Exhibit 10.15
Extreme Networks, Inc.
3.50% Convertible Subordinated Notes due December 1, 2006
----------
Purchase Agreement
------------------
November 29, 2001
Xxxxxxx, Xxxxx & Co.,
As representative of the several Purchasers
named in Schedule I hereto,
00 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000.
Ladies and Gentlemen:
Extreme Networks, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Purchasers named in Schedule I hereto (the "Purchasers") an aggregate of
$175,000,000 principal amount of the 3.50% Convertible Subordinated Notes due
December 1, 2006, convertible into shares of common stock, par value of $0.001
per share ("Stock") of the Company, specified above (the "Firm Securities") and,
at the election of the Purchasers, up to an aggregate of $25,000,000 additional
principal amount of such notes (the "Optional Securities") (the Firm Securities
and the Optional Securities which the Purchasers elect to purchase pursuant to
Section 2 hereof are collectively called the "Securities").
The Purchasers and other holders (including subsequent transferees) of
Securities will be entitled to the benefits of the registration rights
agreement, to be dated as of the First Time of Delivery (as defined in Section
4) (the "Registration Rights Agreement"), by and among the Company and the
Purchasers, in the form attached hereto as Exhibit A. Pursuant to the
Registration Rights Agreement, the Company will agree to file with the United
States Securities and Exchange Commission (the "Commission") under the
circumstances set forth therein a shelf registration statement pursuant to Rule
415 under the United States Securities Act of 1933, as amended (the "Act"),
relating to the resale of (i) Securities initially resold in registered form and
(ii) the shares of Stock initially issuable upon conversion of the Securities by
holders thereof, and to use its reasonable efforts to cause such shelf
registration statement to be declared effective.
1. The Company represents and warrants to, and agrees with, each of the
Purchasers that:
(a) An offering circular, dated November 29, 2001 (the "Offering
Circular"), has been prepared in connection with the offering of the
Securities and shares of Stock issuable upon conversion thereof. Any
reference to the Offering Circular shall be deemed to refer to and include
the Company's Annual Report on Form 10-K for the fiscal year ended July 2,
2001, Quarterly Report on Form 10-Q for the quarter ended September 30,
2001 and Current Reports on Form 8-K filed on October 23, 2001 and November
2, 2001, and all subsequent documents filed with the Commission pursuant to
Section 13(a), 13(c) or 15(d) of the United States Securities Exchange Act
of 1934, as amended (the "Exchange Act") on or prior to the date of the
Offering Circular and any reference to the Offering Circular, as amended or
supplemented, as of any specified date, shall be deemed to include (i) any
documents filed with the Commission pursuant to Section 13(a), 13(c) or
15(d) of the Exchange Act after the date of the Offering Circular, and
prior to such specified date and (ii) any Additional Issuer Information (as
defined in Section 5(f)) furnished by the Company prior to the completion
of the distribution of the Securities. All such documents referred to in
the preceding sentence filed under the Exchange Act and so deemed to be
included in the Offering Circular, or any amendment or supplement thereto,
are hereinafter called the "Exchange Act Reports". The Exchange Act
Reports, when they were or are filed with the Commission, conformed or will
conform in all material respects to the applicable requirements of the
Exchange Act and the applicable rules and regulations of the Commission
thereunder. The Offering Circular and any amendments or supplements thereto
and the Exchange Act Reports did not and will not, as of their respective
dates, contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by a Purchaser through
Xxxxxxx, Sachs & Co. expressly for use therein;
(b) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Offering Circular any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Offering
Circular; and, since the respective dates as of which information is given
in the Offering Circular, there has not been any change in the capital
stock (other than employee stock options issued in the ordinary course of
business consistent with past practice and employee stock options in
existence on the date hereof that have subsequently been exercised) or
long-term debt of the Company or any of its subsidiaries or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the business, management,
2
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, otherwise than as set forth or contemplated
in the Offering Circular;
(c) The Company and its subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Offering
Circular or such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such property
by the Company and its subsidiaries; and any real property and buildings
held under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries;
(d) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Offering Circular, and has been
duly qualified as a foreign corporation for the transaction of business and
is in good standing under the laws of each other jurisdiction in which it
owns or leases properties or conducts any business so as to require such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not, individually or in the aggregate, have a
material adverse effect on the business, financial condition, results of
operations or stockholders' equity or assets of the Company and its
subsidiaries taken as a whole ("Material Adverse Effect"); and each
subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, except to the extent the failure to be in
good standing would not, individually or in the aggregate, have a Material
Adverse Effect. No subsidiary of the Company is a "significant subsidiary"
as defined in Rule 1-02 of Regulation S-X under the Act;
(e) The Company has an authorized capitalization as set forth in the
Offering Circular, and all of the issued shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable; the shares of Stock initially issuable upon conversion of
the Securities have been duly and validly authorized and reserved for
issuance and, when issued and delivered in accordance with the provisions
of the Securities and the Indenture referred to below, will be validly
issued, fully paid and non-assessable and will conform to the description
of the Stock contained in the Offering Circular; and all of the issued
shares of capital stock owned, directly or indirectly, by the Company of
each subsidiary of the Company have been duly authorized and validly
issued, are fully paid and non-assessable and (except for directors'
qualifying shares and except as otherwise set forth in the Offering
Circular) are owned directly or indirectly by the Company, free and clear
of all liens, encumbrances, equities or claims;
3
(f) The Securities have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and legally
binding obligations of the Company entitled to the benefits provided by the
indenture to be dated as of December 5, 2001 (the "Indenture") between the
Company and State Street Bank and Trust Company of California, N.A., as
Trustee (the "Trustee"), under which they are to be issued, which will be
substantially in the form previously delivered to you; the Indenture has
been duly authorized and, when executed and delivered by the Company and
the Trustee, the Indenture will constitute a valid and legally binding
agreement, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles; and the Securities and the Indenture will
conform to the descriptions thereof in the Offering Circular and will be in
substantially the form previously delivered to you;
(g) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of
the Securities) will violate or result in a violation of Section 7 of the
Exchange Act, or any regulation promulgated thereunder, including, without
limitation, Regulations T, U, and X of the Board of Governors of the
Federal Reserve System;
(h) Prior to the date hereof, neither the Company nor any of its
affiliates has taken any action which is designed to or which has
constituted or which might have been expected to cause or result in
stabilization or manipulation of the price of any security of the Company
in connection with the offering of the Securities;
(i) The Company has all requisite corporate power to enter into this
Agreement, the Indenture and the Registration Rights Agreement. This
Agreement has been duly authorized, executed and delivered by the Company
and upon such execution by the Company (assuming the due authorization,
execution and delivery of this Agreement by the Purchasers) this Agreement
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles and except as rights to indemnification and
contribution under this Agreement may be limited by applicable law;
(j) The Registration Rights Agreement has been duly authorized and,
when executed and delivered by the Company and the Purchasers, will
constitute a valid and legally binding agreement of the Company enforceable
against the Company in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles and except as rights to indemnification and
contribution may be limited by applicable law; and the Registration Rights
Agreement
4
will conform to the description thereof in the Offering Circular and will
be substantially in the form previously delivered to you;
(k) The issue and sale of the Securities and the compliance by the
Company with all of the provisions of the Securities, the Indenture, the
Registration Rights Agreement and this Agreement and the consummation of
the transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such action result
in any violation of any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Company
or any of its subsidiaries or any of their properties except in each case
for such conflicts, breaches, violations or defaults that would not,
individually or in the aggregate, have a Material Adverse Effect or impair
the validity or enforceability of the Securities, the Indenture, the
Registration Rights Agreement or this Agreement, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company. No consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the issue and sale of
the Securities or the consummation by the Company of the transactions
contemplated by this Agreement, the Indenture or the Registration Rights
Agreement, except such consents, approvals, authorizations, registrations
or qualifications as may be required (i) under state securities or Blue Sky
laws in connection with the purchase and distribution of the Securities by
the Purchasers or (ii) by Federal and state securities laws contemplated by
the Registration Rights Agreement;
(l) Neither the Company nor any of its subsidiaries is in violation of
its Certificate of Incorporation or By-laws or in default in the
performance or observance of any obligation, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement, lease
or other agreement or instrument to which it is a party or by which it or
any of its properties may be bound other than such defaults which would
not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect;
(m) The statements set forth in the Offering Circular under the
caption "Description of Notes" and "Description of Capital Stock", insofar
as they purport to constitute a summary of the terms of the Securities and
the Stock, and under the captions "Certain United States Federal Income Tax
Consequences," insofar as it purports to describe the provisions of the
laws and documents referred to therein, are accurate and fairly summarize
the matters referred to therein in all material respects;
(n) Other than as set forth in the Offering Circular, there are no
legal or governmental proceedings pending to which the Company or any of
its subsidiaries is
5
a party or of which any property of the Company or any of its subsidiaries
is the subject which, if determined adversely to the Company or any of its
subsidiaries, would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect; and, to the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others, other than as set forth
in the Offering Circular;
(o) When the Securities are issued and delivered pursuant to this
Agreement, the Securities will not be of the same class (within the meaning
of Rule 144A under the Act) as securities which are listed on a national
securities exchange registered under Section 6 of the Exchange Act or
quoted in a U.S. automated inter-dealer quotation system;
(p) The Company is subject to Section 13 or 15(d) of the Exchange Act;
(q) The Company is not, and after giving effect to the offering and
sale of the Securities will not be, an "investment company", as such term
is defined in the United States Investment Company Act of 1940, as amended
(the "Investment Company Act");
(r) Neither the Company, nor any person acting on its or their behalf
has offered or sold the Securities by means of any general solicitation or
general advertising within the meaning of Rule 502(c) under the Act, except
that no representation is given with respect to the Purchasers;
(s) Within the preceding six months, other than Securities offered or
sold to the Purchasers hereunder, neither the Company nor any other person
acting on behalf of the Company has offered or sold to any person any
Securities, or any debt or similar securities of the same or a similar
class as the Securities, other than Securities offered or sold to the
Purchasers hereunder. The Company will take reasonable precautions designed
to insure that any offer or sale, direct or indirect, in the United States
or to any U.S. person (as defined in Rule 902 under the Act) of any
Securities or any substantially similar security issued by the Company,
within six months subsequent to the date on which the distribution of the
Securities has been completed (as notified to the Company by Xxxxxxx, Xxxxx
& Co.), is made under restrictions and other circumstances reasonably
designed not to affect the status of the offer and sale of the Securities
in the United States and to U.S. persons contemplated by this Agreement as
transactions exempt from the registration provisions of the Act;
(t) Assuming the accuracy of the Purchasers' representations and
warranties in Section 3 of this Agreement and compliance by the Purchasers
of the covenants set forth in Section 3 of this Agreement, it is not
necessary in connection with the offer, sale and delivery of the Securities
to the Purchasers, or in connection with the offer, sale and initial resale
of the Securities by the Purchasers in a manner contemplated
6
by this Agreement, to register the Securities under the Act or to qualify
an indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act");
(u) The Securities have been, or prior to the First Time of Delivery
will be, eligible for trading in the PortalSM Market ("Portal") in
accordance with the rules and regulations of the National Association of
Securities Dealers, Inc.;
(v) Ernst & Young, LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(w) The Company and its subsidiaries own or possess, or can acquire on
reasonable terms, adequate rights to use and otherwise exploit all
trademarks, service marks, trade names, goodwill, copyrights, license
rights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, system or procedure),
government authorizations, approvals, permits, franchises and other
intellectual property and proprietary rights, and to the best of the
Company's knowledge, all patents and patent rights (collectively,
"Intellectual Property") which are used in or necessary to conduct their
respective businesses as currently conducted and as proposed to be
conducted in all material respects as described in the Offering Circular,
including without limitation the design, development, use, marketing,
importation, manufacture and sale of their products and services. Except as
described in the Offering Circular, neither the Company nor any of its
subsidiaries has received any notice of any misappropriation or
infringement of or conflict with Intellectual Property or other rights of
others with respect to any of the foregoing which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would, or could reasonably be expected to, have a Material Adverse Effect,
and to the best of Company's knowledge, the conduct of the business of the
Company and its subsidiaries as currently conducted and as proposed to be
conducted would not result in any such misappropriation, infringement or
conflict. The Company and its subsidiaries have taken all actions
reasonably required to perfect, protect and maintain their rights with
respect to all material Intellectual Property, including, without
limitation, recordation of assignments and licenses for patents and patent
applications with the United States Patent and Trademark Office and
appropriate foreign patent offices and protection of confidentiality of
trade secrets. Except as described in the Offering Circular, no material
Intellectual Property of the Company or any of its subsidiaries is invalid
or unenforceable or has terminated or expired, or is reasonably expected to
terminate or expire, within five (5) years after the date of this
Agreement. To the best of Company's knowledge, neither the Company nor any
of its subsidiaries is in breach or default of any agreement covering
material Intellectual Property;
(x) Except as disclosed in the Offering Circular and except for the
holder of that certain Common Stock Warrant, dated May 29, 2001,
exerciseable for 3,000,000
7
shares of Stock, there are no persons with registration rights or other
similar rights to have any securities of the Company (other than the
Securities and the shares of Stock issuable upon conversion thereof)
registered under the Act under any registration statement, which rights
have not been satisfied or waived;
(y) None of the holders of outstanding shares of capital stock of the
Company and no other person has or will have any preemptive or other rights
to purchase, subscribe for or otherwise acquire (i) the shares of Stock to
be issued upon conversion of the Securities or any rights to such shares
(other than those granted by the holders of the Securities) or (ii) as a
result of or in connection with the transactions contemplated by this
Agreement, the Indenture or the Registration Rights Agreement, any other
capital stock of the Company or rights thereto;
(z) The Company and its 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 in which they
are engaged; neither the Company nor any of its subsidiaries has been
refused any insurance coverage sought or applied for; and neither the
Company nor any of its subsidiaries has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not have a
Material Adverse Effect, except as described in the Offering Circular;
(aa) The Company and its subsidiaries have complied and are in
compliance with all federal, state, local and foreign statutes, executive
orders, proclamations, regulations, rules, directives, decrees, ordinances
and similar provisions having the force or effect of law and all judicial
and administrative orders, rulings, determinations and common law
concerning the importation of merchandise, the export or reexport of
products, services and technology, and the terms and conduct of
international transactions applicable to the Company and its subsidiaries
in connection with the conduct of the Company's or any subsidiary's
business (including as the same relates to record keeping requirements)
("International Trade Laws and Regulations"), except where the failure to
be in compliance would not, singly or in the aggregate, have a Material
Adverse Effect; neither the Company nor any of its subsidiaries has made or
provided any material false statement or material omission to any agency of
any federal, state or local government, purchasers of products, or foreign
government or foreign agency, in connection with the exportation of
merchandise (including with respect to export licenses, exceptions and
other export authorizations and any filings required for or related to
exportation of any item), the importation of merchandise or other approvals
required by a foreign government or agency or any other requirement
relating to any International Trade Laws and Regulations; neither the
Company nor any of its subsidiaries has made any payment, offer, gift,
promise to give, or authorized or otherwise participated in, assisted or
facilitated any payment or gift
8
related to the Company's or any subsidiary's business that is prohibited by
the United States Foreign Corrupt Practices Act;
(bb) The Company intends to use the net proceeds received by it from
the sale of the Securities pursuant to this Agreement in the manner
specified in the Offering Circular under the caption "Use of Proceeds".
(cc) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, singly or in
the aggregate, have a Material Adverse Effect;
(dd) To the knowledge of the Company, neither the Company nor any of
its subsidiaries is liable or otherwise legally responsible for any costs
or liabilities associated with any Environmental Laws (including, without
limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities and
any potential liabilities to third parties) which would, singly or in the
aggregate, have a Material Adverse Effect;
(ee) No material labor dispute with the employees of the Company or
any of its subsidiaries exists, except as described in the Offering
Circular, or, to the knowledge of the Company, is imminent; and the Company
is not aware of any existing, threatened or imminent labor disturbance by
the employees of any of its principal suppliers, manufacturers or
contractors that would have a Material Adverse Effect;
(ff) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct their respective
business other than those the failure of which to possess would not have a
Material Adverse Effect, and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or permit
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a Material Adverse Effect, except
as described in the Offering Circular;
(gg) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (1) transactions are executed in accordance with management's general
or specific authorizations; (2)
9
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to maintain asset accountability; (3) access to assets is permitted only in
accordance with management's general or specific authorization; and (4) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences; and
(hh) The consolidated financial statements included in the Offering
Circular, together with related schedules and notes, present fairly in all
material respects the consolidated financial position, results of
operations and changes in financial position of the Company and its
subsidiaries on the basis stated therein at the respective dates or for the
respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; the supporting schedules, if any,
included in the Offering Circular present fairly in all material respects
in accordance with generally accepted accounting principles the information
required to be stated therein; and the other financial and statistical
information and data set forth in the Offering Circular are, in all
material respects, accurately presented and prepared on a basis consistent
with such financial statements and the books and records of the Company.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Purchasers, and each of the Purchasers
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of 97% of the principal amount thereof, the principal amount of Firm
Securities set forth opposite the name of such Purchaser in Schedule I hereto
and (b) in the event and to the extent that the Purchasers shall exercise the
election to purchase Optional Securities as provided below, the Company agrees
to issue and sell to each of the Purchasers and each of the Purchasers agrees,
severally and not jointly, to purchase from the Company, at the same purchase
price set forth in clause (a) of this Section 2, that portion of the aggregate
principal amount of the Optional Securities as to which such election shall have
been exercised (to be adjusted by you so as to eliminate fractions of $1,000)
determined by multiplying such aggregate principal amount of Optional Securities
by a fraction, the numerator of which is the maximum aggregate principal amount
of Optional Securities which such Purchaser is entitled to purchase as set forth
opposite the name of such Purchaser in Schedule I hereto and the denominator of
which is the maximum aggregate principal amount of Optional Securities which all
of the Purchasers are entitled to purchase hereunder.
The Company hereby grants to the Purchasers the right to purchase at
their election up to $25,000,000 aggregate principal amount of Optional
Securities, at the purchase price set forth in clause (a) of the first paragraph
of this Section 2. Any such election to purchase Optional Securities may be
exercised by written notice from you to the Company, given within a period of 30
calendar days after the date of this Agreement, setting forth the aggregate
principal amount of Optional Securities to be purchased and the date on
10
which such Optional Securities are to be delivered, as determined by you but in
no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Securities, the
several Purchasers propose to offer the Securities for sale upon the terms and
conditions set forth in this Agreement and the Offering Circular and each
Purchaser hereby represents and warrants to, and agrees with the Company that:
(a) It will offer and sell the Securities only to persons who it reasonably
believes are "qualified institutional buyers" ("QIBs") within the meaning of
Rule 144A under the Act in transactions meeting the requirements of Rule 144A;
(b) It is an accredited investor as defined under Rule 501(a)(1) under the
Act; and
(c) It will not offer or sell the Securities by any form of general
solicitation or general advertising, including but not limited to the methods
described in Rule 502(c) under the Act.
4. (a) The Securities to be purchased by each Purchaser hereunder will be
represented by one or more definitive global Securities in book-entry form which
will be deposited by or on behalf of the Company with The Depository Trust
Company ("DTC") or its designated custodian. The Company will deliver the
Securities to Xxxxxxx, Xxxxx & Co., for the account of each Purchaser, against
payment by or on behalf of such Purchaser of the purchase price therefore in
federal (same day) funds by official bank check or checks or wire transfer to an
account designated by the Company, by causing DTC to credit the Securities to
the account of Xxxxxxx, Sachs & Co. at DTC. The Company will cause the
certificates representing the Securities to be made available to Xxxxxxx, Xxxxx
& Co. for checking at least twenty-four hours prior to the Time of Delivery (as
defined below) at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Firm Securities, 9:30 a.m., New York City time, on December 5, 2001 or
such other time and date as Xxxxxxx, Sachs & Co. and the Company may agree upon
in writing, and, with respect to the Optional Securities, 9:30 a.m., New York
City time, on the date specified by Xxxxxxx, Xxxxx & Co. in the written notice
given by Xxxxxxx, Sachs & Co. of the Purchasers' election to purchase such
Optional Securities, or such other time and date as Xxxxxxx, Xxxxx & Co. and the
Company may agree upon in writing. Such time and date for delivery of the Firm
Securities is herein called the "First Time of Delivery", such time and date for
the delivery of the Optional Securities, if not the First Time of Delivery, is
herein called the "Second Time of Delivery", and each such time and date for
delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross-receipt
for the Securities and any additional documents requested by the Purchasers
pursuant to Section 7(j) hereof, will be delivered at such time and date at the
offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx,
11
Professional Corporation, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000 (the
"Closing Location"), and the Securities will be delivered at the Designated
Office, all at the Time of Delivery. A meeting will be held at the Closing
Location at 2:00 p.m., California time, on the New York Business Day next
preceding the Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are generally
authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Purchasers:
(a) To prepare the Offering Circular in a form approved by you; to make no
amendment or any supplement to the Offering Circular which shall be disapproved
by you promptly after reasonable notice thereof; and to furnish you with copies
thereof;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Securities and the shares of Stock issuable upon
conversion of the Securities for offering and sale under the securities laws of
such jurisdictions within the United States as you may request and to comply
with such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the distribution
of the Securities, provided that in connection therewith the Company shall not
be required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) To furnish the Purchasers with copies of the Offering Circular and each
amendment or supplement thereto signed by an authorized officer of the Company
with the independent accountants' report(s) in the Offering Circular, and any
amendment or supplement containing amendments to the financial statements
covered by such report(s), signed by the accountants, and additional written and
electronic copies thereof in such quantities as you may from time to time
reasonably request, and if, at any time prior to the expiration of nine months
after the date of the Offering Circular, any event shall have occurred as a
result of which the Offering Circular as then amended or supplemented would
include an untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Offering Circular is
delivered, not misleading, or, if for any other reason it shall be necessary or
desirable during such same period to amend or supplement the Offering Circular,
to notify you and upon your request to prepare and furnish without charge to
each Purchaser and to any dealer in securities as many written and electronic
copies as you may from time to time reasonably request of an amended Offering
Circular or a supplement to the Offering Circular which will correct such
statement or omission or effect such compliance;
(d) During the period beginning from the date hereof and continuing until
the date ninety (90) days after the date of the Offering Circular, not to offer,
sell, contract to sell or
12
otherwise dispose of, except as provided hereunder, any securities of the
Company that are substantially similar to the Securities or the Stock, including
but not limited to any securities that are convertible into or exchangeable for,
or that represent the right to receive, Stock or any such substantially similar
securities (other than (i) pursuant to employee stock option plans or agreements
existing on the date of this Agreement and in the ordinary course of business
consistent with past practice, (ii) upon the conversion or exchange of
convertible or exchangeable securities outstanding as of the date of this
Agreement, (iii) the issuance by the Company of any shares of Stock in
connection with the acquisition of another company or business; provided, that
--------
each recipient of any such stock issued pursuant to this clause agree to be
restricted according to the terms of this section through the end of the 90 day
period specified, (iv) pursuant to stock option agreements entered into after
the date of this Agreement, provided that no such shares shall vest under such
new stock option agreements until after the date ninety (90) days after the date
of the Offering Circular or (v) securities convertible into or exchangeable into
Stock issued in the ordinary course of business and consistent with past
practice under equipment financing or other similar transactions, provided that
no such securities shall vest until after the date ninety (90) days after the
date of the Offering Circular, provided, further that if such securities are
sold or transferred, the recipient of such securities shall agree to be
restricted according to the terms of this section and through the end of the 90
day period specified above), without your prior written consent;
(e) Not to be or become, at any time prior to the expiration of three years
after the latest Time of Delivery, an open-end investment company, unit
investment trust, closed-end investment company or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act;
(f) At any time when the Company is not subject to Section 13 or 15(d) of
the Exchange Act, for the benefit of holders from time to time of Securities, to
furnish at its expense, upon request, to holders of Securities and prospective
purchasers of securities information (the "Additional Issuer Information")
satisfying the requirements of subsection (d)(4)(i) of Rule 144A under the Act;
(g) If requested by you, to use its reasonable efforts to cause the
Securities to be eligible for trading on Portal;
(h) To furnish to the holders of the Securities as soon as practicable
after the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flows of the Company and
its consolidated subsidiaries certified by independent public accountants) and,
as soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the date of the
Offering Circular), to make available to its stockholders consolidated summary
financial information of the Company and its subsidiaries for such quarter in
reasonable detail;
(i) During a period of five years from the date of the Offering Circular,
to furnish to you copies of all reports or other communications (financial or
other) furnished to
13
stockholders of the Company, and to deliver to you (i) as soon as they are
available, copies of any reports and financial statements furnished to or filed
with the Commission or any securities exchange on which the Securities or any
class of securities of the Company is listed; and (ii) such additional
non-confidential information concerning the business and financial condition of
the Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports furnished to its
stockholders generally or to the Commission);
(j) During the period of two years after the Time of Delivery, the Company
will not, and will not permit any of its "affiliates" (as defined in Rule 144
under the Securities Act) to, resell any of the Securities which constitute
"restricted securities" under Rule 144 that have been reacquired by any of them;
(k) To use the net proceeds received by it from the sale of the Securities
pursuant to this Agreement in the manner specified in the Offering Circular
under the caption "Use of Proceeds";
(l) To reserve and keep available at all times, free of preemptive rights,
shares of Stock for the purpose of enabling the Company to satisfy any
obligations to issue shares of its Stock upon conversion of the Securities; and
(m) To list, subject to notice of issuance, the shares of Stock issuable
upon conversion of the Securities on the Nasdaq National Market within 5
business days of the First Time of Delivery.
6. The Company covenants and agrees with the several Purchasers that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
issue of the Securities and the shares of Stock issuable upon conversion of the
Securities and all other expenses in connection with the preparation, printing
and filing of the Offering Circular and any amendments and supplements thereto
and the mailing and delivering of copies thereof to the Purchasers and dealers;
(ii) the cost of printing or producing any Agreement among Purchasers, this
Agreement, the Indenture, the Registration Rights Agreement, the Blue Sky and
Legal Investment Memoranda, closing documents (including any compilations
thereof) and any other documents in connection with the offering, purchase, sale
and delivery of the Securities; (iii) all expenses in connection with the
qualification of the Securities and the shares of Stock issuable upon conversion
of the Securities for offering and sale under state securities laws as provided
in Section 5(b) hereof, including the fees and disbursements of counsel for the
Purchasers in connection with such qualification and in connection with the Blue
Sky and legal investment surveys; (iv) any fees charged by securities rating
services for rating the Securities; (v) the cost of preparing the Securities;
(vi) the fees and expenses of the Trustee and any agent of the Trustee and the
fees and disbursements of counsel for the Trustee in connection with the
Indenture and the Securities; (vii) any cost incurred in connection with the
designation of the Securities for trading on Portal and the listing of the
14
shares of Stock issuable upon conversion of the Securities; and (viii) all other
costs and expenses incident to the performance of its obligations hereunder
which are not otherwise specifically provided for in this Section. It is
understood, however, that, except as provided in this Section, and Sections 8
and 11 hereof, the Purchasers will pay all of their own costs and expenses,
including the fees and expenses of their counsel, transfer taxes on resale of
any of the Securities by them, and any advertising expenses connected with any
offers they may make.
7. The obligations of the Purchasers hereunder as to the Securities to be
delivered at each Time of Delivery shall be subject, in their discretion, to the
condition that all representations and warranties and other statements of the
Company herein are, at and as of such Time of Delivery, true and correct, the
condition that the Company shall have performed all of its obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, counsel for
the Purchasers, shall have furnished to you such opinion or opinions, dated such
Time of Delivery, with respect to such matters as you may reasonably request,
and such counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(b) Xxxx Xxxx Xxxx & Freidenrich LLP, counsel for the Company, (or such
other counsel as the Company shall deem appropriate and which shall be
reasonably acceptable to Xxxxxxx, Xxxxx & Co.) shall have furnished to you their
written opinion, dated such Time of Delivery, in form and substance satisfactory
to you, to the effect that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware, with
power and authority (corporate and other) to own its properties and conduct its
business as described in the Offering Circular;
(ii) As of November 1, 2001, the Company was authorized to issue
750,000,000 shares of Stock, of which 114,173,331 shares were issued and
outstanding, and 2,000,000 shares of convertible preferred stock, none of
which were issued and outstanding; the shares of issued and outstanding
capital stock of the Company have been duly authorized and validly issued
and are fully paid and non-assessable; and the shares of Stock initially
issuable upon conversion of the Securities have been duly and validly
authorized and reserved for issuance and, when issued and delivered in
accordance with the provisions of the Securities and the Indenture, will be
validly issued and fully paid and non-assessable;
(iii) The Company has been duly qualified as a foreign corporation to
transact business and is in good standing under the laws of each other
United States jurisdiction in which it owns or leases properties or
conducts any business so as to
15
require such qualification, except to the extent that the failure to be so
qualified or in good standing would not have a Material Adverse Effect on
the Company;
(iv) Extreme Networks IHC, Inc. has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
State of Delaware, and all of the issued and outstanding capital stock
thereof owned directly or indirectly by the Company have been duly
authorized, validly issued and is fully-paid and non-assessable, and is
owned directly or indirectly by the Company, free and clear of any lien,
encumbrance, claim or equity;
(v) Other than as set forth in the Offering Circular, there are no
legal or governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property of the Company or any
of its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a Material Adverse Effect; and other than as set forth in the Offering
Circular, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(vi) This Agreement has been duly authorized, executed and
delivered by the Company;
(vii) The Securities have been duly authorized, executed, issued and
delivered and constitute valid and legally binding obligations of the
Company entitled to the benefits provided by the Indenture;
(viii) The Registration Rights Agreement has been duly authorized,
executed and delivered by the parties thereto and constitutes a valid and
legally binding agreement of the Company enforceable against the Company in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating
to or affecting creditors' rights and to general equity principles;
(ix) The Indenture has been duly authorized, executed and delivered
by the parties thereto and constitutes a valid and legally binding
instrument, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles;
(x) The issuance and sale of the Securities being issued at such
Time of Delivery and the compliance by the Company with all of the
provisions of the Securities, the Indenture, the Registration Rights
Agreement and this Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under (i) applicable law, (ii) the Certificate of Incorporation or
By-laws of the Company, or (iii) any of the agreements filed as exhibits to
the Company's Annual
16
Report filed on Form 10-K for the year ended July 1, 2001, its Quarterly
Report on Form 10-Q for the quarter ended September 30, 2001 or any other
Exchange Act Report or any agreements entered into by the Company after
September 30, 2001 that would be required to be filed as an exhibit to the
Company's Quarterly Report on Form 10-Q for the period ending December 31,
2001 (collectively, the "Reviewed Agreements"), nor will such actions
result in any violation of any judgment, order or decree of any
governmental agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their properties;
(xi) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required in connection with the issuance of the Securities to the
Purchasers being issued at such Time of Delivery or the consummation by the
Company of the transactions contemplated by this Agreement or the Indenture
or the Registration Rights Agreement, except, such as may be required under
the Act in connection with the shares of Stock issuable upon conversion of
the Securities and such as may be required by Federal and state securities
laws contemplated by the Registration Rights Agreement;
(xii) Neither the Company nor any of its subsidiaries is in violation
of its Certificate of Incorporation or By-laws or, to such counsel's
knowledge, in default in the performance or observance of any material
obligation, covenant or condition contained in any Reviewed Agreement;
(xiii) The statements set forth in the Offering Circular under the
caption "Description of Notes" and "Description of Capital Stock", insofar
as they purport to constitute a summary of the terms of the Indenture,
Registration Rights Agreement, Securities and the Stock, and under the
captions "Certain United States Federal Income Tax Consequences" and
"Underwriting", insofar as they purport to describe the provisions of the
laws and documents referred to therein, and under the caption "Risk
Factors--We have been named as a defendant in shareholder class action
lawsuits that are now pending and which continue to be threatened to be
filed which arise out of our public offering of securities in 1999. If we
do not prevail in such lawsuits our business may suffer" and in the second
paragraph of Part II, Item 1 under the caption "Legal Proceedings" in the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
2001, to the extent that they purport to summarize the referenced legal
proceedings pending against the Company, are accurate and fairly summarize
the matters referred to therein in all material respects;
(xiv) The Exchange Act Reports (other than the financial statements
and related schedules therein and other financial data included or
incorporated by reference therein, as to which such counsel need express no
opinion), when they were filed with the Commission, complied as to form in
all material respects with the requirements of the Exchange Act, and the
rules and regulations of the Commission thereunder;
17
(xv) Assuming the accuracy of the representations and warranties of
the Purchasers in Section 3 of this Agreement and compliance with the
agreements of the Purchasers set forth in Section 3 of this Agreement, no
registration of the Securities under the Act, and no qualification of an
indenture under the United States Trust Indenture Act of 1939 with respect
thereto, is required for the offer, sale and initial resale of the
Securities by the Purchasers in the manner contemplated by this Agreement;
and
(xvi) The Company is not an "investment company", as such term is
defined in the Investment Company Act.
Such opinion may be made subject to other such qualifications as are
reasonable and customary for opinions with respect to such matters and such
counsel need express no opinion regarding the legality, validity, binding
nature or enforceability of any provision in the Purchase Agreement, the
Securities, the Indenture or the Registration Rights Agreement relating to
indemnification or contribution or the ability to obtain specific
performance, injunctive relief or other equitable relief as a remedy for
noncompliance with any of the foregoing agreements or instruments.
Such opinion shall also state that such counsel has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company,
representatives of the Purchasers and counsel for the Purchasers, at which
conferences the contents of the Offering Circular and related matters were
discussed; that such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Offering Circular (other than with regard to the opinions
set forth in paragraph (xiv) above); and that, on the basis of the
foregoing, no facts have come to such counsel's attention which lead such
counsel to believe that the Offering Circular and any further amendments or
supplements thereto made by the Company, on the date thereof or on the date
such opinion is delivered, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary to
make the statements contained therein, in light of the circumstances under
which they were made, not misleading (it being understood that such counsel
need express no view with respect to the financial statements and related
schedules thereto and the other financial and accounting data included or
incorporated by reference in or omitted from the Offering Circular).
(c) Blakely, Sokoloff, Xxxxxx and Zafman LLP, intellectual property
counsel for the Company, shall have furnished to you their written opinion,
dated such Time of Delivery, in form and substance satisfactory to you, to the
effect that:
(i) The Company owns all patents, trademarks, trademark
registrations, service marks, service xxxx registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights described in the
Offering Circular as being owned by it, and such counsel is not aware of
any claim to the contrary or any challenge by
18
any other person to the rights of the Company with respect to the foregoing
other than those identified in the Offering Circular;
(ii) Such counsel is not aware of any legal actions, claims or
proceedings pending or threatened against the Company its manufacturers,
suppliers or customers other than those identified in the Offering Circular
alleging that the Company is infringing or otherwise violating any patents,
trademarks, trademark registrations, service marks, service xxxx
registrations, trade names, copyrights, licenses, inventions or trade
secrets owned by others;
(iii) Such counsel has reviewed the descriptions of patents, patent
applications and legal proceedings included in the Offering Circular, the
Company's Annual Report on Form 10-K for the fiscal year ended July 1, 2001
and Quarterly Report on Form 10-Q for the quarter ended September 30, 2001
(collectively, the "Intellectual Property Sections"), including the
descriptions under the captions "Risk Factors--Our Limited Ability to
Protect Our Intellectual Property and Defend Against Claims May Adversely
Affect Our Ability to Compete" and "--We Are Engaged in Litigation
Regarding Intellectual Property Rights, and an Adverse Outcome Could Harm
Our Business and Require Us to incur Significant Costs" included in the
Offering Circular, "Business--Intellectual Property," "Risk Factors--Our
Limited Ability to Protect Our Intellectual Property and Defend Against
Claims May Adversely Affect Our Ability to Compete," "--We are engaged in
Litigation Regarding Intellectual Property Rights, and an Adverse Outcome
Could Harm Our Business and Require Us to Incur Significant Costs" and in
Item 3 under "Legal Proceedings" included in the Company's Annual Report on
Form 10-K for the fiscal year ended July 1, 2001, and "Risk Factors--Our
Limited Ability to Protect Our Intellectual Property and Defend Against
Claims May Adversely Affect Our Ability to Compete," "--We are Engaged in
Litigation Regarding Intellectual Property Rights, and an Adverse Outcome
Could Harm Our Business and Require Us to Incur Significant Costs" and in
Part II, Item I under "Legal Proceedings" included in the Company's Form
10-Q for the quarter ended September 30, 2001, and, to the extent they
constitute matters of law or legal conclusions, these descriptions are
accurate and fairly and completely present the patent situation of the
Company and the other matters described therein;
(iv) To the best of such counsel's knowledge, the Intellectual
Property Sections, as of their respective dates and as of the date of such
opinion, do not contain any untrue statements of a material fact or omit to
state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(v) For each copyrightable product described in the Offering
Circular, the Company either (i) has registered all copyrights for such
product and has obtained and properly recorded written assignments of all
rights and title therein to the Company from all authors and owners of such
copyrights other than the Company,
19
including without limitation any and all independent contractors; or (ii)
was vested with original title to all copyrights for such product and no
written assignments for such copyrights are required to perfect Company's
rights and title thereto; and
(vi) With respect to the patent protection on the Company's technology
for each patent or patent application described in the Offering Circular as
being owned by the Company, the Company is listed as the record holder of
sole title in the applicable patent office and such counsel is aware of
nothing that causes such counsel to believe that, as of the date of the
Offering Circular and as of the date of such opinion, the description of
patents and patent applications under the captions set forth in (iii) above
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, including without
limitation, any undisclosed material issue with respect to the subsequent
validity or enforceability of such patent or patent issuing from any such
pending patent application.
(d) Howrey Xxxxx Xxxxxx & White LLP, counsel for the Company in the legal
proceeding filed by Nortel Networks, Inc. and Nortel Networks Limited against
the Company in the United States District Court for the District of
Massachusetts, Civil Action No. 01-10443EFH (the "Nortel Case"), shall have
furnished to you their written opinion, dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) The only litigation for which such counsel has been retained is
the Nortel Case; and
(ii) Such counsel has reviewed the descriptions of the Nortel Case (i)
under the caption "Risk Factors----We are Engaged in Litigation Regarding
Intellectual Property Rights, and an Adverse Outcome Could Seriously Harm
Our Business and Require Us to incur Significant Costs" included in the
Offering Circular, (ii) in Part I, Item 1 under the caption
"Business--Intellectual Property" included in the Company's Annual Report
on Form 10-K for the fiscal year ended July 1, 2001, (iii) in Part II, Item
7 under the caption "Risk Factors----We are Engaged in Litigation Regarding
Intellectual Property Rights, and an Adverse Outcome Could Harm Our
Business and Require Us to Incur Significant Costs" included in the
Company's Annual Report on Form 10-K for the fiscal year ended July 1,
2001, (iv) in Part I, Item 3 under the caption "Legal Proceedings" included
in the Company's Annual Report on Form 10-K for the fiscal year ended July
1, 2001, (v) in Part I, Item 2 under the caption "Risk Factors----We are
Engaged in Litigation Regarding Intellectual Property Rights, and an
Adverse Outcome Could Harm Our Business and Require Us to Incur Significant
Costs" in the Company's Form 10-Q for the quarter ended September 30, 2001,
and (vi) in Part II, Item I under the caption "Legal Proceedings" included
in the Company's Form 10-Q for the quarter ended September 30, 2001, and,
these descriptions are accurate and fairly and completely present the
situation of the Company with respect to the Nortel Case.
20
(e) On the date of the Offering Circular prior to the execution of this
Agreement and also at the Time of Delivery, Ernst & Young, LLP shall have
furnished to you a letter or letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, to the effect set forth in
Annex I hereto;
(f) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Offering Circular any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Offering Circular, and (ii) since the
respective dates as of which information is given in the Offering Circular there
shall not have been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Offering
Circular, the effect of which, in any such case described in clause (i) or (ii),
is in the judgment of Xxxxxxx, Xxxxx & Co. so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Securities being issued at such Time of Delivery on the terms and in the
manner contemplated in this Agreement and in the Offering Circular;
(g) On or after the date hereof (i) no downgrading shall have occurred in
the rating accorded the Company's debt securities by any "nationally recognized
statistical rating organization", as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall
have publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's debt securities;
(h) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on the Nasdaq National Market; (ii)
a suspension or material limitation in trading in the Company's securities on
the Nasdaq National Market; (iii) a general moratorium on commercial banking
activities declared by either Federal or New York or California State
authorities or a material disruption in commercial banking or securities
settlement or clearance services in the United States; (iv) the outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war, if the effect of any such event
specified in this clause (iv) in the judgment of Xxxxxxx, Sachs & Co. makes it
impracticable or inadvisable to proceed with the offering or the delivery of the
Securities being issued at such Time of Delivery on the terms and in the manner
contemplated in the Offering Circular; or (v) the occurrence of any other
calamity or crisis or any adverse change in the existing financial, political or
economic conditions in the United States or elsewhere which, in the judgment of
Xxxxxxx, Xxxxx & Co. would materially and adversely affect the financial markets
or the markets for the Securities, the Stock or other debt or equity securities;
21
(i) The Securities have been designated for trading on Portal;
(j) The Company shall have furnished or caused to be furnished to you at
the Time of Delivery certificates of officers of the Company satisfactory to you
as to the accuracy of the representations and warranties of the Company herein
at and as of such Time of Delivery, as to the performance by the Company of all
of its obligations hereunder to be performed at or prior to such Time of
Delivery, as to the matters set forth in subsection (f) of this Section and as
to such other matters as you may reasonably request.
(k) The Company shall have obtained and delivered to the Purchasers
executed copies of a written agreement of those directors and executive officers
and other stockholders of the Company listed on Exhibit B-1 substantially in the
form of Exhibit B-2 hereto (each such an agreement, a "Lock-Up Agreement") by
the First Time of Delivery, and executed originals of each Lock-Up Agreement
shall have been delivered to you by such time. If the First Time of Delivery
shall not have occurred on or prior to ten (10) business days after the date of
this Agreement, then the Lock-Up Agreements shall be of no further force and
effect.
8. (a) The Company will indemnify and hold harmless each Purchaser against
any losses, claims, damages or liabilities, joint or several, to which such
Purchaser may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in the Offering Circular, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, and will
reimburse each Purchaser for any legal or other expenses reasonably incurred by
such Purchaser in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in the Offering Circular
or any such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by any Purchaser through Xxxxxxx,
Sachs & Co. expressly for use therein.
(b) Each Purchaser will indemnify and hold harmless the Company against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in the
Offering Circular, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in
22
the Offering Circular or any such amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by such
Purchaser through Xxxxxxx, Xxxxx & Co. expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such action or claim
as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act, by
or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Purchasers on the other from the offering
of the Securities. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Purchasers on the other in connection with the statements or omissions which
resulted in such losses,
23
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Purchasers on the other shall be deemed to be in
the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Purchasers, in each case as set forth
in the Offering Circular. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the Purchasers
on the other and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Purchasers agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to
investors were offered to investors exceeds the amount of any damages which such
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. The Purchasers' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Purchaser within the meaning of the Act; and the obligations of the Purchasers
under this Section 8 shall be in addition to any liability which the respective
Purchasers may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the Act.
9. (a) If any Purchaser shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Securities on
the terms contained herein at a Time of Delivery. If within thirty-six hours
after such default by any Purchaser you do not arrange for the purchase of such
Securities, then the Company shall be entitled to a further period of thirty-six
hours within which to procure another party or other parties satisfactory to you
to purchase such Securities on such terms. In the event that, within the
respective prescribed periods, you notify the Company that you have so arranged
for the purchase of such Securities, or the Company notifies you that it has so
arranged for the purchase of such Securities, you or the Company shall have the
right to postpone such Time of Delivery for a
24
period of not more than seven days, in order to effect whatever changes may
thereby be made necessary in the Offering Circular, or in any other documents or
arrangements, and the Company agrees to prepare promptly any amendments to the
Offering Circular which in your opinion may thereby be made necessary. The term
"Purchaser" as used in this Agreement shall include any person substituted under
this Section with like effect as if such person had originally been a party to
this Agreement with respect to such Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of such
Securities which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Securities to be purchased at such Time of
Delivery, then the Company shall have the right to require each non-defaulting
Purchaser to purchase the principal amount of Securities which such Purchaser
agreed to purchase at such Time of Delivery hereunder and, in addition, to
require each non-defaulting Purchaser to purchase its pro rata share (based on
the principal amount of Securities which such Purchaser agreed to purchase
hereunder) of the Securities of such defaulting Purchaser or Purchasers for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Purchaser from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of Securities
which remains unpurchased exceeds one-eleventh of the aggregate principal amount
of all the Securities to be purchased at such Time of Delivery, or if the
Company shall not exercise the right described in subsection (b) above to
require non-defaulting Purchasers to purchase Securities of a defaulting
Purchaser or Purchasers, then this Agreement (or, with respect to the Second
Time of Delivery, the obligation of the Purchasers to purchase and of the
Company to sell the Optional Securities) shall thereupon terminate, without
liability on the part of any non-defaulting Purchaser or the Company, except for
the expenses to be borne by the Company and the Purchasers as provided in
Section 6 hereof and the indemnity and contribution agreements in Section 8
hereof; but nothing herein shall relieve a defaulting Purchaser from liability
for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company and the several Purchasers, as set forth in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Purchaser or any controlling person of any Purchaser, or the Company, or
any officer or director or controlling person of the Company, and shall survive
delivery of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company shall not then be under any liability to any Purchaser except as
provided in Sections 6 and 8 hereof; but, if for any other reason, the
Securities are not delivered by or on behalf of the Company as provided herein,
the Company will reimburse the Purchasers through you for all
25
out-of-pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Purchasers in making
preparations for the purchase, sale and delivery of the Securities, but the
Company shall then be under no further liability to any Purchaser except as
provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Purchasers, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Purchaser made or given
by you jointly or by Xxxxxxx, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Purchasers shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Xxxxxxx, Xxxxx &
Co., 00 Xxx Xxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the Offering
Circular, Attention: Secretary; provided, however, that any notice to a
Purchaser pursuant to Section 8(c) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Purchaser at its address set forth in
its Purchasers' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by you upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Purchasers, the Company and, to the extent provided in Sections 8 and 10
hereof, the officers and directors of the Company and each person who controls
the Company or any Purchaser, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Securities from any Purchaser shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such respective counterparts shall together constitute one and the same
instrument.
17. The Company is authorized, subject to applicable law, to disclose any
and all aspects of this potential transaction that are necessary to support any
U.S. federal income tax benefits expected to be claimed with respect to such
transaction, without the Purchasers imposing any limitation of any kind.
26
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company and each of the Purchasers plus one for each
counsel counterparts hereof, and upon the acceptance hereof by you, on behalf of
each of the Purchasers, this letter and such acceptance hereof shall constitute
a binding agreement between each of the Purchasers and the Company. It is
understood that your acceptance of this letter on behalf of each of the
Purchasers is pursuant to the authority set forth in a form of Agreement among
Purchasers, the form of which shall be submitted to the Company for examination
upon request, but without warranty on your part as to the authority of the
signers thereof.
27
Very truly yours,
Extreme Networks, Inc.
/s/ Xxxxxx Xxxxx
By: ----------------------
Name: Xxxxxx Xxxxx
Title: President & CEO
Accepted as of the date hereof:
/s/ Xxxxxxx, Sachs & Co.
By: -----------------------------------
(Xxxxxxx, Xxxxx & Co.)
On behalf of each of the Purchasers
28
SCHEDULE I
Principal Principal Amount of
Amount of Optional Securities
Firm Securities to be Purchased
To be if Maximum Option
Purchaser Purchased Exercised
--------- --------- ---------
Xxxxxxx, Sachs & Co. ............................ $ 131,250,000 $ 18,750,000
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated ................................ 26,250,000 3,750,000
Xxxxxxxxx Xxxxxxxx, Inc. ........................ 17,500,000 2,500,000
------------- ------------
------------- ------------
Total ......................... $ 175,000,000 $ 25,000,000
============= ============
29
ANNEX I
Pursuant to Section 7(e) of the Purchase Agreement, the accountants shall
furnish letters to the Purchasers to the effect that:
(i) They are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In our opinion, the consolidated financial statements and
financial statement schedules audited by us and included in the Offering
Circular comply as to form in all material respects with the applicable
requirements of the Exchange Act and the related published rules and
regulations;
(iii) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
for the five most recent fiscal years included in the Offering Circular
agrees with the corresponding amounts (after restatements where applicable)
in the audited consolidated financial statements for such five fiscal
years;
(iv) On the basis of limited procedures not constituting an audit in
accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of the minute
books of the Company and its subsidiaries since the date of the latest
audited financial statements included in the Offering Circular, inquiries
of officials of the Company and its subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Offering Circular are not in conformity with generally
accepted accounting principles applied on the basis substantially
consistent with the basis for the unaudited condensed consolidated
statements of income, consolidated balance sheets and consolidated
statements of cash flows included in the Offering Circular;
(B) any other unaudited income statement data and balance sheet
items included in the Offering Circular do not agree with the
corresponding items in the unaudited consolidated financial statements
from which such data and items were derived, and any such unaudited
data and items were not determined on a basis substantially consistent
with the basis for the corresponding amounts in the audited
consolidated financial statements included in the Offering Circular;
30
(C) the unaudited financial statements which were not included in
the Offering Circular but from which were derived any unaudited
condensed financial statements referred to in clause (A) and any
unaudited income statement data and balance sheet items included in
the Offering Circular and referred to in clause (B) were not
determined on a basis substantially consistent with the basis for the
audited consolidated financial statements included in the Offering
Circular;
(D) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance
shares and upon conversions of convertible securities, in each case
which were outstanding on the date of the latest financial statements
included in the Offering Circular or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any decreases
in consolidated net current assets or stockholders' equity or other
items specified by the Purchasers, or any increases in any items
specified by the Purchasers, in each case as compared with amounts
shown in the latest balance sheet included in the Offering Circular
except in each case for changes, increases or decreases which the
Offering Circular discloses have occurred or may occur or which are
described in such letter; and
(F) for the period from the date of the latest financial
statements included in the Offering Circular to the specified date
referred to in clause (E) there were any decreases in consolidated net
revenues or operating profit or the total or per share amounts of
consolidated net income or other items specified by the Purchasers, or
any increases in any items specified by the Purchasers, in each case
as compared with the comparable period of the preceding year and with
any other period of corresponding length specified by the Purchasers,
except in each case for decreases or increases which the Offering
Circular discloses have occurred or may occur or which are described
in such letter; and
(v) In addition to the examination referred to in their report(s)
included in the Offering Circular and the limited procedures, inspection of
minute books, inquiries and other procedures referred to in paragraphs
(iii) and (iv) above, they have carried out certain specified procedures,
not constituting an audit in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Purchasers, which are derived from the general
accounting records of the Company and its subsidiaries, which appear in the
Offering Circular, and have compared certain of such amounts, percentages
and financial information with the accounting records of the Company and
its subsidiaries and have found them to be in agreement.
31
EXHIBIT A
Form of Registration Rights Agreement
Exhibit B-1
List of Persons to Sign Lock-Up Agreements
Xxxxxx X. Xxxxx
Xxxxxxx Xxxxxxx
Xxxx Xxxxxxxxx
Xxxxxx X. Xxxxxx
Xxxxxxx Xxxxxxxxxx
Xxxxx Xxxx
Xxxxxxx Xxxxxxxxx
Xxxxxx Xxxxx
Xxxxxxx Xxxx
Xxxxxxxx X. Xxx
Xxxxx Xxxxxx
Exhibit B-2
Lock-Up Agreement
Extreme Networks, Inc.
November __, 2001
Xxxxxxx, Sachs & Co.
As representative of the several Purchasers
named in Schedule I to the Purchase Agreement
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Re: Extreme Networks, Inc. - Lock-Up Agreement
------------------------------------------
Ladies and Gentlemen:
The undersigned understands that you, as representative, propose to enter
into a Purchase Agreement on behalf of the several initial purchasers named in
Schedule I to such agreement (collectively, the "Purchasers"), with Extreme
Networks, Inc., a Delaware corporation (the "Company"), providing for an
offering of 3.50% Convertible Subordinated Notes due December 1, 2006 (the
"Notes") of the Company that will be convertible into shares of the common
stock, par value $0.001 per share, of the Company (the "Common Stock").
In consideration of the agreement by the Purchasers to offer and sell the
Notes, and of other good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, the undersigned agrees that, during the period
beginning from the date of the final Offering Circular covering the offering of
the Notes and continuing to and including the date 90 days after the date of
such final Offering Circular, the undersigned will not offer, sell, contract to
sell, pledge, grant any option to purchase, make any short sale or otherwise
dispose of, or exercise any registration rights with respect to, any shares of
Common Stock, or any options or warrants to purchase any shares of Common Stock,
or any securities convertible into, exchangeable for or that represent the right
to receive shares of Common Stock, whether now owned or hereinafter acquired,
owned directly by the undersigned (including holding as a custodian) or with
respect to which the undersigned has beneficial ownership within the rules
and regulations of the Securities and Exchange Commission (the "SEC")
(collectively the "Undersigned's Shares").
The foregoing restriction is expressly agreed to preclude the undersigned
from engaging in any hedging or other transaction which is designed to or which
reasonably could be expected to lead to or result in a sale or disposition of
the Undersigned's Shares even if such shares would be disposed of by someone
other than the undersigned. Such prohibited hedging or other transactions would
include without limitation any short sale or any purchase, sale or grant of any
right (including without limitation any put or call option) with respect to any
of the Undersigned's Shares or with respect to any security that includes,
relates to, or derives any significant part of its value from such shares.
Notwithstanding the foregoing, the undersigned may transfer the
Undersigned's Shares (i) as a bona fide gift or gifts, provided that the donee
or donees thereof agree to be bound in writing by the restrictions set forth
herein, (ii) to any trust for the direct or indirect benefit of the undersigned
or the immediate family of the undersigned, provided that the trustee of the
trust agrees to be bound in writing by the restrictions set forth herein, and
provided further that any such transfer shall not involve a disposition for
value, or (iii) with the prior written consent of Xxxxxxx, Xxxxx & Co. on behalf
of the Purchasers. For purposes of this agreement, "immediate family" shall mean
any relationship by blood, marriage or adoption, not more remote than first
cousin. In addition, notwithstanding the foregoing, if the undersigned is a
corporation, the corporation may transfer the capital stock of the Company to
any wholly-owned subsidiary of such corporation; provided, however, that in any
-------- -------
such case, it shall be a condition to the transfer that the transferee execute
an agreement stating that the transferee is receiving and holding such capital
stock subject to the provisions of this agreement and there shall be no further
transfer of such capital stock except in accordance with this agreement, and
provided further that any such transfer shall not involve a disposition for
value. The undersigned now has, and, except as contemplated by clause (i), (ii),
or (iii) above, for the duration of this agreement will have, good and
marketable title to the Undersigned's Shares, free and clear of all liens,
encumbrances, and claims whatsoever. The undersigned also agrees and consents to
the entry of stop transfer instructions with the Company's transfer agent and
registrar against the transfer of the Undersigned's Shares except in compliance
with the foregoing restrictions.
The undersigned understands that the Company and the Purchasers are relying
upon this agreement in proceeding toward consummation of the offering. The
undersigned further understands that this agreement is irrevocable and shall be
binding upon the undersigned's heirs, legal representatives, successors, and
assigns.
Very truly yours,
-----------------------------
(signature)
-----------------------------
Exact Name of Shareholder
-----------------------------
Title
