign regulated brokers.
(i) Restricted Securities. The Investors understand that the Securities are characterized
as “restricted securities” under the U.S. federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without registration under the
Securities Act only in certain limited circumstances.
(j) Legends. It is understood that, except as provided in Section 4.1(b) of this
Agreement, certificates evidencing such Securities may bear the legend set forth Section
4.1(b).
(k) No Legal, Tax or Investment Advice. Such Investor understands that nothing in this
Agreement or any other materials presented by or on behalf of the Company to the Investor in
connection with the purchase of the Securities constitutes legal, tax or investment advice. Such
Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has
deemed necessary or appropriate in connection with its purchase of the Securities. Such Investor
understands that the Agent has acted solely as the agent of the Company in this placement of the
Securities, and that the Agent makes no representation or warranty with regard to the merits of
this transaction or as to the accuracy of any information such Investor may have received in
connection therewith. Such Investor acknowledges that he has not relied on any information or
advice furnished by or on behalf of the Agent.
-16-
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Investors covenant that the Securities will only be disposed of pursuant to an
effective registration statement under, and in compliance with the requirements of, the Securities
Act, including in accordance with the plan of distribution set forth in the Prospectus and in
compliance with the prospectus delivery requirements under the Securities Act, or pursuant to an
available exemption from the registration requirements of the Securities Act, and in compliance
with any applicable state securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement or to the Company, or pursuant to Rule 144(k),
the Company may require the transferor to provide to the Company an opinion of counsel selected by
the transferor, the form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration under the Securities Act.
(b) The Investors agree to the imprinting, so long as is required by this Section
4.1(b), of the following legend on any certificate evidencing any of the Securities:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.
Certificates evidencing Securities shall not be required to contain such legend or any other
legend (i) after the Securities have been sold pursuant to a Registration Statement that is
effective under the Securities Act covering the resale of such Securities, (ii) following any
sale of such Securities pursuant to Rule 144 if the holder provides the Company with a legal
opinion (and the documents upon which the legal opinion is based) reasonable acceptable to the
Company to the effect that that the Securities can be sold under Rule 144, (iii) if the holder
provides the Company with standard written assurances reasonably acceptable to the Company
establishing that the Securities are eligible for sale under Rule 144(k), or (iv) if the holder
provides the Company with a legal opinion (and the documents upon which the legal opinion is
based) reasonably acceptable to the Company to the effect that the legend is not required under
applicable requirements of the Securities Act (including controlling judicial interpretations
and pronouncements issued by the Staff of the SEC). The Company shall cause its counsel to
issue the legal opinion included in the Transfer Agent Instructions to the
-17-
Transfer Agent on the Effective Date. Following the Effective Date, the Company will, no later
than three Trading Days following the delivery by an Investor to the Company or the Transfer
Agent of (i) a legended certificate representing such Securities and (ii) an opinion of counsel
to the extent required by Section 4.1(a) deliver or cause to be delivered to such Investor a
certificate representing such Securities that is free from all restrictive and other legends.
The Company may not make any notation on its records or give instructions to the Transfer Agent
that enlarge the restrictions on transfer set forth in this Section.
If within three Trading Days after the Company’s receipt of a legended the certificate and
the other documents as specified in Clauses (i), (ii) and (iii) of the paragraph immediately
above, the Company shall fail to issue and deliver to such Investor a certificate representing
such Securities that is free from all restrictive and other legends, and if on or after such
Trading Day the Investor purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Investor of shares of Common Stock
that the Investor anticipated receiving from the Company without any restrictive legend (the
“Covering Shares”) then the Company shall, within five Trading Days after the Investor’s
request, pay cash to the Investor in an amount equal to the excess (if any) of the Investor’s
total purchase price (including brokerage commissions, if any) for the Covering Shares, over
the product of (A) the number of Covering Shares, times (B) the closing bid price on the date
of delivery of such certificate and the other documents as specified in Clauses (i), (ii) and
(iii) of the paragraph immediately above.
(c) 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 4.1 of
this Agreement; provided that an Investor and its pledgee shall be required to comply with the
provisions of Section 4.1 in order to effect a sale, transfer or assignment of Securities to such
pledgee. Each Investor acknowledges that the Company shall not be responsible for any pledges
relating to, or the grant of any security interest in, any of the Securities or for any agreement,
understanding or arrangement between any Investor and its pledgee or secured party. At the
appropriate Investor’s expense, the Company will execute and deliver such reasonable documentation
as a pledgee or secured party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of Selling Stockholders thereunder. Provided that
the Company is in compliance in all material respects with the terms of this Section 4.1(c), the
Company’s indemnification obligations pursuant to Section 6.4 shall not extend to any Proceeding or
Losses arising out of or related to this Section 4.1(c).
4.2 Furnishing of Information. Until the date that any Investor owning Shares may sell all of
them under Rule 144(k) of the Securities Act (or any successor provision), the Company covenants to
use its commercially reasonable efforts to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the Company after the
date hereof pursuant to the Exchange Act. The Company further
-18-
covenants that it will take such further action as any holder of Securities may reasonably
request to satisfy the provisions of this Section 4.2.
4.3 Integration. The Company shall not, and shall use its commercially reasonably efforts to
ensure that no Affiliate thereof shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Investors or that would be integrated
with the offer or sale of the Securities for purposes of the rules and regulations of any Trading
Market.
4.4 Reservation of Securities. The Company shall maintain a reserve from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may be
required to fulfill its obligations to issue such Shares under the Transaction Documents. In the
event that at any time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations to issue such Shares under the Transaction Documents, the Company shall
promptly take such actions as may be required to increase the number of authorized shares.
4.5 Securities Laws Disclosure; Publicity. The Company shall, on or before 8:30 a.m.,
New York time, on the first Trading Day following execution of this Agreement, issue a press
release reasonably acceptable to the Investors disclosing all material terms of the transactions
contemplated hereby. On or before 8:30 a.m., New York time, on the first Trading Day after the
Closing Date, the Company shall file a Current Report on Form 8-K with the SEC (the “8-K Filing”)
describing the terms of the transactions contemplated by the Transaction Documents and including as
exhibits to such Current Report on Form 8-K the Transaction Documents (including the schedules and
the names, and addresses of the Investors and the amount(s) of Securities respectively purchased),
in the form required by the Exchange Act. Thereafter, the Company shall timely file any filings
and notices required by the SEC or applicable law with respect to the transactions contemplated
hereby and provide copies thereof to the Investors promptly after filing. Except as herein
provided, the Company shall not publicly disclose the name of any Investor, or include the name of
any Investor in any press release without the prior written consent of such Investor, unless
otherwise required by law. 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 Investor
with any material nonpublic information regarding the Company or any of its Subsidiaries from and
after the issuance of the above referenced press release without the express written consent of
such Investor.
4.6 Use of Proceeds. The Company intends to use the net proceeds from the sale of the
Securities for working capital and general corporate purposes. The Company also may use a portion
of the net proceeds, currently intended for general corporate purposes, to acquire or invest in
technologies, products or services that complement its business. Pending these uses, the Company
intends to invest the net proceeds from this offering in short-term, interest-bearing,
-19-
investment-grade securities, or as otherwise pursuant to the Company’s customary investment
policies.
ARTICLE V
CONDITIONS
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Investors. The obligation of each
Investor to acquire Securities at the Closing is subject to the satisfaction or waiver by such
Investor, at or before the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of the Company
contained herein shall be true and correct in all material respects as of the date when made and as
of the Closing as though made on and as of such date; and
(b) Performance. The Company and each other Investor shall have performed, satisfied
and complied in all material respects with all covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing.
5.2 Conditions Precedent to the Obligations of the Company. The obligation of the
Company to sell the Securities at the Closing is subject to the satisfaction or waiver by the
Company, at or before the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of the
Investors contained herein shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made on and as of such date; and
(b) Performance. The Investors shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Investors at or prior to the Closing.
ARTICLE VI
REGISTRATION RIGHTS
REGISTRATION RIGHTS
6.1 Registration Statement.
(a) As promptly as possible, and in any event on or prior to the Filing Date, the Company
shall prepare and file with the SEC a Registration Statement covering the resale of all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale
the Registrable Securities on Form S-3, in which case such registration shall be on another
appropriate form in accordance with the Securities Act and the Exchange Act) and shall contain
(except if otherwise directed by the Investors or requested by the SEC) the “Plan of Distribution”
in substantially the form attached hereto as Exhibit D.
-20-
(b) The Company shall use its commercially reasonable efforts to cause the Registration
Statement to be declared effective by the SEC as promptly as possible after the filing thereof, but
in any event prior to the Required Effectiveness Date, and shall use its commercially reasonable
efforts to keep the Registration Statement continuously effective under the Securities Act until
the earlier of the date that all Registrable Securities covered by such Registration Statement have
been sold or can be sold publicly under Rule 144(k) (the “Effectiveness Period”).
(c) Should an Event (as defined below) occur, then upon the occurrence of such Event, and on
every monthly anniversary thereof until the applicable Event is cured, as partial relief for the
damages suffered therefrom by the Investors (which remedy shall not be exclusive of any other
remedies available under this Agreement, at law or in equity), the Company shall pay to each
Investor an amount in cash, as liquidated damages and not as a penalty, equal to 1.0% of (i) the
number of Securities held by such Investor as of the date of such Event, multiplied by (ii) the
purchase price paid by such Investor for such Securities then held. The payments to which an
Investor shall be entitled pursuant to this Section 6.1(c) are referred to herein as “Event
Payments.” Any Event Payments payable pursuant to the terms hereof shall apply on a pro rated
basis for any portion of a month prior to the cure of an Event. In the event the Company fails to
make Event Payments in a timely manner, such Event Payments shall bear interest at the rate of 1.0%
per month (prorated for partial months) until paid in full. All pro rated calculations made
pursuant to this paragraph shall be based upon the actual number of days in such pro rated month.
For such purposes, each of the following shall constitute an “Event”:
(i) the Registration Statement is not filed on or prior to the Filing Date or is not declared
effective on or prior to the Required Effectiveness Date;
(ii) except (A) as provided for in Section 6.1(d), (B) if the Company is involved in a
“Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, or (C) in the event of a
merger or consolidation of the Company or a sale of more than one-half of the assets of the Company
in one or a series of related transactions, unless following such transaction or series of
transactions, the holders of the Company’s securities prior to the first such transaction continue
to hold at least 50% of the voting rights and equity interests of the surviving entity or acquirer
(clauses (B) and (C), collectively, the “Excluded Events”), after the Effective Date, an Investor
is not permitted to sell Registrable Securities under the Registration Statement (or a subsequent
Registration Statement filed in replacement thereof) for any reason (other than the fault of such
Investor) for five or more Trading Days (whether or not consecutive);
(iii) except as a result of the Excluded Events, the Common Stock is not listed or quoted, or
is suspended from trading, on an Eligible Market for a period of three Trading Days (which need not
be consecutive Trading Days) during the Effectiveness Period;
(iv) the Company fails for any reason to deliver a certificate evidencing any Securities to an
Investor within five Trading Days after delivery of such certificate is required pursuant to any
Transaction Document; or
-21-
(d) Notwithstanding anything in this Agreement to the contrary, after 60 consecutive Trading
Days of continuous effectiveness of the initial Registration Statement filed and declared effective
pursuant to this Agreement, the Company may, by written notice to the Investors, suspend sales
under a Registration Statement after the Effective Date thereof and/or require that the Investors
immediately cease the sale of shares of Common Stock pursuant thereto and/or defer the filing of
any subsequent Registration Statement if the Company is engaged in a material merger, acquisition
or sale and the Board of Directors determines in good faith, by appropriate resolutions, that, as a
result of such activity, (A) it would be materially detrimental to the Company (other than as
relating solely to the price of the Common Stock) to maintain a Registration Statement at such time
or (B) it is in the best interests of the Company to suspend sales under such registration at such
time. Upon receipt of such notice, each Investor shall immediately discontinue any sales of
Registrable Securities pursuant to such registration until such Investor has received copies of a
supplemented or amended Prospectus or until such Investor is advised in writing by the Company that
the then-current Prospectus may be used and has received copies of any additional or supplemental
filings that are incorporated or deemed incorporated by reference in such Prospectus. In no event,
however, shall this right be exercised to suspend sales beyond the period during which (in the good
faith determination of the Company’s Board of Directors) the failure to require such suspension
would be materially detrimental to the Company. The Company’s rights under this Section
6(d) may be exercised for a period of no more than 20 Trading Days at a time and not more than
three times in any twelve-month period, without such suspension being considered as part of an
Event Payment determination. Immediately after the end of any suspension period under this
Section 6(d), the Company shall take all necessary actions (including filing any required
supplemental prospectus) to restore the effectiveness of the applicable Registration Statement and
the ability of the Investors to publicly resell their Registrable Securities pursuant to such
effective Registration Statement.
(e) The Company shall not, from the date hereof until the Effective Date of the Registration
Statement, prepare and file with the SEC a registration statement relating to an offering for its
own account or the account of others under the Securities Act of any of its equity securities,
other than any registration statement or post-effective amendment to a registration statement (or
supplement thereto) relating to the Company’s 5% Convertible Notes issued in June 2003, its
existing and effective shelf registration statement or to any of the Company’s employee benefit
plans registered on Form S-8.
6.2 Registration Procedures. In connection with the Company’s registration obligations
hereunder, the Company shall:
(a) Not less than three Trading Days prior to the filing of a Registration Statement or any
related Prospectus or any amendment or supplement thereto, furnish via email to those Investors who
have supplied the Company with email addresses copies of all such documents proposed to be filed,
which documents (other than any document that is incorporated or deemed to be incorporated by
reference therein) will be subject to the review of such Investors. The Company shall reflect in
each such document when so filed with the SEC such comments regarding the Investors and the plan of
distribution as the Investors may reasonably
- 22 -
and promptly propose no later than two Trading Days
after the Investors have been so furnished with copies of such documents as aforesaid.
(b) (i) Subject to Section 6.1(d), prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement continuously effective, as to the
applicable Registrable Securities for the Effectiveness Period and prepare and file with the SEC
such additional Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented
by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424; (iii) respond as promptly as reasonably possible, and in any event within 12 Trading Days
(except to the extent that the Company reasonably requires additional time to respond to accounting
comments), to any comments received from the SEC with respect to the Registration Statement or any
amendment thereto; and (iv) comply in all material respects with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by
the Registration Statement during the applicable period in accordance with the intended methods of
disposition by the Investors thereof set forth in the Registration Statement as so amended or in
such Prospectus as so supplemented.
(c) Notify via email to those Investors who have supplied the Company with email addresses as
promptly as reasonably possible of any of the following events: (i) the SEC notifies the Company
whether there will be a “review” of any Registration Statement; (ii) the SEC comments in writing on
any Registration Statement; (iii) any Registration Statement or any post-effective amendment is
declared effective; (iv) the SEC or any other Federal or state governmental authority requests any
amendment or supplement to any Registration Statement or Prospectus or requests additional
information related thereto; (v) the SEC issues any stop order suspending the effectiveness of any
Registration Statement or initiates any Proceedings for that purpose; (vi) the Company receives
notice of any suspension of the qualification or exemption from qualification of any Registrable
Securities for sale in any jurisdiction, or the initiation or
threat of any Proceeding for such purpose; or (vii) the financial statements included in any
Registration Statement become ineligible for inclusion therein or any Registration Statement or
Prospectus or other document contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(d) Use its reasonable Best Efforts to avoid the issuance of or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of any Registration Statement, or (ii) any
suspension of the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, as soon as possible.
(e) If requested by an Investor, provide such Investor, without charge, at least one conformed
copy of each Registration Statement and each amendment thereto, including financial statements and
schedules, and all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such documents with the SEC.
- 23 -
(f) Promptly deliver to each Investor, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such
Persons may reasonably request. The Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Investors in connection with the offering
and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement
thereto to the extent permitted by federal and state securities laws and regulations.
(g) (i) In the time and manner required by each Trading Market, prepare and file with such
Trading Market an additional shares listing application covering all of the Registrable Securities;
(ii) take all steps necessary to cause such Registrable Securities to be approved for listing on
each Trading Market as soon as possible thereafter; and (iii) except as a result of the Excluded
Events, during the Effectiveness Period, maintain the listing of such Registrable Securities on
each such Trading Market or another Eligible Market.
(h) Prior to any public offering of Registrable Securities, use its reasonable Best Efforts to
register or qualify or cooperate with the selling Investors in connection with the registration or
qualification (or exemption from such registration or qualification) of such Registrable Securities
for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United
States as any Investor requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective for so long as required, but not to exceed the duration of the
Effectiveness Period, and to do any and all other acts or things reasonably necessary or advisable
to enable the disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, that the Company shall not be obligated
to file any general consent to service of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.
(i) Cooperate with the Investors to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent permitted by this Agreement
and under law, of all restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Investors may reasonably request.
(j) Upon the occurrence of any event described in Section 6.2(c)(vii), as promptly as
reasonably possible, prepare a supplement or amendment, including a post-effective amendment, to
the Registration Statement or a supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading.
(k) Cooperate with any reasonable due diligence investigation undertaken by the Investors in
connection with the sale of Registrable Securities, including, without limitation,
- 24 -
by making
available documents and information; provided that the Company will not deliver or make available
to any Investor material, nonpublic information unless such Investor requests in advance in
writing to receive material, nonpublic information and agrees to keep such information
confidential. .
(l) Comply with all rules and regulations of the SEC applicable to the registration of the
Securities.
(m) 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 any
particular Investor or to make any Event Payments set forth in Section 6.1(c) to such Investor that
such Investor furnish to the Company the information specified in Exhibits X-0, X-0 and B-3 hereto
and such other information regarding itself, the Registrable Securities and other shares of Common
Stock held by it and the intended method of disposition of the Registrable Securities held by it
(if different from the Plan of Distribution set forth on Exhibit D hereto) as shall be reasonably
required to effect the registration of such Registrable Securities and shall complete and execute
such documents in connection with such registration as the Company may reasonably request.
6.3 Registration Expenses. The Company shall pay all fees and expenses incident to
the performance of or compliance with Article VI of this Agreement by the Company, including
without limitation (a) all registration and filing fees and expenses, including without limitation
those related to filings with the SEC, any Trading Market and in connection with applicable state
securities or Blue Sky laws, (b) printing expenses (including without limitation expenses of
printing certificates for Registrable Securities), (c) messenger, telephone and delivery expenses,
(d) fees and disbursements of counsel for the Company, (e) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions contemplated by
this Agreement, and (f) all listing fees to be paid by the Company to the Trading Market.
6.4 Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Investor, the officers, directors,
partners, members, agents and employees of each of them, each Person who controls any such Investor
(within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, partners, members, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all Losses, as incurred,
arising out of or relating to (i) 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, (ii) 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, (iii) any cause of action, suit or claim brought or made against
such Indemnified Party (as defined in Section 6.4(c) below) by a third party (including for these
purposes a derivative action brought on behalf of the Company), arising out of or resulting from
(x) execution, delivery, performance or
- 25 -
enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (y) 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 (z) the status of Indemnified Party as holder of the Securities or (iv) any
untrue or alleged untrue statement of a material fact contained in the Registration Statement, any
Prospectus or any form of Company prospectus or in any amendment or supplement thereto or in any
Company preliminary prospectus, or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to the extent, but only to the
extent, that (A) such untrue statements, alleged untrue statements, omissions or alleged omissions
are based solely upon information regarding such Investor furnished in writing to the Company by
such Investor for use therein, or to the extent that such information relates to such Investor or
such Investor’s proposed method of distribution of Registrable Securities, or (B) in the case of an
occurrence of an event of the type specified in Section 6.2(c)(v)-(vii), the use by such
Investor of an outdated or defective Prospectus after the Company has notified such Investor in
writing that the Prospectus is outdated or defective and prior to the receipt by such Investor of
the Advice contemplated in Section 6.5; or (C) with respect to any prospectus, if the
untrue statement or omission of material fact contained in such prospectus was corrected on a
timely basis in the prospectus, as then amended or supplemented, if such corrected prospectus was
timely made available by the Company to the Holder, and the Holder seeking indemnity hereunder was
advised in writing not to use the incorrect prospectus prior to the use giving rise to Losses.
(b) Indemnification by Investors. Each Investor shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person
who controls the Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses
(as determined by a court of competent jurisdiction in a final judgment not subject to appeal or
review) arising solely out of any untrue statement of a material fact contained in the Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising out of or relating to any omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under which they were made)
not misleading, but only to the extent that such untrue statement or omission is contained in any
information so furnished by such Investor in writing to the Company specifically for inclusion in
such Registration Statement or such Prospectus (it being understood that the information provided
by the Investor to the Company in Exhibits X-0, X-0 and B-3 and the Plan of Distribution set forth
on Exhibit D, as the same may be modified by such Investor and other information provided by the
Investor to the Company in or pursuant to the Transaction Documents constitutes information
reviewed and expressly approved by such Investor in writing expressly for use in the Registration
Statement), such Prospectus or such form of Prospectus or in any amendment or supplement thereto or
(ii) in the case of an occurrence of an event of the type specified in Section
6.2(c)(v)-(vii), the use by such Investor of an outdated or defective Prospectus after the
Company has notified such Investor in writing that the Prospectus is outdated or defective and
prior to the receipt by such Investor of the Advice contemplated in Section 6.5. In no
event shall the liability of any selling Investor hereunder be greater in amount
- 26 -
than the dollar
amount of the gross proceeds received by such Investor upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying
Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees
and expenses incurred in connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations
or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (iii) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party
(in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall
not have the right to assume the defense thereof and the reasonable fees and expenses of separate
counsel shall be at the expense of the Indemnifying Party). It being understood, however, that the
Indemnifying Party shall not, in connection with any one such Proceeding (including separate
Proceedings that have been or will be consolidated before a single judge) be liable for the fees
and expenses of more than one separate firm of attorneys at any time for all
Indemnified Parties, which firm shall be appointed by a majority of the Indemnified Parties. The
Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without
its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement
includes an unconditional release of such Indemnified Party from all liability on claims that are
the subject matter of such Proceeding.
All reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses
to the extent incurred in connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred,
within 20 Trading Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder;
provided, that the Indemnifying Party may require such Indemnified
- 27 -
Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined that such Indemnified
Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 6.4(a) or
(b) is unavailable to an Indemnified Party (by reason of public policy or otherwise), then
each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in
connection with the actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact or omission or
alleged omission of a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such action, statement or omission.
The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 6.4(c), any reasonable attorneys’ or other
reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the indemnification provided
for in this Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if contribution pursuant to this
Section 6.4(d) were determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 6.4(d), no Investor
shall be required to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Investor from the sale of the Registrable Securities subject to
the Proceeding exceeds the amount of any damages that such Investor has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.
6.5 Dispositions. Each Investor agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement and shall sell its Registrable
Securities in accordance with the Plan of Distribution set forth in the Prospectus. Each Investor
further agrees that, upon receipt of a notice from the Company of the occurrence of any event of
the kind described in Sections 6.2(c)(v), (vi) or (vii), such Investor will
discontinue disposition of such Registrable Securities under the Registration Statement until such
Investor’s receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 6.2(j), or until it is advised in writing (the “Advice”)
by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has
received copies of any
- 28 -
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
6.6 No Piggyback on Registrations. Neither the Company nor any of its security
holders (other than the Investors in such capacity pursuant hereto) may include securities of the
Company in the Registration Statement other than the Registrable Securities.
6.7 Piggy-Back Registrations. If at any time during the Effectiveness Period there is
not an effective Registration Statement covering all of the Registrable Securities and the Company
shall determine to prepare and file with the SEC a registration statement relating to an offering
for its own account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or
their then equivalents relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in connection with stock option
or other employee benefit plans, then the Company shall send to each Investor not then eligible to
sell all of their Registrable Securities under Rule 144 in a three-month period, written notice of
such determination and if, within ten days after receipt of such notice, any such Investor shall so
request in writing, the Company shall include in such registration statement all or any part of
such Registrable Securities such Investor requests to be registered. Notwithstanding the
foregoing, in the event that, in connection with any underwritten public offering, the managing
underwriter(s) thereof shall impose a limitation on the number of shares of Common Stock which may
be included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or
other factors dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such limited portion of
the Registrable Securities with respect to which such Investor has requested inclusion hereunder as
the underwriter shall permit; provided, however, that (i) the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding securities, the
holders of which are not contractually entitled to inclusion of such securities in such
Registration Statement or are not contractually entitled to pro rata inclusion with the Registrable
Securities and (ii) after giving effect to the immediately preceding proviso, any such exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to include Registrable
Securities and the holders of other securities having the contractual right to inclusion of their
securities in such Registration Statement by reason of demand registration rights, in proportion to
the number of Registrable Securities or other securities, as applicable, sought to be included by
each such Investor or other holder. If an offering in connection with which an Investor is
entitled to registration under this Section 6.7 is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration Statement shall,
unless otherwise agreed by the Company, offer and sell such Registrable Securities in an
underwritten offering using the same underwriter or underwriters on the same terms and conditions
as other shares of Common Stock included in such underwritten offering and shall enter into an
underwriting agreement in a form and substance reasonably satisfactory to the Company and the
underwriter or underwriters. Upon the effectiveness the registration statement for which piggy-back
registration has been provided in this Section 6.7, any Event Payments payable to an Investor whose
Securities are included in such registration statement shall terminate.
- 29 -
ARTICLE VII
MISCELLANEOUS
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated by the Company or any Investor, by written
notice to the other parties, if the Closing has not been consummated by the third Business Day
following the date of this Agreement; provided that no such termination will affect the right of
any party to xxx for any breach by the other party (or parties).
7.2 Fees and Expenses. Each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this Agreement. The Company
shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with
the sale and issuance of their applicable Securities.
7.3 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such documents, exhibits and
schedules. At or after the Closing, and without further consideration, the Company will execute
and deliver to the Investors such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction Documents.
7.4 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile or email at the facsimile number or email address specified in this Section prior to
6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile or email at the facsimile
number or email address specified in this Section on a day that is not a Trading Day or later than
6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of
deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by the
party to whom such notice is required to be given. The addresses, facsimile numbers and email
addressed for such notices and communications are those set forth on the signature pages hereof, or
such other address or facsimile number as may be designated in writing hereafter, in the same
manner, by any such Person.
7.5 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the Company and each of
the Investors or, in the case of a waiver, by the party against whom enforcement of any such
waiver is sought. No waiver of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any
subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall
any delay or omission of either party to exercise any right hereunder in any manner impair the
exercise of any such right. Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to
- 30 -
the rights of Investors
under Article VI may be given by Investors holding at least a majority of the Registrable
Securities to which such waiver or consent relates.
7.6 Construction. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
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.
7.7 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written consent of the
Investors. Any Investor may assign its rights under this Agreement to any Person to whom such
Investor assigns or transfers any Securities, provided (i) such transferor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the
Company after such assignment, (ii) the Company is furnished with written notice of (x) the name
and address of such transferee or assignee and (y) the Registrable Securities with respect to which
such registration rights are being transferred or assigned, (iii) following such transfer or
assignment, the further disposition of such securities by the transferee or assignee is restricted
under the Securities Act and applicable state securities laws, (iv) such transferee agrees in
writing to be bound, with respect to the transferred Securities, by the provisions hereof that
apply to the “Investors” and (v) such transfer shall have been made in accordance with the
applicable requirements of this Agreement and with all laws applicable thereto. .
7.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, except that each Indemnified Party
is an intended third party beneficiary of Section 6.4 and (in each case) may enforce the
provisions of such Sections directly against the parties with obligations thereunder.
7.9 Governing Law; Venue; Waiver of Jury Trial. THE CORPORATE LAWS OF THE STATE OF
DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS
STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT 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 BROUGHT BY THE COMPANY OR ANY INVESTOR HEREUNDER, IN CONNECTION
HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY
OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION
DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING
BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT,
- 31 -
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 VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR 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. THE COMPANY AND INVESTORS HEREBY
WAIVE ALL RIGHTS TO A TRIAL BY JURY.
7.10 Survival. The representations and warranties, agreements and covenants contained
herein shall survive the Closing.
7.11 Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together 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, it being
understood that both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission or email attachment, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile or email-attached signature page were an original
thereof.
7.12 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.
7.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction Documents, whenever
any Investor exercises a right, election, demand or option owed to such Investor by the Company
under a Transaction Document and the Company does not timely perform its related obligations within
the periods therein provided, then, prior to the performance by the Company of the Company’s
related obligation, such Investor may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights.
7.14 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and the execution by the holder
thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and
hold harmless the Company for any losses in connection therewith. The applicants for a new
- 32 -
certificate or instrument under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
7.15 Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Investors and the Company will be
entitled to seek specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation (other than in connection with any action for temporary
restraining order) the defense that a remedy at law would be adequate.
7.16 Payment Set Aside. To the extent that the Company makes a payment or payments to
any Investor hereunder or any Investor enforces or exercises its 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.
7.17 Adjustments in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or other securities or
rights convertible into, or entitling the holder thereof to receive directly or indirectly shares
of Common Stock), combination or other similar recapitalization or event occurring after the date
hereof and prior to the Closing, each reference in any Transaction Document to a number of shares
or a price per share shall be amended to appropriately account for such event.
7.18 Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
any other Investor under any Transaction Document. The decision of each Investor to purchase
Securities pursuant to this Agreement has been made by such Investor independently of any other
Investor and independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have been made or given by any other
Investor or by any agent or employee of any other Investor, and no Investor or any of its agents or
employees shall have any liability to any other Investor (or any other person) relating to or
arising from any such information, materials, statements or opinions. Nothing contained herein or
in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed
to constitute the Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated
by the Transaction Document. Each Investor acknowledges that no other Investor has acted as
- 33 -
agent for such Investor in connection with making its investment hereunder and that no other
Investor will be acting as agent of such Investor in connection with monitoring its investment
hereunder. Each Investor shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Investor to be joined as an
additional party in any proceeding for such purpose.
[SIGNATURE PAGES TO FOLLOW]
- 34 -
IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
MRV COMMUNICATIONS, INC. | ||||||||||
/s/ Xxxx Loan | ||||||||||
By: | ||||||||||
Name: Xxxx Xxxxx | ||||||||||
Title: President and Chief Executive Officer | ||||||||||
Address for Notice: | ||||||||||
MRV Communications, Inc. | ||||||||||
00000 Xxxxxxxx Xxxxxx | ||||||||||
Xxxxxxxxxx, XX 00000 | ||||||||||
Facsimile No.: (000) 000-0000 | ||||||||||
Telephone No.: (000) 000-0000 | ||||||||||
Email address: xxxx@xxx.xxx | ||||||||||
Attn: Xxxx Xxxxx | ||||||||||
With a copies to: | Xxxxx Xxxxx | |||||||||
Facsimile: | (000) 000-0000 | |||||||||
Email: | Xxxxx@xxx.xxx | |||||||||
Telephone: | (000) 000-0000 | |||||||||
and | ||||||||||
Krikpatrick & Xxxxxxxx Xxxxxxxxx Xxxxxx | ||||||||||
Facsimile: | (000) 000-00000 | |||||||||
Email: | xxxxxx@xxxx.xxx | |||||||||
Telephone: | (000) 000-0000 | |||||||||
Attn: | Xxxx X. Xxxxx, Esq. |
Investor Signature Page(1)
By its execution and delivery of this signature page, the undersigned Investor hereby joins in and
agrees to be bound by the terms and conditions of the Securities Purchase Agreement dated as of
March 15, 2006 (the “Purchase Agreement”) by and among MRV Communications, Inc. and the Investors
(as defined therein), as to the number of shares of Common Stock set forth below, and authorizes
this signature page to be attached to the Purchase Agreement or counterparts thereof.
Name of Investor
(2:) |
By:
|
(3 | ) | ||||
Name: | ||||||
Title: |
Address:
|
Telephone No.:
|
Facsimile No.:
|
Email Address:
|
Number of Shares:
|
Aggregate Purchase Price:$
|
1 | This is form of Investor Signature Page, identical for each investor. | |
2 | The name of each investor, the amount of shares purchase and the price paid is set forth on Exhibit A, Schedule of Investors. | |
3 | Each Investor Signature Page of the investors set forth on Exhibit A, Schedule of Investors, has been signed by such investor’s authorized signatory. |
Exhibits:
A Schedule of Investors | ||
B Instruction Sheet for Investors | ||
C Opinion of Company Corporate Counsel | ||
D Plan of Distribution | ||
E Company Transfer Agent Instructions |
Exhibit A
Schedule of Investors
Investor | Shares | Dollars | ||||||||
GLG Investments IV PLC |
4,000,000 | $ | 15,000,000.00 | |||||||
Smithfield Fiduciary LLC (c/o Highbridge Capital Management LLC) |
3,016,667 | 11,312,501.25 | ||||||||
DE Shaw Valence Portfolios, L.L.C. |
2,000,000 | 7,500,000.00 | ||||||||
Capital Ventures International (c/o Heights Capital Management) |
1,400,000 | 5,250,000.00 | ||||||||
Magnetar Capital Master Fund, LTD. |
1,300,000 | 4,875,000.00 | ||||||||
Fort Xxxxx Master/Partner, LP |
1,041,489 | 3,905,583.75 | ||||||||
Cranshire Capital, LP |
1,000,000 | 3,750,000.00 | ||||||||
Iroquois Master Fund, Ltd. |
1,000,000 | 3,750,000.00 | ||||||||
Xxxxxxxx SPC, Ltd. for and on behalf of the Class A Convertible Crossover
Segregated Fund |
1,000,000 | 3,750,000.00 | ||||||||
Tudor Investment Corp. (Witches Rock Portfolio,
Ltd./The Tudor BVI Global Portfolio, Ltd./Tudor Proprietary Trading, LLC) |
1,000,000 | 3,750,000.00 | ||||||||
EagleRock Institutional Partners, LP/Eagle Rock Master Fund, LP |
600,000 | 2,250,000.00 | ||||||||
Alexandra Global Master Fund Ltd. |
500,000 | 1,875,000.00 | ||||||||
Evolution Master Fund Ltd. SPC, Segregated Portfolio M |
500,000 | 1,875,000.00 | ||||||||
SF Capital Partners, LLC |
500,000 | 1,875,000.00 | ||||||||
UBS X’Xxxxxx LLC fbo X’Xxxxxx PIPES Corporate Strategies Master Limited |
500,000 | 1,875,000.00 | ||||||||
XI Asset Management (HFR HE XI Master
Trust/XI Capital Offshore Fund, Ltd./XI Capital Partners, Ltd.) |
500,000 | 1,875,000.00 | ||||||||
19,858,156 | $ | 74,468,085.00 | ||||||||
Exhibit B
INSTRUCTION SHEET FOR INVESTOR
[Omitted]
Exhibit B-1
MRV Communications, Inc.
[Omitted]
Exhibit B-2
MRV Communications, Inc.
REGISTRATION STATEMENT QUESTIONNAIRE
[Omitted]
2
ACKNOWLEDGEMENT
[Omitted]
3
Exhibit B-3
MRV COMMUNICATIONS, INC.
CERTIFICATE FOR CORPORATE, PARTNERSHIP, LIMITED LIABILITY
COMPANY, TRUST, FOUNDATION AND JOINT INVESTORS
COMPANY, TRUST, FOUNDATION AND JOINT INVESTORS
[Omitted]
4
Exhibit C
FORM OF OPINION OF COMPANY CORPORATE COUNSEL
[Omitted]
1
Exhibit D
PLAN OF DISTRIBUTION
[Omitted]
1
Exhibit E
COMPANY TRANSFER AGENT INSTRUCTIONS
[Omitted]
1
Appendix I
To Exhibit E
To Exhibit E
[Omitted]
Schedule 3.1(a)
SUBSIDIARIES
The Company has the following direct or indirect Subsidiaries:
% | Jurisdiction of | |||||
Subsidiary Name (1) | Ownership | Organization | ||||
Alcadon AB
|
100 | % | Sweden | |||
Charlotte’s Networks, Inc.
|
60 | Delaware | ||||
Creative Electronic Systems SA
|
100 | Switzerland | ||||
EDSLan SpA
|
00 | Xxxxx | ||||
Xxxxxxxxx
|
000 | Xxxxxx | ||||
LuminentOIC, Inc.
|
100 | Delaware | ||||
MRV Communications — Boston Division, Inc.
|
100 | Massachusetts | ||||
MRV Communications GmbH
|
100 | Germany | ||||
MRV International, Ltd.
|
100 | Israel | ||||
Tecnonet SpA
|
00 | Xxxxx | ||||
XxxxXxx Xxxxxxxxxxxxxx XX
|
000 | Xxxxxxxxxxx |
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.
Schedule 3.1(f)
CAPITALIZATION (at February 28, 2006)
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 |
105,909,405 | |||
Less: held in treasury |
(1,305,100 | ) | ||
Total outstanding |
104,604,305 | |||
Dilutable Securities: |
||||
5% Convertible notes |
9,913,794 | |||
Employee stock options and warrants: |
||||
Outstanding |
11,429,602 | |||
Available for grant |
3,897,418 | |||
Total authorized but unissued |
15,327,020 | |||
Total outstanding assuming full dilution |
129,845,119 |
Schedule 3.1(h)
MATERIAL CHANGES
None
Schedule 3.1(p)
REGISTRATION RIGHTS
None