Exhibit 10.1
NUMBER NINE VISUAL TECHNOLOGY CORPORATION
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is made and entered
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into as of May 7, 1998, by and between Number Nine Visual Technology
Corporation, a Delaware corporation (the "COMPANY"), and Silicon Graphics, Inc.,
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a Delaware corporation (the "INVESTOR").
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R E C I T A L S
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WHEREAS, the Company and the Investor entered into a Securities Purchase
Agreement dated as of April 17, 1998 (the "PURCHASE AGREEMENT") pursuant to
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which the Company sold and the Investor purchased a promissory note in the
aggregate principal amount of Three Million Dollars ($3,000,000) (the "ORIGINAL
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NOTE") and the Company issued to the Investor warrants (collectively the
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"ORIGINAL WARRANTS") convertible into 1,031,489 shares and 486,000 shares
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respectively, of the Company's Series A Convertible Preferred Stock, $.01 par
value per share ("SERIES A CONVERTIBLE PREFERRED STOCK");
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WHEREAS, subject to the terms and conditions set forth herein, the Investor
desires to loan to the Company an aggregate amount of Nine Million Dollars
($9,000,000) (the "AGGREGATE COMMITMENT") in such installments and under such
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conditions set forth herein;
WHEREAS, in consideration of the Aggregate Commitment and upon receipt of
each installment of the Aggregate Commitment from the Investor, the Company
shall issue to Investor a secured subordinated convertible promissory note
issuable upon receipt of each installment of the Aggregate Commitment (each a
"NOTE" and, collectively, the "NOTES"), which Notes shall be convertible into
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shares of Series A Convertible Preferred Stock as described herein
(collectively, the "PREFERRED SHARES");
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WHEREAS, the first installment of the Aggregate Commitment shall be made on
the date hereof by surrender of the Original Note and the Original Warrants by
the Investor to the Company for cancellation, and, in connection therewith the
Company shall issue a new Note in the aggregate principal amount of Three
Million Dollars ($3,000,000) (the "INITIAL NOTE) pursuant to the terms and
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conditions set forth in this Agreement and the Company shall issue to Investor a
warrant exercisable for shares of Series A Convertible Preferred Stock on the
terms and conditions set forth therein (the "WARRANT");
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NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
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1. AUTHORIZATION, ISSUANCE, SALE AND DELIVERY OF THE NOTES AND THE
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WARRANT.
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1.1 Authorization. As of the Initial Closing (as defined below), the
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Company's Board of Directors will have authorized the issuance and sale,
pursuant to the terms and conditions of this Agreement, of the Notes (including
the Initial Note) and the Warrant.
1.2 Agreement to Loan Aggregate Commitment. Subject to the terms and
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conditions set forth herein, the Investor hereby agrees to loan the Company the
Aggregate Commitment.
1.3 Agreement to Purchase, Sell and Deliver the Notes and the Warrant.
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The Company hereby agrees to issue and sell to the Investor at the
Initial Closing and each Subsequent Closing, and the Investor agrees to purchase
from the Company at the Initial Closing and each Subsequent Closing, the Notes
in the aggregate principal amount equal to the Aggregate Commitment. The
Company hereby agrees to issue and sell to the Investor at the Initial Closing,
and the Investor agrees to purchase from the Company at the Initial Closing, the
Initial Note, in the aggregate principal amount of $3,000,000 by surrender of
the Original Note and the Original Warrants by the Investor to the Company for
cancellation. The Company shall also issue to the Investor the Warrant
exercisable for such number of shares of Series A Convertible Preferred Stock
(the "WARRANT SHARES") and pursuant to such terms and conditions as set forth in
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the Warrant, which is attached hereto as EXHIBIT B.
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2. CLOSING.
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2.1 The Initial Closing. The purchase and sale of the Initial Note and
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the issuance of the Warrant will take place on May 7, 1998 at the offices of
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP, High Street Tower, 000 Xxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, at 4:00 p.m. Boston time, subject to the satisfaction of
the conditions set forth in Articles 6 and 7, or at such other time and place as
the Company and the Investor mutually agree upon (which time and place are
referred to in this Agreement as the "INITIAL CLOSING"). At the Initial Closing,
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the Company will deliver to the Investor the Initial Note, against delivery to
the Company by the Investor of the Original Note and the Original Warrants for
cancellation.
2.2 Subsequent Closings.
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(a) From and after the Initial Closing, the Company may request
additional installments (subject to Section 2.2(b) herein) of the Aggregate
Commitment at one or more subsequent closings (individually, a "SUBSEQUENT
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CLOSING" and collectively, the "SUBSEQUENT CLOSINGS"). The Company shall request
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a Subsequent Closing by delivering a written notice to the Investor no less than
two (2) days prior to the intended Subsequent Closing, specifying the amount
(subject to Section 2.2(b) herein) and date of the applicable installment and
certifying that all representations and warranties of the Company set forth in
Section 4 remain true and correct (except as to such changes as have occurred in
the ordinary course of the Company's business and which do not have,
individually or in the aggregate, a Material Adverse Effect) and all conditions
set forth in Section 8 herein have been satisfied. At each such
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Subsequent Closing, the Investor shall advance the requisite installment of the
Aggregate Commitment, it being understood that the advancement of such
installment by the Investor shall constitute an express representation by the
Investor that all conditions set forth in Section 9 herein have been satisfied.
At each such Subsequent Closing, the Company shall issue and deliver to the
Investor a Note against advancement to the Company by the Investor of the
installment amount of the Aggregate Commitment. The Company will not sell
additional Notes to any person other than the Investor without the prior written
consent of the Investor.
(b) The Company shall not request an advance of an installment at any
Subsequent Closing in an amount in which the principal, and any accrued interest
thereon, of a Note shall be convertible into greater than 19.9% of the Company's
issued and outstanding Common Stock (assuming conversion of the Preferred
Shares) as of the date of the advance of such installment (the "THRESHOLD
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RESTRICTION"); provided, however, that there shall be no such Threshold
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Restriction if the Company has complied with the Stockholder Notice set forth in
Section 8.6 herein.
3. THE NOTES.
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3.1 Form of Note. Each Note to be issued by the Company to the Investor
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hereunder at the Initial Closing and each Subsequent Closing shall be
substantially in the form attached hereto as EXHIBIT A. Each such Note shall be
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identical in form, except that the principal amount of each Note shall be
modified to reflect the amount and original issue date of the applicable
installment of the Aggregate Commitment. Each of the Notes shall be secured by
all of the Company's assets and intellectual property as evidenced by a Security
Agreement by and between the Company and the Investor entered into as of the
date hereof, such Security Agreement to be in the form attached hereto as
EXHIBIT C.
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3.2 Conversion of Note. Subject to the terms, conditions and
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obligations of the parties herein and the terms and conditions set forth in the
Notes, which terms and conditions are incorporated herein by reference, Investor
may convert all or a portion of the principal outstanding under the Note and
accrued interest thereon into shares of Series A Convertible Preferred Stock in
accordance with Section 4 of the Note.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
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represents and warrants to the Investor that the statements in this Section 4
are true and correct, except as set forth in the Disclosure Letter from the
Company dated as of the date hereof (the "DISCLOSURE LETTER"). The term
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"CLOSING" used herein shall refer to the Initial Closing or any subsequent
Closing as the case may be.
4.1 Organization, Good Standing and Qualification. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all corporate power and authority required to
(a) own and hold its properties; (b) carry on its business as presently
conducted; (c) enter into this Agreement, the Notes, the Warrant, the Security
Agreement and the Technology Agreements (as defined in Section 6.8 herein)
(collectively, the "TRANSACTION DOCUMENTS") and to consummate the transactions
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contemplated hereby and thereby; and (d) to issue, sell and deliver the Notes,
the Warrant, the Preferred Shares and the Warrant Shares and the shares of the
Company's Common Stock, $.01 par value per share (the "COMMON STOCK") issuable
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upon conversion of the Preferred Shares and the Warrant Shares (the "CONVERSION
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SHARES," and, together with the Notes, the Warrant, the Preferred Shares and the
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Warrant Shares, are hereinafter the "SECURITIES"). The Company is qualified to
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do business and is in good standing in each jurisdiction in which the failure to
so qualify would have a Material Adverse Effect. As used in this Agreement,
"MATERIAL ADVERSE EFFECT" means a material adverse effect on, or a material
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adverse change in, the business, operations, financial condition, results of
operations, assets or liabilities of the Company.
4.2 Capitalization. As of the date hereof, the capitalization of the
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Company is as follows:
(a) Preferred Stock. 5,000,000 authorized shares of Preferred Stock,
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$.01 par value, of which 3,400,000 shares have been approved by the Board of
Directors and, upon filing of a Certificate of Designation with the Secretary of
State of Delaware, will be designated as Series A Convertible Preferred Stock,
the terms of which are set forth in EXHIBIT D attached hereto, none of which is
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issued or outstanding.
(b) Common Stock. 20,000,000 authorized shares of Common Stock of
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which 9,291,925 shares are issued and outstanding. All of such outstanding
shares are validly issued, fully paid and non-assessable. No such outstanding
shares were issued in violation of any preemptive right.
(c) Options, Warrants, Reserved Shares. Except for the Transaction
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Documents and the Securities and the plans set forth in the SEC Documents (as
defined below) (the "PLANS"), there are not outstanding any options, warrants,
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rights (including conversion or preemptive rights) or agreements for the
purchase or acquisition from the Company of any shares of its capital stock or
any securities convertible into or ultimately exchangeable or exercisable for
any shares of the Company's capital stock. Except for the rights granted to
Investor under the Transaction Documents and the Securities and any stock
repurchase rights of the Company under the Plans, no shares of the Company's
outstanding capital stock, or stock issuable upon exercise, conversion or
exchange of any outstanding options, warrants or rights, or other stock issuable
by the Company, are subject to any rights of first refusal or other rights to
purchase such stock (whether in favor of the Company or any other person),
pursuant to any agreement, commitment or other obligation of the Company.
4.3 Subsidiaries. The Company does not presently own or control,
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directly or indirectly, any interest in any other corporation, partnership,
limited liability company, trust, joint venture, association or other entity.
4.4 Due Authorization. All corporate action on the part of the
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Company, its officers, directors and shareholders necessary for the
authorization, execution, delivery of, and the performance of all obligations of
the Company under the Transaction Documents, and the authorization, issuance,
reservation for issuance and delivery of all of the Securities being sold or
issued under this Agreement has been taken or will be taken prior to the
Closing, and this
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Agreement constitutes, valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as may be limited by (a) applicable bankruptcy, insolvency,
reorganization or others laws of general application relating to or affecting
the enforcement of creditors' rights generally, (b) the effect of rules of law
governing the availability of equitable remedies and (c) the fact that any
indemnification or contribution provision contained in the Transaction Documents
may be unenforceable insofar as the enforceability of such provision may be
sought under United States federal or state securities laws.
4.5 Valid Issuance of Securities.
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(a) The Preferred Shares and the Warrant Shares have been duly
reserved for issuance upon conversion of the Notes and the exercise of the
Warrant, the Conversion Shares have been duly reserved for issuance upon
conversion of the Preferred Shares and the Warrant Shares, and the Preferred
Shares, the Warrant Shares and the Conversion Shares when so issued, will be
duly authorized, validly issued, fully paid and nonassessable shares of capital
stock with no personal liability attaching to the ownership thereof and will be
free and clear of all liens, charges, restrictions, claims and encumbrances
imposed by or through the Company except as set forth in the Transaction
Documents.
(b) Based in part on the representations made by the Investor in
Section 4 hereof, the Notes, and the Preferred Shares, the Warrant Shares and
the Conversion Shares, when so issued, will be issued in compliance with the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended (the "1933 ACT"), or in compliance with applicable exemptions
therefrom, and the registration and qualification requirements of all applicable
securities laws of the Commonwealth of Massachusetts and the State of
California, as applicable.
(c) The issuance of the Notes and the Warrant hereunder do not
require, and the Preferred Shares, the Warrant Shares and the Conversion Shares,
when so issued, will not require the approval of the stockholders of the Company
under the rules of The Nasdaq National Market.
4.6 Governmental Consents. No consent, approval, order or
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authorization of, or registration, qualification, designation, declaration or
filing with, any United States federal, state or local governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for the filing of such
qualifications or filings under the 1933 Act and the regulations thereunder,
under The Nasdaq National Market rules and all applicable United States federal
and state securities laws as may be required in connection with the transactions
contemplated by this Agreement. All such qualifications will be effective on
the Closing and all such filings have been or will be made within the time
prescribed by law.
4.7 Non-Contravention. The execution, delivery and performance of
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the Transaction Documents by the Company, and the consummation by the Company of
the transactions contemplated hereby and thereby, do not and will not (i)
contravene or conflict with
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the Certificate of Incorporation or By-laws of the Company; (ii) constitute a
material violation of any provision of any United States federal, state, local
or, to the Company's knowledge, foreign (non-United States) law binding upon or
applicable to the Company; or (iii) constitute a default or require any consent
under, give rise to any right of termination, cancellation or acceleration of,
or to a loss of any benefit to which the Company is entitled under, or result in
the creation or imposition of any lien, claim or encumbrance on any assets of
the Company under, any contract to which the Company is a party or any permit,
license or similar right relating to the Company or by which the Company may be
bound or affected in such a manner as would have Material Adverse Effect.
4.8 Litigation. Except as disclosed in the SEC Documents, there is
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no action, suit, proceeding, claim, arbitration or investigation ("ACTION")
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pending: (a) against the Company, its activities, properties or assets or, to
the best of the Company's knowledge, against any officer, director or employee
of the Company in connection with such officer's, director's or employee's
relationship with, or actions taken on behalf of, the Company which is
reasonably likely to have a Material Adverse Effect, (b) that seeks to prevent,
enjoin, alter or delay the transactions contemplated by this Agreement or the
Investor Rights Agreement. Except as individually or in the aggregate is not
reasonably likely to have a Material Adverse Effect, (i) there is no Action
pending or, to the best of the Company's knowledge, threatened, relating to the
current or prior employment of any of the Company's current or former employees
or consultants, their use in connection with the Company's business of any
information, technology or techniques allegedly proprietary to any of their
former employers, clients or other parties, or their obligations under any
agreements with prior employers, clients or other parties, and (ii) the Company
is not a party to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality. No
Action by the Company is currently pending nor does the Company have a current
intent to initiate any Action which is reasonably likely to have a Material
Adverse Effect.
4.9 Intellectual Property.
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(a) Ownership or Right to Use. To the Company's knowledge, the
Company has title to and owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents or patent applications, software, know-
how, registered or unregistered trademarks and service marks and any
applications therefor, registered or unregistered copyrights, trade names, and
any applications therefor, trade secrets or other confidential or proprietary
information ("INTELLECTUAL PROPERTY") necessary to enable the Company to carry
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on its business as currently conducted or as presently proposed to be conducted,
except where any deficiency therein would not have a Material Adverse Effect.
(b) Licenses; Other Agreements. The Company is not currently
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subject to any exclusive licenses (whether such exclusivity is temporary or
permanent) to any material portion of the Intellectual Property of the Company.
To the Company's knowledge, there are not outstanding any licenses or agreements
of any kind relating to any Intellectual Property of the Company, except for
agreements with OEM's and other customers of the Company entered into in the
ordinary course of the Company's business. The Company is not
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obligated to pay any royalties or other payments to third parties with respect
to the marketing, sale, distribution, manufacture, license or use of any
Intellectual Property, except as the Company may be so obligated in the ordinary
course of its business or as disclosed in the Company's SEC Documents (as
defined below) or where the failure to make such payments would not have a
Material Adverse Effect.
(c) No Infringement. To the Company's knowledge, the Company has not
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violated or infringed and is not currently violating or infringing, and the
Company has not received any communications alleging that the Company (or any of
its employees or consultants) has violated or infringed, any Intellectual
Property of any other person or entity, to the extent that any such violation or
infringement, either individually or together with all other such violations and
infringements, would have a Material Adverse Effect.
(d) Employees and Consultants. To the Company's knowledge, no
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employee of or consultant to the Company is in default under any term of any
employment contract, agreement or arrangement relating to Intellectual Property
of the Company or any non-competition arrangement, other contract, or any
restrictive covenant relating to the Intellectual Property of the Company, which
default would have a Material Adverse Effect.
4.10 Compliance with Law and Charter Documents. The Company is not
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in violation or default of any provisions of its Certificate of Incorporation or
By-laws, both as amended, and except for any violations that would not, either
individually or in the aggregate, have a Material Adverse Effect. The Company
has complied and is in compliance with all applicable statutes, laws, and
regulations and executive orders of the United States of America, and all
states, and, to the Company's knowledge, foreign countries (non-United States)
and other governmental bodies and agencies having jurisdiction over the
Company's business or properties except where such noncompliance would not,
either individually or in the aggregate, have a Material Adverse Effect.
4.11 Registration Rights. Except as provided in the Investor Rights
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Agreement or as described in, or filed as exhibits to, the SEC Documents (as
defined below) effective upon the Closing, the Company is not currently subject
to any grant or agreement to grant to any person or entity any rights (including
piggyback registration rights) to have any securities of the Company registered
with the Securities and Exchange Commission ("SEC") or any other governmental
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authority.
4.12 SEC Documents.
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(a) The Company has furnished to the Investor prior to the date hereof
copies of its Annual Report on Form 10-K, as amended, for the fiscal year ended
December 27, 1997 ("FORM 10-K"), and all other registration statements, reports
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and proxy statements filed by the Company with the SEC on or after December 27,
1997 (the Form 10-K and such registration statements, reports and proxy
statements, are collectively referred to herein as the "SEC DOCUMENTS"). Each
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of the SEC Documents, as of the respective date thereof, did not, and each of
the registration statements, reports and proxy statements filed by the Company
with the SEC after the date hereof and prior to the Closing will not, as of the
date thereof, contain any untrue
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statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, except as may have been corrected in a
subsequent SEC Document. The Company is not a party to any material contract,
agreement or other arrangement which was required to have been filed as an
exhibit to the SEC Documents that is not so filed.
(b) The Company has provided the Investor with its audited financial
statements (the "AUDITED FINANCIAL STATEMENTS") for the fiscal year ended
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December 27, 1997 (the "BALANCE SHEET DATE") and its unaudited financial
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statements as of March 28, 1998. Since December 28, 1997, the Company has duly
filed with the SEC all registration statements, reports and proxy statements
required to be filed by it under the Securities Exchange Act of 1934, as
amended, and the 1933 Act. The audited and unaudited consolidated financial
statements of the Company included in the SEC Documents filed prior to the date
hereof fairly present, in conformity with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis (except as may be
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indicated in the notes thereto), the consolidated financial position of the
Company and its consolidated subsidiaries as at the date thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject to normal year and audit adjustments in the case of unaudited
interim financial statements).
(c) Except as and to the extent reflected or reserved against in the
Company's Audited Financial Statements and the unaudited financial statements as
of March 28, 1998 (including the notes thereto), the Company has no material
liabilities (whether accrued or unaccrued, liquidated or unliquidated, secured
or unsecured, joint or several, due or to become due, vested or unvested,
executory, determined or determinable) other than: (i) liabilities incurred in
the ordinary course of business since the Balance Sheet Date that are consistent
with the Company's past practices, (ii) liabilities with respect to agreements
to which the Investor is a party, and (iii) other liabilities that either
individually, or in the aggregate, would not result in a Material Adverse
Effect.
4.13 Absence of Certain Changes Since Balance Sheet Date. Since the
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Balance Sheet Date, and, except as set forth in the Disclosure Letter, the
business and operations of the Company have been conducted in all material
respects in the ordinary course consistent with past practice and there has not
been:
(a) any declaration, setting aside or payment of any dividend or other
distribution of the assets of the Company with respect to any shares of capital
stock of the Company, or any repurchase, redemption or other acquisition by the
Company or any subsidiary of the Company of any outstanding shares of the
Company's capital stock;
(b) any damage, destruction or casualty loss, whether or not covered
by insurance, except for such occurrences that have not resulted, and are not
expected to result, in a Material Adverse Effect;
(c) any waiver by the Company of a valuable right or of a material
debt owed to it, except for such waivers that have not resulted, and are not
expected to result, in a Material Adverse Effect;
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(d) any material change or amendment to, or any waiver of any material
rights under, a material contract or arrangement by which the Company or any of
its assets or properties is bound or subject, except for changes, amendments, or
waivers that are expressly provided for or disclosed in this Agreement or that
have not resulted, and are not expected to result, in a Material Adverse Effect;
(e) any change by the Company in its accounting principles, methods or
practices or in the manner it keeps its accounting books and records, except any
such change required by a change in GAAP; and
(f) any other event or condition of any character, except for such
events and conditions that have not resulted, and are not expected to result, in
a Material Adverse Effect.
4.14 Full Disclosure. This Agreement, the Disclosure Letter and the
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SEC Documents with respect to the business, operations, assets, results of
operations and financial condition of the Company, and the transactions
contemplated by the Transaction Documents do not contain any untrue statement of
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
5. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE INVESTOR.
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The Investor hereby represents and warrants to the Company, and agrees that:
5.1 Authorization. This Agreement has been duly authorized by all
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necessary corporate action on the part of the Investor. This Agreement
constitutes the Investor's valid and legally binding obligations, enforceable in
accordance with its respective terms, except as may be limited by (a) applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the enforcement of creditors' rights generally, (b) the
effect of rules of law governing the availability of equitable remedies, and (c)
the fact that any indemnification or contribution provision contained in the
Transaction Documents may be unenforceable insofar as the enforceability of such
provision may be sought under United States federal, or state securities laws.
The Investor has full corporate power and authority to enter into the
Transaction Documents.
5.2 Purchase for Own Account. The Securities are being acquired for
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investment for the Investor's own account, not as a nominee or agent, and not
with a view to the public resale or distribution thereof within the meaning of
the 1933 Act, and the Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. The Investor also
represents that it has not been formed for the specific purpose of acquiring the
Securities.
5.3 Non-Contravention. The execution, delivery and performance of
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this Agreement by the Investor, and the consummation by the Investor of the
transactions contemplated hereby and thereby, do not and will not (i) contravene
or conflict with the Certificate of Incorporation or By-laws of the Investor;
(ii) constitute a material violation of any
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provision of any United States federal, state, local or, to the Investor's
knowledge, foreign (non-United States) law binding upon or applicable to the
Investor; or (iii) constitute a default or require any consent under, give rise
to any right of termination, cancellation or acceleration of, or to a loss of
any benefit to which the Investor is entitled under, or result in the creation
or imposition of any lien, claim or encumbrance on any assets of the Investor
under, any contract to which the Investor is a party or any permit, license or
similar right relating to the Investor or by which the Investor may be bound or
affected in such a manner as would have Material Adverse Effect.
5.4 Investment Experience. The Investor understands that the
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purchase of the Securities involves substantial risk. The Investor has
experience as an investor in securities of companies and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment in the
Securities and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of this investment
in the Securities and protecting its own interests in connection with this
investment.
5.5 Accredited Investor Status. The Investor is an "ACCREDITED
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INVESTOR" within the meaning of Regulation D promulgated under the 1933 Act.
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5.6 Restricted Securities. The Investor understands that the
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Securities to be issued to the Investor hereunder are characterized as
"RESTRICTED SECURITIES" under the 1933 Act inasmuch as they are being acquired
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from the Company in a transaction not involving a public offering and that under
the 1933 Act and applicable regulations thereunder such securities may be resold
without registration under the 1933 Act only in certain limited circumstances.
The Investor is familiar with Rule 144 of the SEC, as presently in effect, and
understands the resale limitations imposed thereby and by the 1933 Act. The
Investor understands that the Company is under no obligation to register any of
the securities sold hereunder except as provided in the Investor Rights
Agreement.
5.7 Further Limitations on Disposition. Without in any way limiting
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the representations set forth above, the Investor further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) there is then in effect a registration statement under the 1933
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) the Investor has notified the Company of the proposed disposition
and has furnished the Company with a statement of the circumstances surrounding
the proposed disposition, and the Investor has furnished the Company, at the
expense of the Investor or its transferee, with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration of such securities under the 1933 Act.
Notwithstanding the provisions of paragraphs (a) and (b) of this Section 4.7, no
such registration statement will be required for any transfer of the Securities
in compliance with Rule 144,
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Rule 144A or Rule 145(d) of the SEC, or if such transfer otherwise is exempt, in
the reasonable opinion of the Company's legal counsel, from the registration
requirements of the 0000 Xxx.
5.8 Legends. Certificates evidencing the Preferred Shares, the
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Warrant Shares and the Conversion Shares, when so issued, will bear each of the
legends set forth below:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS
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OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
(b) THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS SPECIFIED IN A CERTAIN INVESTOR RIGHTS AGREEMENT BETWEEN THE
COMPANY AND THE ORIGINAL HOLDER OF SUCH SHARES DATED AS OF [ ], A COPY OF
WHICH IS AVAILABLE FOR EXAMINATION AT THE ISSUER'S PRINCIPAL OFFICE.
(c) Any Legends required by any applicable state securities laws.
The Legend set forth in Section 5.8(a) hereof will be removed by the Company
from any certificate evidencing the Preferred Shares, the Warrant Shares or
Conversion Shares upon delivery to the Company of an opinion by counsel,
reasonably satisfactory to the Company, that a registration statement under the
1933 Act is at that time in effect with respect to the legended security or that
such security can be freely transferred in a public sale without such a
registration statement being in effect and that such transfer will not
jeopardize the exemption or exemptions from registration pursuant to which the
Company issued such securities.
6. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT THE INITIAL CLOSING. The
---------------------------------------------------------------
obligations of the Investor under Sections 1 and 2 of this Agreement are subject
to the fulfillment or waiver, on or before the Initial Closing, of each of the
following conditions:
6.1 Representations and Warranties True. Each of the representations
-----------------------------------
and warranties of the Company contained in Section 4 will be true and correct on
and as of the date hereof and on and as of the date of the Initial Closing,
except as set forth in the Disclosure Letter, as amended through the Initial
Closing, with the same effect as though such representations and warranties had
been made as of the Initial Closing.
-12-
6.2 Performance. The Company will have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Initial Closing
and will have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
6.3 Securities Exemptions. The offer, sale and issuance of the
---------------------
Securities to the Investor pursuant to this Agreement will be exempt from the
registration requirements of the 1933 Act and the registration and/or
qualification requirements of all applicable state securities laws.
6.4 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Initial Closing and all
documents incident thereto will be reasonably satisfactory in form and substance
to the Investor, and the Investor will have received all such counterpart
originals and certified or other copies of such documents as it may reasonably
request. Such documents shall include (but not be limited to) the following:
(a) Certified Charter Documents. A copy of (i) the Certificate of
---------------------------
Incorporation and (ii) the By-laws of the Company (each as amended through the
date of the Initial Closing) certified by the Secretary of the Company as true
and correct copies thereof as of the Initial Closing.
(b) Board Resolutions. A copy, certified by the Secretary of the
-----------------
Company, of the resolutions of the Board of Directors of the Company providing
for the approval of the Transaction Documents and the issuance of the Securities
and the other matters contemplated hereby.
6.5 Opinion of Company Counsel. The Investor will have received an
--------------------------
opinion on behalf of the Company, dated as of the date of the Initial Closing,
from counsel to the Company, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC,
in form and substance reasonably satisfactory to the Investor.
6.6 Series A Convertible Preferred Stock Terms. The rights,
------------------------------------------
privileges and preferences of the Preferred Shares and the Warrant Shares shall
be as set forth in the terms of the Series A Convertible Preferred Stock set
forth in EXHIBIT E hereto, which terms shall have been approved and authorized
---------
by the Board of Directors of the Company as of the date hereof.
6.7 Security Agreement. The Company shall have executed a Security
------------------
Agreement substantially in the form attached hereto as EXHIBIT D in favor of the
---------
Investor and Marine Midland Bank shall have consented to Investor's security
interest in all of the Company's assets and intellectual property in accordance
with the Security Agreement.
6.8 Technology Agreements. The Company shall have entered into the
---------------------
Product Development & Marketing Agreement, the Patent License and the Agreement
for the Disclosure of SGI Restricted Confidential Information substantially in
the forms attached hereto as EXHIBIT F (collectively, the "TECHNOLOGY
--------- ----------
AGREEMENTS").
----------
-13-
6.9 Marine Midland Bank; Extension of Forbearance Agreement. The
-------------------------------------------------------
Company shall have obtained an extension of its forbearance agreement with
Marine Midland Bank until September 30, 1998 satisfactory in form and substance
to the Investor.
7. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT THE INITIAL CLOSING. The
--------------------------------------------------------------
obligations of the Company to the Investor under this Agreement are subject to
the fulfillment or waiver on or before the Initial Closing, of each of the
following conditions:
7.1 Representations and Warranties True. The representations and
-----------------------------------
warranties of the Investor contained in Section 5 will be true and correct on
and as of the date hereof and on and as of the date of the Initial Closing with
the same effect as though such representations and warranties had been made as
of the Initial Closing.
7.2 Cancellation of Original Note and Original Warrants. The
---------------------------------------------------
Investor will have delivered to the Company the Original Note and Original
Warrants for cancellation as specified in Section 1.3.
7.3 Securities Exemptions. The offer and sale of the Securities to
---------------------
the Investor pursuant to this Agreement will be exempt from the registration
requirements of the 1933 Act and the registration and/or qualification
requirements of all applicable state securities laws.
7.4 Technology Agreements; Security Agreement. The Investor shall
-----------------------------------------
have entered into the Technology Agreements and have agreed to and acknowledged
the Security Agreement.
7.5 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Initial Closing and all
documents incident thereto will be reasonably satisfactory in form and substance
to the Company and to the Company's legal counsel, and the Company will have
received all such counterpart originals and certified or other copies of such
documents as it may reasonably request.
8. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT SUBSEQUENT CLOSINGS. The
---------------------------------------------------------------
obligations of the Investor under Sections 1 and 2 of this Agreement with
respect to Subsequent Closings are subject to the fulfillment or waiver, on or
before each such Subsequent Closing, of each of the following conditions (except
for 8.6 which shall be applicable if the Company requests an advance of an
installment of the Aggregate Commitment greater than the Threshold Restriction):
8.1 Representations and Warranties True. Each of the representations
-----------------------------------
and warranties of the Company contained in Section 4 (including in the
Disclosure Letter) will be true and correct on and as of the date of the
Subsequent Closing, (except as to such changes as have occurred in the ordinary
course of the Company's business and which do not have, individually or in the
aggregate, a Material Adverse Effect).
8.2 Performance. The Company will have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be
-14-
performed or complied with by it on or before the Subsequent Closing and will
have obtained all approvals, consents and qualifications necessary to complete
the purchase and sale described herein.
8.3 Securities Exemptions. The offer, sale and issuance of the
---------------------
Securities to the Investor at such Subsequent Closing will be exempt from the
registration requirements of the 1933 Act and the registration and/or
qualification requirements of all applicable state securities laws.
8.4 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Subsequent Closing and
all documents incident thereto will be reasonably satisfactory in form and
substance to the Investor, and the Investor will have received all such
counterpart originals and certified or other copies of such documents as it may
reasonably request.
8.5 No Material Adverse Effect. Between the Initial Closing and each
--------------------------
Subsequent Closing, there shall not have occurred any Material Adverse Effect.
8.6 Stockholder Notice. If the Company requests an advance of an
------------------
installment of the Aggregate Commitment in an amount greater than the Threshold
Restriction, the Company shall mail to all stockholders of the Company not later
than ten (10) days before the date of the intended Subsequent Closing a letter
complying with Rule 4460(i) of The Nasdaq National Market.
9. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT SUBSEQUENT CLOSINGS. The
--------------------------------------------------------------
obligations of the Company to the Investor under this Agreement are subject to
the fulfillment or waiver on or before each Subsequent Closing, of each of the
following conditions:
9.1 Representations and Warranties True. The representations and
-----------------------------------
warranties of the Investor contained in Section 5 will be true and correct on
and as of the date of each Subsequent Closing.
9.2 Payment of Installment of Aggregate Commitment. The Investor
----------------------------------------------
will have delivered to the Company the requisite installment of the Aggregate
Commitment required to be delivered by it in connection with the Subsequent
Closing.
9.3 Securities Exemptions. The offer and sale of the Securities to
---------------------
the Investor at such Subsequent Closing will be exempt from the registration
requirements of the 1933 Act and the registration and/or qualification
requirements of all applicable state securities laws.
9.4 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto will be reasonably satisfactory in form and substance
to the Company and to the Company's legal counsel, and the Company will have
received all such counterpart originals and certified or other copies of such
documents as it may reasonably request.
-15-
10. INDEMNIFICATION.
---------------
10.1 Agreement to Indemnify.
----------------------
(a) Company Indemnity. The Investor, its Affiliates (as defined
-----------------
below), and each officer and director, of any of the foregoing (collectively,
the "INVESTOR INDEMNITEES") shall each be indemnified and held harmless to the
--------------------
extent set forth in this Section 10 by the Company with respect to any and all
Damages (as defined below) incurred by any Investor Indemnitee as a result of
any inaccuracy or misrepresentation in, or breach of, any representation,
warranty, covenant or agreement made by the Company in this Agreement or the
Investor Rights Agreement (including any Exhibits and Schedules hereto).
(b) Investor Indemnity. The Company, its Affiliates, and each officer
------------------
and director, of any of the foregoing (collectively, the "COMPANY INDEMNITEES")
-------------------
shall each be indemnified and held harmless to the extent set forth in this
Section 10, by the Investor, in respect of any and all Damages incurred by any
Company Indemnitee as a result of any inaccuracy or misrepresentation in, or
breach of, any representation, warranty, covenant or agreement made by the
Investor in this Agreement or the Investor Rights Agreement (including any
Exhibits and Schedules hereto).
(c) Equitable Relief. Nothing set forth in this Section 10 shall be
----------------
deemed to prohibit or limit any Investor Indemnitee's or Company Indemnitee's
right at any time before, on or after the Closing Date, to seek injunctive or
other equitable relief for the failure of any Indemnifying Party to perform or
comply with any covenant or agreement contained herein.
10.2 Survival. All representations and warranties of the Investor
--------
and the Company contained herein, and all claims of any Investor Indemnitee or
Company Indemnitee in respect of any inaccuracy or misrepresentation in or
breach thereof, shall survive the Closing until twelve (12) months from the date
of this Agreement, regardless of whether the applicable statute of limitations,
including extensions thereof, may expire (except to the extent any such covenant
or agreement shall expire by its terms). All covenants and agreements of the
Investor and the Company contained herein or in the Investor Rights Agreement
shall survive the Closing in perpetuity (except to the extent any such covenant
or agreement shall expire by its terms). All claims of any Investor Indemnitee
or Company Indemnitee in respect of any breach of such covenants or agreements
shall survive the Closing until the expiration of twelve (12) months following
the non-breaching party's obtaining actual knowledge of such breach.
10.3 Claims for Indemnification. If any Investor Indemnitee or
--------------------------
Company Indemnitee (an "INDEMNITEE") shall believe that such Indemnitee is
----------
entitled to indemnification pursuant to this Section 10 in respect of any
Damages, such Indemnitee shall give the appropriate Indemnifying Party (which
for purposes hereof, in the case of an Investor Indemnitee, means the Company,
and in the case of a Company Indemnitee, means the Investor) prompt written
notice thereof. Any such notice shall set forth in reasonable detail and to the
extent then known the basis for such claim for indemnification. The failure of
such Indemnitee to give notice of any claim for indemnification promptly shall
not adversely affect such Indemnitee's right to indemnity hereunder except to
the extent that such failure adversely affects the right of the
-16-
Indemnifying Party to assert any reasonable defense to such claim. Each such
claim for indemnity shall expressly state that the Indemnifying Party shall have
only the twenty (20) business day period referred to in the next sentence to
dispute or deny such claim. The Indemnifying Party shall have twenty (20)
business days following its receipt of such notice either (a) to acquiesce in
such claim by giving such Indemnitee written notice of such acquiescence or (b)
to object to the claim by giving such Indemnitee written notice of the
objection. If Indemnifying Party does not object thereto within such twenty (20)
business day period, such Indemnitee shall be entitled to be indemnified for all
Damages reasonably incurred by such Indemnitee in respect of such claim. If the
Indemnifying Party objects to such claim in a timely manner, the senior
management of the Company and the Investor shall meet to attempt to resolve such
dispute. If the dispute cannot be resolved by the senior management either party
may make a written demand for formal dispute resolution and specify therein the
scope of the dispute. Within thirty days after such written notification, the
parties agree to meet for one day with an impartial mediator and consider
dispute resolution alternatives other than litigation. If an alternative method
of dispute resolution is not agreed upon within thirty days after the one day
mediation, either party may begin litigation proceedings. Nothing in this
section shall be deemed to require arbitration.
10.4 Defense of Claims. In connection with any claim that may give
-----------------
rise to indemnity under this Section 10 resulting from or arising out of any
claim or Proceeding (as defined below) against an Indemnitee by a person or
entity that is not a party hereto, the Indemnifying Party may but shall not be
obligated to (unless such Indemnitee elects not to seek indemnity hereunder for
such claim), upon written notice to the relevant Indemnitee, assume the defense
of any such claim or proceeding if the Indemnifying Party with respect to such
claim or Proceeding acknowledges to the Indemnitee the Indemnitee's right to
indemnity pursuant hereto to the extent provided herein (as such claim may have
been modified through written agreement of the parties or arbitration hereunder)
and provides assurances, reasonably satisfactory to such Indemnitee, that the
Indemnifying Party will be financially able to satisfy such claim to the extent
provided herein if such claim or Proceeding is decided adversely; provided,
--------
however, that nothing set forth herein shall be deemed to require the
-------
Indemnifying Party to waive any crossclaims or counterclaims the Indemnifying
Party may have against the Indemnified Party for damages. The Indemnified Party
shall be entitled to retain separate counsel, reasonably acceptable to the
Indemnifying Party, if the Indemnified Party shall reasonably determine, upon
the written advice of counsel, that an actual or potential conflict of interest
exists between the Indemnifying Party and the Indemnified Party in connection
with such Proceeding. The Indemnifying Party shall be obligated to pay the
reasonable fees and expenses of such separate counsel to the extent the
Indemnified Party is entitled to indemnification by the Indemnifying Party with
respect to such claim or Proceeding under this Section 10.4. If the
Indemnifying Party assumes the defense of any such claim or Proceeding, the
Indemnifying Party shall select counsel reasonably acceptable to such Indemnitee
to conduct the defense of such claim or Proceeding, shall take all steps
reasonably necessary in the defense or settlement thereof and shall at all times
diligently and promptly pursue the resolution thereof. If the Indemnifying
Party shall have assumed the defense of any claim or Proceeding in accordance
with this Section 10.4, the Indemnifying Party shall be authorized to consent to
a settlement of, or the entry of any judgment arising from, any such claim or
Proceeding, with the prior written consent of such
-17-
Indemnitee, not to be unreasonably withheld; provided, however, that the
Indemnifying Party shall pay or cause to be paid all amounts arising out of such
settlement or judgment concurrently with the effectiveness thereof; provided,
further, that the Indemnifying Party shall not be authorized to encumber any of
the assets of any Indemnitee or to agree to any restriction that would apply to
any Indemnitee or to its conduct of business; and provided, further, that a
condition to any such settlement shall be a complete release of such Indemnitee
and its Affiliates, directors, officers, employees and agents with respect to
such claim, including any reasonably foreseeable collateral consequences
thereof. Such Indemnitee shall be entitled to participate in (but not control)
the defense of any such action, with its own counsel and at its own expense.
Each Indemnitee shall, and shall cause each of its Affiliates, directors,
officers, employees and agents to, cooperate fully with the Indemnifying Party
in the defense of any claim or Proceeding being defended by the Indemnifying
Party pursuant to this Section 10.4. If the Indemnifying Party does not assume
the defense of any claim or Proceeding resulting therefrom in accordance with
the terms of this Section 10.4, such Indemnitee may defend against such claim or
Proceeding in such manner as it reasonably may deem appropriate, including
settling such claim or proceeding after giving reasonable notice of the same to
the Indemnifying Party, on such terms as such Indemnitee may deem appropriate.
If any Indemnifying Party seeks to question the manner in which such Indemnitee
defended such claim or Proceeding or the amount of or nature of any such
settlement, such Indemnifying Party shall have the burden to prove by a
preponderance of the evidence that such Indemnitee did not defend such claim or
Proceeding in a reasonably prudent manner.
10.5 Certain Definitions. As used in this Section 10, (a)
-------------------
"AFFILIATE" means, with respect to any person or entity, any person or entity
---------
directly or indirectly controlling, controlled by or under direct or indirect
common control with such other person or entity; (b) "DAMAGES" means all
-------
damages, costs, expenses, or amounts paid in settlement to third parties,
including (1) interest on cash disbursements in respect of any of the foregoing
at the prime rate as published in the Wall Street Journal, as in effect from
time to time, compounded quarterly, from the date each such cash disbursement is
made until the date the party incurring such cash disbursement shall have been
indemnified in respect thereof, and (2) reasonable out-of-pocket costs, fees and
expenses (including reasonable costs, fees and expenses of attorneys,
accountants and other agents of, or other parties retained by, such party), and
(c) "PROCEEDING" means any action, suit, hearing, arbitration, proceeding
----------
(public or private) or investigation that is brought or initiated by or against
any United States federal, state, local or foreign governmental authority or any
other person or entity.
11. COVENANTS OF THE PARTIES. The Company covenants and agrees with the
------------------------
Investor, that for so long as (a) any of the Notes are outstanding, or (b) the
Investor continues to hold Preferred Shares (or Notes convertible for Preferred
Shares), based upon the then applicable conversion price, equal to at least five
percent (5%) of the then issued and outstanding shares of the Company's Common
Stock (provided, however, that such percentage shall not apply to Section 11.10
-------- --------
herein), and, with respect to Sections 11.7 and 11.8, the Investor covenants and
agrees with the Company, that:
-18-
11.1 Financial Statements, Reports, Etc. The Company shall furnish
-----------------------------------
to the Investor:
(a) annually no later than prior to the start of each fiscal year,
consolidated capital and operating expense budgets, cash flow projections and
income and loss projections for the Company and its subsidiaries, if any, in
respect of such fiscal year, which shall have been approved by the Board of
Directors, all itemized in reasonable detail and prepared on a quarterly basis
(and on a monthly basis through September 30, 1998), and, promptly after
preparation, any revisions to any of the foregoing;
(b) promptly following receipt by the Company, each audit response
letter, accountant's management letter and other written report submitted to the
Company by its independent public accountants in connection with an annual or
interim audit of the books of the Company and its subsidiaries;
(c) promptly after the commencement thereof, notice of all actions,
suits, claims, proceedings, investigations and inquiries of the type described
in Section 4.8 which is reasonably like to have a Material Adverse Effect;
(d) promptly upon sending, making available or filing the same, all
press releases, reports and financial statements that the Company sends or makes
available to its stockholders or directors or files with the SEC; and
(e) promptly, from time to time, such other information regarding the
business, prospects, financial condition, operations, property or affairs of the
Company and its subsidiaries as the Investor reasonably may request.
Investor agrees to maintain all such information provided by the
Company pursuant to this Section 11.1 on a confidential basis.
11.2 Inspection, Consultation and Advice. The Company shall permit
-----------------------------------
and cause each of its subsidiaries to permit the Investor and such persons as it
may designate, at such Investor's expense, to visit and inspect any of the
properties of the Company and its subsidiaries, examine their books and take
copies and extracts therefrom, discuss the affairs, finances and accounts of the
Company and its subsidiaries with their officers, employees and public
accountants (and the Company hereby authorizes said accountants to discuss with
such Investor and such designees such affairs, finances and accounts), and
consult with and advise the management of the Company and its subsidiaries as to
their affairs, finances and accounts, all at reasonable times and upon
reasonable notice, and subject to the Investor's obligation to maintain the
confidentiality of such information.
11.3 Use of Proceeds. The Company shall use the principal amount of
---------------
the Notes for working capital purposes and certain capital expenditures as
described in the Disclosure Letter.
-19-
11.4 Activities of Subsidiaries. The Company will not organize or
--------------------------
acquire any entity that is a subsidiary unless such subsidiary is wholly-owned
(directly or indirectly) by the Company. The Company shall not permit any
subsidiary to consolidate or merge into or with or sell or transfer all or
substantially all its assets, except that any subsidiary may (i) consolidate or
merge into or with or sell or transfer assets to any other subsidiary, or (ii)
merge into or sell or transfer assets to the Company. The Company shall not
sell or otherwise transfer any shares of capital stock of any subsidiary, except
to the Company or another subsidiary, or permit any subsidiary to issue, sell or
otherwise transfer any shares of its capital stock or the capital stock of any
subsidiary, except to the Company or another subsidiary. The Company shall not
permit any subsidiary to purchase or set aside any sums for the purchase of, or
pay any dividend or make any distribution on, any shares of its stock, except
for dividends or other distributions payable to the Company or another
subsidiary.
11.5 Right of First Refusal. (a) Subject to 11.5(b), the Company
----------------------
shall, prior to any proposed issuance by the Company of any of its securities
(other than debt securities with no equity feature), offer to the Investor by
written notice the right, for a period of fifteen (15) days, to purchase for
cash at an amount equal to the price or other consideration for which such
securities are to be issued, any and all such securities; provided, however,
-------- -------
that the participation rights of the Investor pursuant to this Section 11.5
shall not apply to securities issued (A) as a stock dividend or upon any
subdivision of shares of Common Stock, provided that the securities issued
pursuant to such stock dividend or subdivision are limited to additional shares
of Common Stock, (B) pursuant to any subscriptions, warrants, options,
convertible securities, or other rights which are listed in the SEC Documents or
Disclosure Letter as being outstanding or authorized on the date of this
Agreement, (C) solely in consideration for the acquisition (whether by merger or
otherwise) by the Company or any of its subsidiaries of all or substantially all
of the stock or assets of any other entity, (D) pursuant to a firm commitment
public offering, and (E) pursuant to the exercise of options to purchase Common
Stock (appropriately adjusted to reflect stock splits, stock dividends,
combinations of shares and the like with respect to the Common Stock) granted to
directors, officers, employees or consultants of the Company in connection with
their service to the Company under the Plans or any Plan to be approved in the
future or issued pursuant to subscriptions, warrants, options, convertible
securities, or other rights outstanding or authorized on the date of this
Agreement and listed on the SEC Documents or the Disclosure Letter pursuant to
clause (B) above (the shares exempted by this clause (E) being hereinafter
referred to as the "RESERVED EMPLOYEE SHARES"). The Company's written notice to
------------------------
the Investor shall describe the securities proposed to be issued by the Company
and specify the number, price and payment terms. The Investor may accept the
Company's offer as to the any or all of the securities offered to it, by written
notice thereof given by it to the Company prior to the expiration of the
aforesaid fifteen (15) day period, in which event the Company shall promptly
sell and such Investor shall buy, upon the terms specified, the number of
securities to be purchased by such Investor. The Company shall be free at any
time prior to one hundred twenty (120) days after the date of its notice of
offer to the Investor, to offer and sell to any third party or parties the
remainder of such securities proposed to be issued by the Company (including but
not limited to the securities not agreed by the Investor to be purchased by it),
at a price and on payment terms no less favorable to the Company than those
specified in such notice of offer to the Investor. However, if such third party
sale or sales are not consummated within such one hundred twenty (120) day
period,
-20-
the Company shall not sell such securities as shall not have been purchased
within such period without again complying with this Section 11.5.
(b) Notwithstanding the foregoing, the Investor's right set forth in
11.5(a) herein shall not apply to (i) any issuance by the Company of any of its
securities pursuant to a registration statement filed with the SEC on or after
August 31, 1998 and (ii) any issuance by the Company of its securities after
September 30, 1998, provided, however, if Investor has elected to convert the
--------- -------
principal and/or interest outstanding under any of the Notes and Investor
continues to hold Preferred Shares, based on the then applicable conversion
price, equal to at least five percent (5%) of the then issued and outstanding
shares of Common Stock, Investor shall maintain its rights under Section 11.5(a)
to participate on a pro-rata basis with respect to any such issuance of
securities by the Company after September 30, 1998.
11.6 No Solicitation. Except to the extent the Board of Directors of
---------------
the Company, after having consulted with and considered the advice of outside
counsel, determines in good faith that the failure to take such actions would
constitute a breach of fiduciary duties of the members of such Board of
Directors to its stockholders under applicable law, the Company will not
directly or indirectly at any time prior to September 30, 1998 (or authorize its
agents, investment bankers, officers, directors, employees, affiliates or
representatives of any of their respective family members to) solicit,
entertain, negotiate or discuss with any person or entity (other than Investor)
the sale or licensing of the Company's products (other than transactions
consistent with the Company's ordinary course of business) or the sale or
transfer of the Company or the Company's business, whether by asset sale, stock
sale, merger or otherwise or enter into any agreement or understanding with
respect thereto (and except with respect to any transaction permitted under
Section 11.5(b)(i)). If the Company (or any of its agents, investment bankers,
officers, directors, employees, affiliates or representatives or any of their
respective family members) shall receive any bona fide offer or proposal
concerning the above, the Company shall promptly deliver notice thereof to
Investor.
11.7 Public Announcements; Disclosure. Investor and the Company
--------------------------------
shall consult with each other before issuing any press release or otherwise
making any public statements (including, without limitation, any statement
contained in, or any filing of a Transaction Document as an exhibit to, any
filing with the SEC) with respect to the transactions contemplated hereby and
shall not issue any such press release or make any such public statement without
the prior written consent of both parties, except as may be required by law. In
the event any such public statement is required by law, each party shall make a
good faith effort to consult with the other party, and in any event shall notify
the other party in advance, prior to making such public statement. The Investor
shall designate a representative to respond to inquiries from the media and
press concerning the transactions contemplated by the Transaction Documents
which representative shall be subject to the terms of this Section 11.7.
11.8 Certificate of Designation; Investor Rights Agreement. At such
--------------------------- -------------------------
time as Investor determines that it expects to convert a Note or exercise the
Warrant, the Investor may request in writing that the Company file a Certificate
of Designation pursuant to its corporate charter setting forth the terms of the
Series A Convertible Preferred Stock, and the Company
-21-
shall promptly file such Certificate of Designation with the Secretary of State
of Delaware. At such time as the Investor first converts a Note or exercises the
Warrant, the Company and the Investor shall enter into the Investor Rights
Agreement substantially in the form attached to this Agreement as EXHIBIT D.
---------
11.9 Board Observer Rights.
---------------------
(a) During the period from the date hereof until the Investor holds
Preferred Shares, based upon the then applicable conversion price, equal to at
least five percent (5%) of the then issued and outstanding shares of the
Company's Common Stock, based on the then applicable conversion price of such
securities, Investor shall be entitled to appoint a non-voting observer (the
"OBSERVER") to the Company's Board of Directors who is acceptable to the
---------
Company; and such Observer shall be entitled to attend all meetings of the
Company's Board of Directors and committees thereof (other than the audit,
nomination, governance, and compensation committees) and shall receive notice of
all meetings and all materials furnished to members of the Company's Board of
Directors in their capacities as such at the same time and in the same manner as
such notice and materials are provided to the Board of Directors, unless the
Board of Directors of the Company shall in good faith determine, after having
consulted with and considered the advice of outside counsel, that delivery of
such notice and/or materials to Investor would constitute a breach of fiduciary
duties of the members of such Board of Directors to its stockholders under
applicable law. Upon the request of the Board of Directors of the Company, the
Observer will excuse himself or herself from any portion of the Board or
committee meetings if the Board of Directors shall reasonably determine that the
Observer's presence may violate the attorney-client privilege, create a conflict
of interest or otherwise constitute a breach of fiduciary duties of the members
of such Board of Directors to its stockholders under applicable law. The
materials furnished to Investor and the discussions and presentations in
connection with or at such meetings shall be considered confidential information
and Investor shall not disclose such materials and discussions to any third
party; provided, however, that the foregoing shall not limit in any manner the
-------- -------
rights of Investor under the Technology Agreements.
(b) The Investor acknowledges that the use or disclosure of any information
which is material and non-public ("INSIDE INFORMATION"), or trading in the
------------------
securities of the Company on the basis of such Inside Information, may result in
civil and criminal penalties and enforcement proceedings commenced by the SEC
and others in the event the Investor, its affiliates or any of its employees
engages in transactions involving the capital stock of the Company. Because of
receipt of the confidential information provided to the Investor and its
Nominee, the Investor and its Nominee may be deemed to have Inside Information
regarding the Company.
(c) The Company acknowledges that the Observer will likely have, from time
to time, information that may be of interest to the Company ("INFORMATION")
-----------
regarding a wide variety of matters including, by way of example only, (a)
Investor's technologies, plans and services, and plans and strategies relating
thereto, (b) current and future investments Investor has made, may make, may
consider or may become aware of with respect to other companies and other
technologies, products and services, including, without limitation,
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technologies, products and services that may be competitive with the Company's,
and (c) developments with respect to the technologies, products and services,
and plans and strategies relating thereto, of other companies, including,
without limitation, companies that may be competitive with the Company. The
Company recognizes that a portion of such Information may be of interest to the
Company. Such Information may or may not be known by the Observer. The
Company, as a material part of the consideration for this Agreement, agrees that
Investor and its Observer shall have no duty to disclose any Information to the
Company or permit the Company to participate in any projects or investments
based on any Information, or to otherwise take advantage of any opportunity that
may be of interest to the Company if it were aware of such Information, and
hereby waives, to the extent permitted by law, any claim based on the corporate
opportunity doctrine or otherwise that could limit Investor's ability to pursue
opportunities based on such Information or that would require Investor or
Observer to disclose any such Information to the Company or offer any
opportunity relating thereto to the Company.
11.10 Termination of Purchase Agreement. The Company and the Investor
---------------------------------
hereby expressly agree that the terms of the Purchase Agreement shall terminate
as of the date hereof and have no further force and effect.
11.11 VESTING OF RESERVED EMPLOYEE SHARES. Except as disclosed in
-----------------------------------
the Plans, the Disclosure Letter delivered pursuant to the Purchase Agreement or
as otherwise approved by the Board of Directors, the Company shall not grant to
any of its employees options to purchase Reserved Employee Shares which will
become exercisable at a rate in excess of 25% per annum from the date of such
grant, nor will the Company accelerate the vesting of any outstanding options
without prior consultation with the Investor.
12. MISCELLANEOUS.
-------------
12.1 Successors and Assigns. The terms and conditions of this
----------------------
Agreement will inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. Neither party may assign this
Agreement or any rights hereunder without the consent of the other party, except
that Investor may assign its rights hereunder to a wholly-owned subsidiary.
12.2 Governing Law. This Agreement will be governed by and construed
-------------
under the internal laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware,
without reference to principles of conflict of laws or choice of laws.
12.3 Counterparts. This Agreement may be executed in counterparts,
------------
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.
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12.4 Headings. The headings and captions used in this Agreement are
--------
used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules will, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
12.5 Notices. Any notice required or permitted under this Agreement
-------
will be given in writing, shall be effective when received, and shall in any
event be deemed received and effectively given upon personal delivery to the
party to be notified one (1) business day after deposit with a nationally
recognized courier service such as Federal Express for next business day
delivery, or one (1) business day after being sent by facsimile with copy
delivered by a nationally recognized courier service such as Federal Express for
next business day delivery, addressed to the party to be notified at the
address indicated for such party on the signature page hereof or at such other
address as the Investor or the Company may designate by giving at least ten (10)
days advance written notice pursuant to this Section 12.5.
12.6 Financial Advisor; No Finder's Fees. The Company has retained
------------------ ----------------
Advest, Inc. ("ADVEST") as its exclusive financial advisor in connection with
------
the transactions contemplated by this Agreement. Other than any fee or
commission payable to Advest (which payment shall be the obligation of the
Company), each party represents that it neither is nor will be obligated for any
finder's or broker's fee or commission in connection with this transaction. The
Investor will indemnify and hold harmless the Company from any liability for any
commission or compensation in the nature of a finders' or broker's fee for which
the Investor or any of its officers, partners, employees or consultants, or
representatives is responsible. The Company will indemnify and hold harmless
the Investor from any liability for any commission or compensation in the nature
of a finder's or broker's fee for which the Company or any of its officers,
employees or consultants or representatives is responsible, including any fee or
compensation payable to Advest.
12.7 Amendments and Waivers. This Agreement may be amended and the
----------------------
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Investor. Any amendment or waiver
effected in accordance with this Section 12.7 will be binding upon the Investor,
the Company and their respective successors and assigns.
12.8 Severability. If any provision of this Agreement is held to be
------------
unenforceable under applicable law, such provision will be excluded from this
Agreement and the balance of the Agreement will be interpreted as if such
provision were so excluded and will be enforceable in accordance with its terms.
12.9 Entire Agreement. This Agreement, together with all Exhibits
----------------
and schedules hereto, constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings duties or
obligations between the parties with respect to the subject matter hereof.
-24-
12.10 Further Assurances. From and after the date of this Agreement
------------------
upon the request of the Investor or the Company, the Company and the Investor
will execute and deliver such instruments, documents or other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
12.11 Meaning of Include and Including. Whenever in this Agreement
--------------------------------
the word "include" or "including" is used, it shall be deemed to mean "include,
without limitation" or "including, without limitation," as the case may be, and
the language following "include" or "including" shall not be deemed to set forth
an exhaustive list.
12.12 Fees, Costs and Expenses. All fees, costs and expenses
------------------------
(including attorneys' fees and expenses) incurred by either party hereto in
connection with the preparation, negotiation and execution of the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby, shall be the sole and exclusive responsibility of such party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
NUMBER NINE VISUAL TECHNOLOGY CORPORATION SILICON GRAPHICS, INC.
By: /s/ Xxxxxx Xxxxx By:
------------------------------------ -----------------------------------
Name:/s/ XXXXXX XXXXX Name:
---------------------------------- ---------------------------------
Title: Chairman of the Board & CEO Title:
--------------------------------- --------------------------------
Address: 00 Xxxxxxxx Xxxxxx Address: 0000 X. Xxxxxxxxx Xxxx.
Xxxxxxxxx, Xxxxxxxxxxxxx 00000 Xxxxxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Chief Executive Officer Attention: Director of Corporate Legal Services
Telephone No.: (000) 000-0000 Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000 Facsimile No.: (000) 000-0000
WITH COPIES TO:
Xxxxxxx X. Xxxxx, Xx., Esq.
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx; Xxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Xxxx X. Xxxxxxx, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
NUMBER NINE VISUAL TECHNOLOGY CORPORATION SILICON GRAPHICS, INC.
By: By: /s/ XXXXX XXXXX
------------------------------------ ------------------------------------
Name: Name: Xxxxx Xxxxx
---------------------------------- ----------------------------------
Title: Title: Sr. Vice President
--------------------------------- --------------------------------
Address: 00 Xxxxxxxx Xxxxxx Address: 0000 X. Xxxxxxxxx Xxxx.
Xxxxxxxxx, Xxxxxxxxxxxxx 00000 Xxxxxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Chief Executive Officer Attention: Director of Corporate Legal Services
Telephone No.: (000) 000-0000 Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000 Facsimile No.: (000) 000-0000
WITH COPIES TO:
Xxxxxxx X. Xxxxx, Xx., Esq.
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx; Xxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Xxxx X. Xxxxxxx, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
-27-
CONVERTIBLE NOTE PURCHASE AGREEMENT
LIST OF EXHIBITS
----------------
Exhibit A - Form of Secured Subordinated Convertible Promissory Note
Exhibit B - Form of Series A Convertible Preferred Stock Purchase Warrant
Exhibit C - Form of Security Agreement
Exhibit D - Form of Series A Convertible Preferred Stock Terms
Exhibit E - Form of Investor Rights Agreement
Exhibit F - Form of Technology Agreements
