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Exhibit 10.30
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of May 25,
2001, by and among GADZOOX NETWORKS, INC., a corporation organized under the
laws of the State of Delaware (the "COMPANY"), and the purchasers (the
"PURCHASERS") set forth on the execution pages hereof (the "EXECUTION PAGES").
WHEREAS:
A. The Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("REGULATION D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT").
B. Each Purchaser desires to purchase, severally and not jointly,
subject to the terms and conditions stated in this Agreement, an aggregate of
5,600,000 shares of the Company's common stock, $.005 par value per share, at a
purchase price of $2.65 per share (the "COMMON STOCK").
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
in the form attached hereto as Exhibit A (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws.
NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:
1. CERTAIN DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings ascribed to them as provided below:
"BUSINESS DAY" shall mean any day on which the principal United States
securities exchange or trading market on which the Common Stock is listed or
traded is open for trading.
"INVESTMENT AMOUNT" shall mean the dollar amount to be invested in the
Company at the Closing pursuant to this Agreement by a Purchaser, as set forth
on the Execution Page hereto executed by such Purchaser.
"MATERIAL ADVERSE EFFECT" shall mean any material adverse effect on (i)
the ability of the Company to perform its obligations hereunder (including the
issuance of the Shares) or under the Registration Rights Agreement or (ii) the
business, operations, properties, prospects or financial condition of the
Company.
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"PRO RATA PERCENTAGE" shall mean, with respect to any Purchaser, a
percentage computed by dividing such Purchaser's Investment Amount by the
aggregate Investment Amounts of all Purchasers.
"SHARES" means the shares of Common Stock to be issued and sold by the
Company and purchased by the Purchasers at the Closing.
"TRADING DAY" shall mean a Business Day on which at least 5,000 shares
of the Company's Common Stock are traded on the principal United States
securities exchange or trading market on which such security is listed or
traded.
2. PURCHASE AND SALE OF SHARES.
a. Generally. Except as otherwise provided in this Section 2 and subject
to the satisfaction (or waiver) of the conditions set forth in Section 6 and
Section 7 below, each Purchaser shall purchase the number of Shares determined
as provided in this Section 2, and the Company shall issue and sell such number
of Shares to each Purchaser for such Purchaser's Investment Amount as provided
below.
b. Number of Closing Shares; Form of Payment; Closing Date.
i. On the Closing Date (as defined below), the Company shall sell
and each Purchaser shall buy the number of Shares as is equal to the quotient of
(I) such Purchaser's Investment Amount divided by (II) $2.65, as shown on the
Schedule of Purchasers attached hereto as Exhibit C. On the Closing Date, each
Purchaser shall pay the Company an amount equal to such Purchaser's Investment
Amount.
ii. On the Closing Date, each Purchaser shall pay its Investment
Amount by wire transfer of immediately available funds to the Escrow Holder (as
defined in the Escrow Agreement dated May 25, 2001 by and among the Company, the
Purchasers, Shoreline Pacific (as defined below) and the Escrow Holder (as
defined therein) (the "Escrow Agreement")), against delivery of certificates
representing the Shares, and the Company shall deliver such Shares to the Escrow
Holder against delivery of the such Purchaser's Investment Amount.
iii. Subject to the satisfaction (or waiver) of the conditions
thereto set forth in Section 6 and Section 7 below, the date and time of the
sale of the Shares pursuant to this Agreement (the "CLOSING") shall be 1:00 p.m.
California time on May 25, 2001, or such other date or time as Shoreline Pacific
Institutional Finance, the Institutional Division of Financial West Group
("SHORELINE PACIFIC"), the Purchasers and the Company may mutually agree
("CLOSING DATE").
3. THE PURCHASER'S REPRESENTATIONS AND WARRANTIES.
Each Purchaser severally and not jointly represents and warrants to the
Company as follows:
a. Purchase for Own Account. The Purchaser is purchasing the Shares for
the Purchaser's own account and not with a present view towards the distribution
thereof. The
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Purchaser understands that the Purchaser must bear the economic risk of this
investment indefinitely, unless the Shares are registered pursuant to the
Securities Act and any applicable state securities or blue sky laws or an
exemption from such registration is available, and that the Company has no
present intention of registering the Shares other than as contemplated by the
Registration Rights Agreement. Notwithstanding anything in this Section 3(a) to
the contrary, by making the foregoing representation, the Purchaser does not
agree to hold the Shares for any minimum or other specific term and reserves the
right to dispose of the Shares at any time in accordance with or pursuant to a
registration statement or an exemption from registration under the Securities
Act and any applicable state securities laws. The Purchaser further represents
that it does not have any contract, undertaking, agreement or arrangement with
any person or entity to sell, transfer or grant participation to any third
person or entity with respect to any of the Shares.
b Information. The Purchaser has been furnished all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Shares which have been requested by the Purchaser.
The Purchaser has been afforded the opportunity to ask questions of the Company
and has received what the Purchaser believes to be satisfactory answers to any
such inquiries. The Purchaser understands that its investment in the Shares
involves a high degree of risk. Neither such inquiries nor any other due
diligence investigation conducted by the Purchaser or its counsel or any of its
representatives shall modify, amend or affect the Purchaser's right to rely on
the Company's representations and warranties contained in Section 4 below.
c. Experience. The Purchaser is experienced in evaluating companies such
as the Company, is able to fend for itself in transactions such as the one
contemplated by this Agreement, has such knowledge and experience in financial
and business matters that such Purchaser is capable of evaluating the merits and
risks of such Purchaser's prospective investment in the Company, and has the
ability to bear the economic risks of the investment.
d. Governmental Review. The Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Shares.
e. Organization and Existence. To the extent indicated on the signature
pages hereto, each Purchaser is either (i) a limited partnership duly organized
and validly existing under the laws of its respective state of formation, (ii) a
limited liability company duly organized and validly existing under the laws of
its respective state of formation, (iii) a corporation duly organized and
validly existing under the laws of its respective state of incorporation or (iv)
an individual. Such Purchaser represents that it was not organized solely for
the purpose of making an investment in the Company.
f.. Authorization; Enforcement. The Purchaser has the requisite power
and authority to enter into and perform its obligations under this Agreement and
to purchase the Shares in accordance with the terms hereof. This Agreement, the
Registration Rights Agreement and the Escrow Agreement have been duly and
validly authorized, executed and delivered on behalf of the Purchaser and are
each a valid and binding agreement of the Purchaser enforceable against the
Purchaser in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization,
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moratorium, fraudulent transfer and other laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
g. Transfer or Resale. The Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the Shares have not been and are
not being registered under the Securities Act or any state securities laws, and
may not be transferred unless (a) subsequently registered thereunder, or (b) the
Purchaser shall have delivered to the Company an opinion of counsel reasonably
acceptable to the Company (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the Shares to be sold or transferred may be sold or transferred under an
exemption from such registration, or (c) sold under Rule 144 promulgated under
the Securities Act (or a successor rule), or (d) sold or transferred to an
affiliate of the Purchaser pursuant to an exemption under the Securities Act;
and (ii) neither the Company nor any other person is under any obligation to
register the Shares under the Securities Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder, in each case,
other than pursuant to the Registration Rights Agreement.
h. Legends. The Purchaser understands that until such time as the Shares
have been registered under the Securities Act as contemplated by the
Registration Rights Agreement or otherwise may be sold by the Purchaser under
Rule 144, the certificates for the Shares may bear a restrictive legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL
IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF
THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE
OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any security upon which it is
stamped, if (a) the sale of such security is registered under the Securities Act
or (b) in connection with the resale of such security, such holder provides the
Company with an opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public sale
or transfer of such security may be made without registration under the
Securities Act. The Purchaser agrees to sell the Shares, including those
represented by a certificate(s) from which the legend has been removed, pursuant
to an effective registration statement or under an exemption from the
registration requirements of the Securities Act. The legend shall be removed
when such security is sold pursuant to an effective registration statement or
may be sold by a Purchaser who is not an "affiliate" of the Company under Rule
144(k).
i. Compliance with Securities Laws. Each Purchaser will observe and
comply with the Securities Act and the General Rules and Regulations thereunder,
as now in effect and as from time
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to time amended and including those hereafter enacted or promulgated, in
connection with any offer, sale, exchange, transfer, pledge or other disposition
of the Shares or any part thereof.
j. Accredited Investor Status. The Purchaser is an "ACCREDITED INVESTOR"
as that term is defined in Rule 501(a) of Regulation D. The Purchaser is not
registered as a broker or dealer under Section 15(a) of the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), affiliated with any broker or
dealer registered under Section 15(a) of the Exchange Act or a member of the
NASD (as defined below).
k. Representation. The Purchaser has had an opportunity to consult with
an attorney in connection with the Purchaser's investment in the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser as follows, except
as otherwise set forth in the disclosure schedules attached hereto as the
"Company Disclosure Schedules":
a. Organization and Qualification. The Company is a corporation duly
organized and existing under the laws of the jurisdiction in which it is
incorporated, and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. Schedule 4(a) sets forth the Company's jurisdiction of incorporation.
The Company has no significant subsidiary as such term is defined in Rule 405
under the Securities Act.
b. Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Registration Rights Agreement and the Escrow Agreement, to
issue and sell the Shares in accordance with the terms hereof; (ii) the
execution, delivery and performance of this Agreement, the Registration Rights
Agreement and the Escrow Agreement by the Company and the consummation by it of
the transactions contemplated hereby and thereby (including, without limitation,
the reservation for issuance and issuance of the Shares) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors or its shareholders is
required; (iii) this Agreement, has been duly executed and delivered by the
Company; and (iv) this Agreement, the Registration Rights Agreement and the
Escrow Agreement constitute, and, upon execution and delivery by the Company and
the other parties thereto, to the extent required, such agreements will
constitute, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other laws affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
c. Capitalization. The capitalization of the Company as of the date
hereof is set forth on Schedule 4(c), including the authorized capital stock,
the number of shares issued and outstanding, the number of shares issuable and
reserved for issuance pursuant to the Company's
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stock option plans, the number of shares issuable and reserved for issuance
pursuant to securities exercisable for, or convertible into or exchangeable for
any shares of capital stock. All of such outstanding shares of the Company's
capital stock have been, or upon issuance will be, validly issued, fully paid
and nonassessable. Except as set forth on Schedule 4(c), no shares of capital
stock of the Company (including the Shares) are subject to preemptive rights or
any other similar rights of the shareholders of the Company or any liens or
encumbrances. Except as disclosed in Schedule 4(c), as of the date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever to which the
Company is a party relating to the issuance by the Company of securities or
rights convertible into or exercisable or exchangeable for, any shares of
capital stock of the Company, or arrangements by which the Company is or may
become bound to issue additional shares of capital stock of the Company, and
(ii) there are no agreements or arrangements under which the Company is
obligated to register the sale of any of its or their securities under the
Securities Act (except the Registration Rights Agreement). The Company has made
available to each Purchaser through its filings with the SEC true and correct
copies of the Company's Amended and Restated Certificate of Incorporation as in
effect on the date hereof ("CERTIFICATE OF INCORPORATION"), the Company's
By-laws as in effect on the date hereof (the "BY-LAWS") and all other
instruments and agreements governing securities convertible into or exercisable
or exchangeable for capital stock of the Company, except for stock options
granted under any employee benefit plan or director stock option plan of the
Company.
d. Issuance of Shares. The Shares are duly authorized and when issued
and paid for in accordance with the terms hereof, will be validly issued, fully
paid and non-assessable, and free from all taxes, liens, claims and encumbrances
(other than those imposed through acts or omissions of the Purchaser thereof),
and will not be subject to preemptive rights or other similar rights of
shareholders of the Company and will not impose personal liability upon the
holder thereof.
e. No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement and the Escrow Agreement by the
Company, and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the reservation for issuance
and issuance of the Shares) will not (i) conflict with or result in a violation
of the Certificate of Incorporation or By-laws or (ii) conflict with, or
constitute a default (or an event which, with notice or lapse of time or both,
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any agreement, indenture or
instrument to which the Company is a party, or result in a violation of any law,
rule, regulation, order, judgment or decree (including (assuming the accuracy of
the representations and warranties of the Purchasers) the United States federal
and state securities laws and regulations) applicable to the Company or by which
any property or asset of the Company is bound or affected (except, with respect
to clause (ii), for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). The Company is not in violation of
its Certificate of Incorporation, By-laws and other organizational documents and
the Company is not in default (and no event has occurred which, with notice or
lapse of time or both, would put the Company in default) under, nor has there
occurred any event giving others (with notice or lapse of time or both) any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company is a party, except for
actual or possible violations, defaults or rights as would not, individually or
in the aggregate, have a Material Adverse Effect. The businesses of the
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Company are not being conducted in violation of any law, ordinance or regulation
of any governmental entity, except for actual or possible violations, if any,
the sanctions for which either singly or in the aggregate would not have a
Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the Securities Act and any applicable state securities
laws, the Company is not required to obtain any consent, approval, authorization
or order of, or make any filing or registration with, any court or governmental
agency or any regulatory or self regulatory agency in order for it to execute,
deliver or perform any of its obligations under this Agreement (including
without limitation the issuance and sale of the Shares) or the Registration
Rights Agreement or the Escrow Agreement, in each case in accordance with the
terms hereof or thereof. The Company is not in violation of the listing
requirements of the Nasdaq National Market and, assuming completion of the
transactions contemplated by this Agreement, does not reasonably anticipate that
the Common Stock will be delisted by the Nasdaq National Market in the
foreseeable future based on its rules (and interpretations thereof) as currently
in effect.
f. SEC Documents; Financial Statements. Since March 31, 2000, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the Exchange Act,
and has filed all registration statements and other documents required to be
filed by it with the SEC pursuant to the Securities Act (all of the foregoing
filed prior to the date hereof, and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference
therein, being hereinafter referred to herein as the "SEC DOCUMENTS"). As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Exchange Act or the Securities Act, as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable to
the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Any statements made in any such SEC Documents that are or
were required to be updated or amended under applicable law have been so updated
or amended. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC applicable with respect thereto. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the consolidated financial position of the Company as
of the dates thereof and the results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal and
recurring year-end audit adjustments). Except as set forth in the SEC Documents,
the Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to the date
of such SEC Documents and (ii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under generally
accepted accounting principles to be reflected in such SEC Documents, which
liabilities and obligations referred to in clauses (i) and (ii), individually or
in the aggregate, would not have a Material Adverse Effect.
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g. Absence of Certain Changes. Except as disclosed in the SEC Documents,
since March 31, 2000, there has been no change or development which individually
or in the aggregate has had or could have a Material Adverse Effect.
h. Absence of Litigation. Except as disclosed in the SEC Documents,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its directors or officers in their capacities as such which
would have a Material Adverse Effect.
i. Intellectual Property. The Company owns or is licensed to use all
patents, patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, licenses, permits, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "INTANGIBLES") necessary for the conduct of
its business as now being conducted and as proposed to be conducted, except
where the failure to own or be licensed to use such Intangibles does not have a
Material Adverse Effect. The Company has not received written notice that it is
infringing upon or in conflict with any third party Intangibles. The Company has
not entered into any consent, indemnification, forbearance to xxx or settlement
agreements with respect to the validity of the Company's ownership or right to
use its Intangibles. The Intangibles are valid and enforceable in all material
respects, and no material registration relating thereto has lapsed, expired or
been abandoned or canceled or is the subject of cancellation or other
adversarial proceedings, and all material applications therefor are pending and
in good standing. The Company has complied in all material respects with its
contractual obligations relating to the protection of the Intangibles used
pursuant to licenses. To the Company's knowledge, no person is infringing on or
violating the Intangibles owned or used by the Company, which infringement or
violation, individually or in the aggregate, would have a Material Adverse
Effect.
j. Environment. Except as disclosed in the SEC Documents and to the best
of the Company's knowledge (i) there is no environmental liability, nor factors
likely to give rise to any environmental liability, affecting any of the
properties of the Company that, individually or in the aggregate, would have a
Material Adverse Effect and (ii) the Company has not violated any environmental
law applicable to it now or previously in effect, other than such violations or
infringements that, individually or in the aggregate, have not had and will not
have a Material Adverse Effect.
k. Title. Except as disclosed in the SEC documents, the Company has good
title to all personal property owned by it which is material to its business,
free and clear of all liens, encumbrances and defects except for such defects in
title that, individually or in the aggregate, could not have a Material Adverse
Effect. Any real property and facilities held under lease by the Company are
held by the Company under valid, subsisting and enforceable leases with such
exceptions which have not had and will not have a Material Adverse Effect.
l. Insurance. The Company maintains such insurance relating to its
business, operations, assets, key-employees and officers and directors as is
appropriate to its business, assets and operations, in such amounts and against
such risks as are customarily carried and insured against
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by owners of comparable businesses, assets and operations, and such insurance
coverages will be continued in full force and effect to and including the
Closing Date other than those insurance coverages in respect of which the
failure to continue in full force and effect could not reasonably be expected to
have a Material Adverse Effect.
m. Acknowledgment Regarding the Purchasers' Purchase of the Shares. The
Company acknowledges and agrees that no Purchaser is acting as a financial
advisor or is acting as a fiduciary of the Company (or in any similar capacity)
with respect to this Agreement or the transactions contemplated hereby, and the
relationship between the Company and the Purchasers is "arms length" and that
any statement made by any Purchaser or any of its representatives or agents in
connection with this Agreement and the transactions contemplated hereby is not
advice or a recommendation and is merely incidental to such Purchaser's purchase
of the Shares and, except for the representations, warranties and covenants of
Purchaser expressly contained in this Agreement, has not been relied upon by the
Company, its officers or directors in any way. The Company further represents to
the Purchaser that the Company's decision to enter into this Agreement has been
based solely on an independent evaluation by the Company and its
representatives.
n. No Brokers. The Company has not engaged any person to which or to
whom brokerage commissions, finder's fees, financial advisory fees or similar
payments are or will become due in connection with this Agreement or the
transactions contemplated hereby except for Shoreline Pacific, whose commissions
and fees will be paid by the Company.
o. Tax Status. The Company has made or filed all material federal, state
and local income and all other tax returns, tax reports and tax declarations
required by any jurisdiction to which it is subject (unless and only to the
extent that the Company has set aside on its books provisions adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due and payable on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provisions adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
material unpaid taxes claimed to be due by the taxing authority of any
jurisdiction. The Company has not executed a waiver with respect to any statute
of limitations relating to the assessment or collection of any federal, state or
local tax.
p. No General Solicitation. Neither the Company nor any person
participating on the Company's behalf in the transactions contemplated hereby
has conducted any "general solicitation" or "general advertising" as such terms
are used in Regulation D, with respect to any of the Shares being offered
hereby.
q. Securities Laws. Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf, has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security
under circumstances that would require registration of the Shares being offered
hereby under the Securities Act or cause this offering of Shares to be
integrated with any prior offering of securities of the Company for purposes of
the Securities Act or any applicable stockholder approval provisions, including,
without limitation, Rule 4310(25)(h) of the National Association of Securities
Dealers ("NASD") or any similar rule.
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r. Form S-3 Eligibility. The Company is currently eligible to register
the resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act. To the Company's knowledge, there exist no facts or
circumstances (including without limitation any required approvals or waivers of
any circumstances that may delay or prevent the obtaining of accountant's
consents) that would prohibit the timely preparation and filing of a
registration statement on Form S-3 with respect to the Registrable Securities
(as defined in the Registration Rights Agreement).
s. Disclosure. The information relating to or concerning the Company set
forth in this Agreement or provided to the Purchaser pursuant to Section 3(b)
hereof and otherwise in connection with the transactions contemplated hereby
does not contain an untrue statement of material fact nor omit to state a
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not misleading. Except
as otherwise indicated in writing with a particular purchaser, the Company has
not disclosed or provided, and without such Purchaser's consent thereto, will
not hereafter disclose or provide to any Purchaser, any information that (i) if
disclosed, would, or could reasonably be expected to have, a material effect on
the price of the Common Stock or (ii) according to applicable law, rule or
regulation, should have been disclosed publicly by the Company but which has not
been disclosed.
5. COVENANTS.
a. Satisfaction of Conditions. The parties shall use their commercially
reasonable efforts to satisfy in a timely manner each of the conditions set
forth in Section 6 and Section 7 of this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Shares as required under Regulation D. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Shares for sale to the Purchasers pursuant
to this Agreement under applicable securities or "blue sky" laws of the states
of the United States or obtain exemption therefrom.
c. Reporting Status. So long as a Purchaser beneficially owns any Shares
or has the right to acquire any Shares pursuant to this Agreement, the Company
shall timely file all reports required to be filed with the SEC pursuant to the
Exchange Act, and shall not terminate its status as an issuer required to file
reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would permit such termination.
d. Expenses. At the Closing, the Company shall reimburse Shoreline
Pacific for the out-of-pocket expenses reasonably incurred by Shoreline Pacific
and its affiliates and advisors in connection with the negotiation, preparation,
execution and delivery of this Agreement, the Registration Rights Agreement and
the other agreements to be executed in connection herewith, including, without
limitation, in conducting Shoreline Pacific's and its affiliates' and advisors'
reasonable due diligence and Shoreline Pacific's and its affiliates' reasonable
attorneys' fees and expenses (the "EXPENSES"). Notwithstanding the foregoing,
the Company shall not be obligated to reimburse Shoreline Pacific for more than
$25,000.00 of Expenses pursuant to this Section 5(d).
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e. Financial Information. For a period of two (2) years following the
Closing, the Company agrees to send to each Purchaser within ten days after the
filing with the SEC, to the extent not available through the SEC's XXXXX system,
a copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q,
its proxy and information statements and any Current Reports on Form 8-K.
f. Reservation of Shares. The Company has and shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the issuance of the Shares as provided in
Section 2 hereof. The Company shall not reduce the number of shares of Common
Stock reserved for issuance under this Agreement (except as a result of the
issuance of the Shares hereunder)or the Registration Rights Agreement (except as
a result of the termination), without the consent of the Purchasers.
g. Listing. On the Closing Date, the Company shall have applied for the
listing of the Shares upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed or
quoted and shall maintain, so long as any other shares of Common Stock shall be
so listed, such listing of all Shares from time to time issuable hereunder. The
Company shall use its commercially reasonable efforts to continue the listing
and trading of its Common Stock on The Nasdaq Stock Market and to comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of NASDAQ or any exchanges, as applicable.
h. No Integrated Offerings. The Company shall not make any offers or
sales of any security (other than the Shares) under circumstances that would
require registration of the Shares being offered or sold hereunder under the
Securities Act or cause this offering of Shares to be integrated with any other
offering of securities by the Company for purposes of any state securities or
blue sky law.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell Shares to a
Purchaser at the Closing hereunder is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions thereto; provided,
however, that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
a. The applicable Purchaser shall have executed the signature page to
this Agreement, the Registration Rights Agreement and the Escrow Agreement, and
delivered the same to the Company and Shoreline Pacific.
b. The applicable Purchaser shall have delivered such Purchaser's
Investment Amount in accordance with Section 2(b) above.
c. The representations and warranties of the applicable Purchaser shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date, which representations and warranties shall be true and
correct as of such date), and the applicable Purchaser shall have performed,
satisfied
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and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the applicable Purchaser at or prior to the Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling,
injunction, action, proceeding or interpretation shall have been enacted,
entered, promulgated, endorsed or adopted by any court or governmental authority
of competent jurisdiction or any self-regulatory organization, or the staff of
any thereof, having authority over the matters contemplated hereby which
questions the validity of, or challenges or prohibits the consummation of, any
of the transactions contemplated by this Agreement.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE SHARES.
The obligation of each Purchaser hereunder to purchase Shares to be
purchased by it hereunder is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for such Purchaser's sole benefit and may be waived by such
Purchaser at any time in such Purchaser's sole discretion:
a. The Company shall have executed the signature pages to this
Agreement, the Registration Rights Agreement and the Escrow Agreement, and
delivered the same to the Purchaser and Shoreline Pacific.
b. The Company shall have delivered duly executed certificates
representing the number of Shares as provided in Section 2(b) above.
c. The additional listing application shall have been filed to authorize
the Shares for quotation on NASDAQ and trading in the Common Stock (or on NASDAQ
generally) shall not have been suspended or be under threat of suspension by the
SEC or NASDAQ.
d. The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date, which representations and warranties shall be true and correct as of such
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing Date. The Purchaser shall have received a certificate, executed
on behalf of the Company by its President and Chief Executive Officer, dated as
of the Closing Date, to the foregoing effect and attaching true and correct
copies of the resolutions adopted by the Company's Board of Directors
authorizing the execution, delivery and performance by the Company of its
obligations under this Agreement and the Registration Rights Agreement.
e. No statute, rule, regulation, executive order, decree, ruling,
injunction, action, proceeding or interpretation shall have been enacted,
entered, promulgated, endorsed or adopted by any court or governmental authority
of competent jurisdiction or any self-regulatory organization, or the staff of
any thereof, having authority over the matters contemplated hereby which
questions
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the validity of, or challenges or prohibits the consummation of, any of the
transactions contemplated by this Agreement.
f. The Purchaser shall have received an opinion of the Company's
counsel, dated as of the Closing Date, relating to the matters set forth in
Exhibit B attached hereto.
g. From the date of this Agreement through the Closing Date, there shall
not have occurred any Material Adverse Effect.
8. GOVERNING LAW MISCELLANEOUS.
a. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts made and to be performed in the State of California. Each of the
parties irrevocably consents to the jurisdiction of the United States federal
courts and the state courts located in the State of California in any suit or
proceeding based on or arising under this Agreement and irrevocably agrees that
all claims in respect of such suit or proceeding may be determined in such
courts. Each of the parties, irrevocably waives the defense of an inconvenient
forum to the maintenance of such suit or proceeding. Each of the parties further
agrees that service of process upon such party mailed by first class mail to the
address set forth in Section 8(f) shall be deemed in every respect effective
service of process upon such party in any such suit or proceeding. Nothing
herein shall affect the right of any Purchaser to serve process in any other
manner permitted by law. Each of the parties, agrees that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.
b. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
hereof to be physically delivered to the other party within five (5) days of the
execution hereof.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments; Waiver. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Purchasers
make any representation, warranty, covenant or undertaking with respect to such
matters.
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No provision of this Agreement may be waived or amended other than by an
instrument in writing signed by the Company and, by the Purchasers as provided
in Section 8(o) hereof. Any waiver by the Purchasers, on the one hand, or the
Company, on the other hand, of a breach of any provision of this Agreement shall
not operate as or be construed to be a waiver of any other breach of such
provision of or any breach of any other provision of this Agreement. The failure
of the Purchasers, on the one hand, or the Company, on the other hand to insist
upon strict adherence to any term of this Agreement on one or more occasions
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement.
f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Gadzoox Networks, Inc.
0000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx, President
and Chief Executive Officer
With a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX
Telephone No. (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxx X. XxXxxxxx, Esq.
If to the Purchaser, to the address set forth under the Purchaser's name on the
Execution Page hereto executed by such Purchaser, with a copy to:
Shoreline Pacific
0 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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Attention: Xxxxxx X. Xxxxxxx
Chief Executive Officer
Each party hereto may from time to time change its address or facsimile number
for notices under this Section 8 by giving at least ten (10) days' prior written
notice of such changed address or facsimile number, in the case of the
Purchasers to the Company, and in the case of the Company to all of the
Purchasers.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers, such consent not to be
unreasonably withheld or delayed. No Purchaser shall assign this Agreement or
any rights or obligations hereunder without the prior written consent of the
Company, such consent not to be unreasonably withheld or delayed, except to an
affiliate of such Purchaser, and provided further, that any such assignee shall
agree in writing with the Company to be bound by the terms and conditions hereof
and of the Registration Rights Agreement.
h. Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by any other
person.
i. Survival. The representations and warranties of the Company shall
survive for three (3) years from the Closing Date and the agreements and
covenants of the Company shall survive the Closing subject to any applicable
statute of limitations notwithstanding any due diligence investigation conducted
by or on behalf of the Purchasers. Moreover, none of the representations and
warranties made by the Company herein shall act as a waiver of any rights or
remedies a Purchaser may have under applicable federal or state securities laws.
The Company agrees to indemnify and hold harmless each Purchaser and each of
such Purchaser's officers, directors, employees, partners, members, agents and
affiliates for loss or damage relating to the Shares purchased hereunder arising
as a result of or related to any breach by the Company of any of its
representations or covenants set forth herein, including advancement of expenses
as they are incurred.
j. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
k. Termination. In the event that the Closing Date shall not have
occurred on or before June 1, 2001, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date.
l. Joint Participation in Drafting. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement, the Registration
Rights Agreement and the Escrow
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Agreement. As such, the language used herein and therein shall be deemed to be
the language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction will be applied against any party to this Agreement,
the Registration Rights Agreement and the Escrow Agreement.
m. Equitable Relief. Each party acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the other parties by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, each party acknowledges that the remedy at law for a breach of its
obligations hereunder will be inadequate and agrees, in the event of a breach or
threatened breach by such party of the provisions of this Agreement, that the
other parties shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any bond or
other security being required.
n. Determinations. Except as otherwise expressly provided herein, all
consents, approvals and other determinations to be made by the Purchasers
pursuant to this Agreement shall be made by the Purchasers holding at least a
majority of the Shares then held by all Purchasers.
o. Public Disclosure. The Company shall have the right to approve the
issuance of any press release (including any "tombstone" advertisement) or any
other public statements with respect to the transactions contemplated hereby.
p. California Corporate Securities Law. THE SALE OF THE SECURITIES THAT
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
q. Aggregation of Shares. All of the Shares held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of
determining the availability of rights under this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
COMPANY:
GADZOOX NETWORKS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
DATE:
------------------------------------
THE PURCHASERS:
XXXXX HILL PARTNERS, L.P.
By: Xxxxx Xxxx Capital, LLC
General Partner
By:
-------------------------------------
Name: Xxxxx Xxxxxxx
-----------------------------------
Title: Manager
----------------------------------
DATE:
--------------------------------
BALBOA FUND, L.P.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
DATE:
--------------------------------
GALLEON TECHNOLOGY PARTNERS, L.P.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
DATE:
--------------------------------
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18
GALLEON TECHNOLOGY PARTNERS II, L.P.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
DATE:
--------------------------------
GALLEON TECHNOLOGY OFFSHORE, LTD.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
DATE:
--------------------------------
ADMIRALS, L.P.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
DATE:
--------------------------------
GALLEON MANAGEMENT, LP
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
DATE:
--------------------------------
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19
EXHIBIT A
TO SECURITIES PURCHASE AGREEMENT
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of May 25,
2001, by and among GADZOOX NETWORKS, INC., a corporation organized under the
laws of the State of Delaware (the "COMPANY"), and the undersigned (the "INITIAL
INVESTORS").
WHEREAS:
A. The Company and the Initial Investors have entered into a Securities
Purchase Agreement dated the date hereof (the "SECURITIES PURCHASE AGREEMENT");
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement. In
connection with the Securities Purchase Agreement, the Company has agreed, upon
the terms and subject to the conditions contained therein, to issue and sell to
the Initial Investors shares of the Company's common stock, $0.005 par value per
share (the "COMMON STOCK"). The shares of Common Stock issued on the Closing
Date under the Securities Purchase Agreement are referred to herein as the
"SHARES".
B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"SECURITIES ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investors, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
(i) "INVESTORS" means the Initial Investors and any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Section 9 hereof, provided that neither such person
nor any affiliate of such person is registered as a broker or dealer under
Section 15(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or a member of the National Association of Securities Dealers, Inc.
("NASD").
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(ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer
to a registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("RULE 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iii) "REGISTRABLE SECURITIES" means (i) the Shares and
(ii) any shares of capital stock issued or issuable, from time to time (with any
adjustments), as a distribution on or in exchange for or otherwise with respect
to any of the foregoing.
(iv) "REGISTRATION STATEMENT" means one or more
registration statements of the Company under the Securities Act registering all
of the Registrable Securities, including the Initial Registration Statement, any
Uncovered Shares Amendments and Uncovered Shares Registration Statements (each,
as defined below).
2. REGISTRATION.
a. Mandatory Registration. Within 45 days following the Closing
Date (the "FILING DEADLINE"), the Company shall file with the United States
Securities and Exchange Commission ("SEC") a Registration Statement on Form S-3
(or, if Form S-3 is not then available, on such form of Registration Statement
as is then available to effect a registration of all of the Registrable
Securities, covering the resale of at least 5,600,00 shares of Common Stock,
which Registration Statement, to the extent allowable under the Securities Act
and the rules promulgated thereunder shall state that such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable to prevent dilution resulting from stock splits,
stock dividends or similar transactions (the "INITIAL REGISTRATION STATEMENT").
The Registrable Securities included in the Initial Registration Statement shall
be registered on behalf of the Investors as set forth in Section 11(k) hereof.
The Initial Registration Statement (and each amendment or supplement thereto,
and each request for acceleration of effectiveness thereof) shall be provided to
(and subject to the review by) the Initial Investors and their counsel at least
five (5) business days prior to its filing or other submission. If for any
reason (including, but not limited to, a determination by the staff of the SEC
that all or any portion of the Shares or any other Registrable Securities cannot
be included in the Initial Registration Statement (an "SEC DETERMINATION")) the
Initial Registration Statement declared effective by the SEC does not include
all of the Registrable Securities (any such shares that are not included being
the "UNCOVERED SHARES"), the Company shall prepare and file with the SEC, as
soon as practicable, but in any event within 30 days after becoming aware of the
existence of any Uncovered Shares (such date referred to herein as the
"UNCOVERED SHARE FILING DEADLINE"), either (a) an amendment (the "UNCOVERED
SHARES AMENDMENT") to the Initial Registration Statement effecting a
registration of the Uncovered Shares or (b) a registration statement which
registers the Uncovered Shares (the "UNCOVERED SHARES REGISTRATION STATEMENT").
The Uncovered Shares Amendment or the Uncovered Shares Registration Statement
(and each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to the Initial Investors and their
counsel for review and comment at least three (3)
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business days prior to its filing or other submission. The Company shall use
commercially reasonable efforts to cause each of the Initial Registration
Statement and the Uncovered Shares Amendment or the Uncovered Shares
Registration Statement to become effective as soon as practicable after the
filing thereof.
b. Underwritten Offering. The Investors may offer and sell the
Registrable Securities pursuant to a Registration Statement filed in accordance
with Section 2(a) in an underwritten offering. In any such underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering, shall have the right to select
one legal counsel to represent the Investors and an investment banker or bankers
and manager or managers to administer the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the Company.
In the event that any Investors elect not to participate in such underwritten
offering, the Registration Statement covering all of the Registrable Securities
shall contain appropriate plans of distribution reasonably satisfactory to the
Investors participating in such underwritten offering and the Investors electing
not to participate in such underwritten offering (including, without limitation,
the ability of nonparticipating Investors to sell from time to time and at any
time during the effectiveness of such Registration Statement). In the event the
Investors elect to offer and sell the Registrable Securities pursuant to a
Registration Statement filed in accordance with Section 2(a) in an underwritten
offering, the provisions of the Section 2(c) shall be inapplicable to such
Registration Statement.
c. Payments by the Company.
The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities required to be
registered pursuant to Section 2(a) (but in no event later than the Filing
Deadline) and use its commercially reasonable efforts to cause such Registration
Statement to become effective as soon as possible after such filing (but in no
event later than the ninetieth (90th) day after the Closing Date (the
"REGISTRATION DEADLINE"), and as to any Uncovered Shares Amendment or Uncovered
Shares Registration Statement, in no event later than the ninetieth (90th) day
after the Uncovered Share Filing Deadline (the "UNCOVERED SHARE REGISTRATION
DEADLINE")). If (i) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not filed with the SEC by the Filing Deadline or the Uncovered Share Filing
Deadline, as applicable, or, declared effective by the SEC on or before the
Registration Deadline or the Uncovered Share Registration Deadline, as
applicable, or if, after a Registration Statement has been declared effective by
the SEC, sales of all the Registrable Securities (including any Registrable
Securities required to be registered pursuant to Section 3(b) hereof) required
to be included therein (except, in the case of the Initial Registration
Statement, for Uncovered Shares which are the subject of an SEC Determination)
cannot be made pursuant to the Registration Statement (by reason of a stop
order, the Company's failure to update a Registration Statement, any reason
resulting in Uncovered Shares or any other reason outside the control of the
Investors) or (ii) the Common Stock is not listed or included for quotation on
the Nasdaq National Market or Small Cap Market (the "NASDAQ MARKETS"), the New
York Stock Exchange (the "NYSE") or the American Stock Exchange (the "AMEX") at
any time after the Registration Deadline, then the Company will make payments to
the Investors in such amounts and
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at such times as shall be determined pursuant to this Section 2(c) as damages to
the Investors by reason of any such delay in or reduction of their ability to
sell the Registrable Securities. The damages described in the following
paragraph are the Investors' sole and exclusive remedy for the failure to comply
with the timelines set forth in this section.
On the first day of each thirty (30) day period after the Filing
Deadline, the Uncovered Filing Deadline, the Registration Deadline or the
Uncovered Share Registration Deadline, as applicable, the Company will pay each
Investor a penalty until such time that the Registration Statement is filed with
the SEC or declared effective by the SEC, as applicable. The amount of each
payment shall equal the product of (A) one-half of one percent (0.5%) for the
first thirty (30) day period and one (1%) percent for each thirty (30) day
period thereafter, multiplied by (B) the Investment Amount (as defined in the
Securities Purchase Agreement) paid by such Investor (or if such Investor is not
an Initial Investor, the Investment Amount paid by such Investor's transferor or
assignor of such Shares) for the Shares purchased by such Investor (or such
Investor's transferor or assignor) pursuant to the Securities Purchase Agreement
(the "AGGREGATE PURCHASE PRICE"). In the event that such Registration Statement
is not declared effective by the SEC within 270 days after the Registration
Deadline, either the Investors or the Company shall have the right at any time
prior to the effectiveness of the Registration Statement to require redemption
of any or all of the Shares at a price equal to 110% of the Aggregate Purchase
Price. Such amounts shall be paid in cash. If the Company is unable to pay all
amounts due and payable with respect to the penalties, the Company will pay the
Investors such amounts pro rata based upon the total amounts payable to each
Investor as a percentage of the total amounts payable to all Investors.
d. Eligibility for Form S-3. The Company represents and warrants
that it is currently eligible to register the resale of Registrable Securities
on a registration statement on Form S-3 under the Securities Act, and that it
knows of no facts or circumstances (including without limitation any required
approvals or waivers or any circumstances that may delay or prevent the
obtaining of accountant's consents) that would prohibit or delay the preparation
and filing of a registration statement on Form S-3 with respect to the
Registrable Securities within the time periods required herein. The Company
shall file all reports required to be filed by the Company with the SEC in a
timely manner so as to maintain or, if applicable, regain its eligibility for
the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare and file with the SEC, on or before
the Filing Deadline or the Uncovered Share Filing Deadline, as applicable, the
applicable Registration Statement required by Section 2(a) and shall use its
commercially reasonable efforts to cause such Registration Statement to become
effective as soon as practicable after such filing (but in no event later than
the Registration Deadline or the Uncovered Share Registration Deadline, as
applicable). The Company shall keep such Registration Statement effective
pursuant to Rule 415 at all times
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until the date on which all of the outstanding Registrable Securities may (in
the reasonable opinion of counsel experienced in securities matters representing
at least a majority of the Initial Investors and, if none, to counsel to the
Company) be immediately sold to the public without registration or restriction
pursuant to Rule 144(k) under the Securities Act (the "REGISTRATION PERIOD"). In
the event that the sale of Registrable Securities by one or more Investors is
determined by the SEC to constitute a primary offering, upon the written request
from time to time of any such Investor, the Company shall as promptly as
practicable: cause a Registration Statement to be amended and/or one or more
additional Registration Statements (which may be requested on a sequential
basis) to be filed (as specified by the applicable Investors) and to be declared
effective; and take all other actions reasonably requested by such Investors to
effectuate the offering of Registrable Securities. If the Initial Registration
Statement is not filed on Form S-3, the Company shall, as soon as it is eligible
to do so, file a post-effective amendment on Form S-3 to the Initial
Registration Statement to the extent permitted by the SEC or, if not so
permitted, file a post-effective amendment on an appropriate form or a new
Registration Statement on Form S-3 to permit sales of the Registrable Securities
under the Securities Act; and the Company shall use its best efforts to cause
such post-effective amendment or Registration Statement to become effective as
soon as possible. Each Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein and all documents
incorporated by reference therein) filed pursuant to this Agreement (i) shall
comply in all material respects with the requirements of the Securities Act and
the rules and regulations of the SEC promulgated thereunder and (ii) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading. The
financial statements of the Company included in the Registration Statement or
incorporated by reference therein will comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC applicable with respect thereto. Such financial
statements shall be prepared in accordance with U.S. generally accepted
accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may not include footnotes or may be condensed or summary statements) and shall
fairly present in all material respects the consolidated financial position of
the Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to immaterial or recurring
year-end adjustments).
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company covered by the Registration
Statement until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof as set forth in the Registration Statement. Notwithstanding
the foregoing, the Company's obligations hereunder to file a Registration
Statement and to keep a registration statement continuously in effect under the
Securities Act shall be suspended without
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24
penalty as provided in Section 2 (c) of this Agreement if the fulfillment of
such obligations would require the Company to make a disclosure that would, in
the reasonable judgment of the Company's Board of Directors, have a Material
Adverse Effect (as such term is defined in the Securities Purchase Agreement) on
the Company or a material adverse effect on the future prospects of the Company
or its stockholders; provided, that the Registration Statement shall be
suspended for a total of no more than forty-five (45) days during any twelve
(12) month period.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and legal counsel, if any,
representing Investors holding at least a majority of the Registrable Securities
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each prospectus and each amendment or supplement thereto (ii)
on the date of effectiveness of the Registration Statement or any amendment
thereto, a notice stating that the Registration Statement or amendment has been
declared effective, and (iii) such number of copies of a prospectus and all
amendments and supplements thereto and such other documents as such Investor may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor. In responding to comments from the staff of
the SEC, the Company shall cooperate with any Investor that notifies the Company
that it desires to be consulted with respect to such process. To the extent that
issues raised by the staff of the SEC have an impact primarily on any such
Investor rather than the Company, the Company shall give reasonable deference to
such Investor's requests with respect to the process and substance of responses
with respect to such issues. In the event that the Company is unable to meet the
Filing Deadline, the Uncovered Share Filing Deadline, the Registration Deadline
or the Uncovered Share Registration Deadline due to delays caused by requests of
any Investor to be consulted or due to changes to the Registration Statement or
prospectus requested by any Investor or its representative, the Company shall
have no obligation to pay any penalties set forth in Section 2(c).
d. The Company shall use commercially reasonable efforts to (i)
register and qualify the Registrable Securities covered by the Registration
Statement under such other securities or "blue sky" laws of such jurisdictions
in the United States as each Investor who holds Registrable Securities being
offered reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its articles of incorporation or bylaws,
which in each case the Board of Directors of the Company determines to be
contrary to the best interests of the Company and its stockholders.
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25
e. In the event the Investors who hold a majority in interest of
the Registrable Securities being offered in an offering select underwriters for
the offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor by telephone, facsimile or e-mail
of the happening of any event, of which the Company has knowledge, as a result
of which the prospectus included in the Registration Statement, as then in
effect, includes an untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission and deliver such number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest practicable date (including in each
case by amending or supplementing such Registration Statement) and to notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance of such
order and the resolution thereof (and if such Registration Statement is
supplemented or amended, deliver such number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request).
h. The Company shall permit a single firm of counsel designated
by the Initial Investors to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time prior to their filing with
the SEC.
i. At the request of the Initial Investors whose Registrable
Securities are included in a Registration Statement, the Company shall furnish,
on the date of effectiveness of the Registration Statement (i) an opinion, dated
as of such date, from counsel representing the Company addressed to the
Investors to the effect that the Registration Statement and related prospectus
comply as to form in all material respects with the requirements of the
Securities Act and the applicable rules and regulations thereunder (except that
no opinion need be expressed with respect to the financial statements, including
the notes and schedules thereto, or any other financial, statistical or
accounting information, or information relating to the Investors or any
underwriters or the method of distribution of the Registrable Securities by the
Investors and any underwriters included therein), and (ii) a letter (the "Cold
Comfort Letter"), dated as of such date, from the Company's independent
certified public accountants (the "Auditors") in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the Initial Investors and the
underwriters, if any, provided, however, that such Investors requesting the Cold
Comfort Letter shall, as a condition precedent to receiving the Cold Comfort
Letter, furnish the Auditors with such information as the Auditors may
reasonably request in order to render the Cold Comfort Letter.
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26
j. The Company shall make available for inspection by (i) any
Investor who holds at least 20% of the Shares initially purchased by that
Investor and whose Registrable Securities are included in a Registration
Statement, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence.
k. The Company and each Investor shall hold in confidence and
not make any disclosure of information concerning an Investor and the Company,
respectively, provided to the Company or an Investor unless (i) disclosure of
such information is necessary to comply with federal or state securities laws,
(ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, (iv) such information has been
made generally available to the public other than by disclosure in violation of
this or any other agreement, or (v) such Investor consents to the form and
content of any such disclosure. The Company agrees that it shall, upon learning
that disclosure of such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to such Investor prior to making such disclosure, and allow
the Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
l. The Company shall use reasonable efforts to promptly either
(i) secure the designation and quotation, of all the Registrable Securities
covered by the Registration Statement on The Nasdaq National Market, or (ii)
cause all the Registrable Securities covered by the Registration Statement to be
listed on the NYSE or the AMEX or another national securities exchange and on
each additional national securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange.
m. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
n. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing
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27
underwriter or underwriters, if any, or the Investors may request, and, if
required by the transfer agent for the Registrable Securities, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an opinion of such
counsel in a form customary for such transactions.
o. At the request of an Initial Investor or Investors who holds
a majority-in-interest of the Registrable Securities, the Company shall prepare
and file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with the Registration Statement as may be reasonably necessary in order to
change the plan of distribution set forth in such Registration Statement.
p. The Company shall comply with applicable federal and state
securities laws and regulations related to a Registration Statement and offering
and sale of securities.
q. The Company shall take all such other actions as any Investor
or the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five (5)
business days prior to the first anticipated filing date of the Initial
Registration Statement and at least three (3) business days prior to the
anticipated filing date of any Uncovered Shares Registration Statement or other
registration statement, the Company shall notify each Investor to be included in
such registration statement of any information the Company requires from each
such Investor.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. In the event Investors holding a majority in interest of the
Registrable
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28
Securities being offered determine to engage the services of an underwriter,
each Investor agrees to enter into and perform such Investor's obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriter(s) of such offering and the Company and take such other actions as
are reasonably required in order to expedite or facilitate the disposition of
the Registrable Securities, unless such Investor has notified the Company in
writing of such Investor's election not to participate in such underwritten
distribution.
d. No Investor may participate in any underwritten distribution
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below. Notwithstanding anything in this Section
4(d) to the contrary, this Section 4(d) is not intended to limit an Investor's
rights under Section 2(a) or 3(b) hereof.
e. Each Investor will enter into customary lock-up agreements
(not to exceed ninety (90) days (or such shorter period of time as may be
required of the directors and executive officers)) with the underwriters of a
public offering of the capital stock of the Company if so requested by such
underwriters; provided, however, that such lock-up shall not apply to shares
registered on Form S-3.
5. EXPENSES OF REGISTRATION.
All reasonable expenses incurred by the Company or the Investors in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3 above (excluding brokers' fees, underwriting discounts and commissions,
and similar selling expenses), including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees and the fees and
disbursements of counsel for the Company, up to a maximum of $25,000 incurred by
the Investors, shall be borne by the Company. In addition, the Company shall pay
all of the Investors' costs and expenses (including reasonable legal fees)
incurred in connection with the enforcement of the rights of the Investors
hereunder.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, and (ii) the directors, officers, partners, members, employees and
agents of such Investor and each person who controls any Investor within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
if any
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29
(each, an "INDEMNIFIED PERSON"), against any joint or several losses, claims,
damages, liabilities or expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, in respect thereof, "CLAIMS") to which any of
them may become subject insofar as such Claims arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law, or any rule
or regulation thereunder relating to the offer or sale of the Registrable
Securities (the matters in the foregoing clauses (i) through (iii) being,
collectively, "VIOLATIONS"). Subject to the restrictions set forth in Section
6(c) with respect to the number of legal counsel, the Company shall reimburse
the Investors and each other Indemnified Person, promptly as such expenses are
incurred and are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person expressly for use in the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; and (iii) with respect to any prospectus, shall not inure
to the benefit of any Indemnified Person if the untrue statement or omission of
material fact contained in such prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented, if such corrected prospectus
was timely made available by the Company pursuant to Section 3(c) hereof, and
the Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, its employees, agents and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim to which any of
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30
them may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and subject to Section 6(c) such Investor will reimburse any legal or
other expenses (promptly as such expenses are incurred and are due and payable)
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Agreement (including this Section 6(b) and
Section 7) for only that amount as does not exceed the net proceeds actually
received by such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact by the
Investor contained in the preliminary prospectus was corrected on a timely basis
in the prospectus, as then amended or supplemented, and the Indemnified Party
failed to utilize such corrected prospectus.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to assume control of the defense thereof with counsel mutually
satisfactory to the indemnifying party and the Indemnified Person or the
Indemnified Party, as the case may be; provided, however, that such indemnifying
party shall not be entitled to assume such defense and an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel with the
reasonable fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
conflicts of interest between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding or the actual or
potential defendants in, or targets of, any such action include both the
Indemnified Person or the Indemnified Party and the indemnifying party and any
such Indemnified Person or Indemnified Party reasonably determines that there
may be legal defenses available to such Indemnified Person or Indemnified Party
which are in conflict with those available to such indemnifying party. The
indemnifying party shall pay for only one separate legal counsel for the
Indemnified Persons or the Indemnified Parties, as applicable, and such legal
counsel shall be selected by Investors holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to which the Claim
relates (with the approval of the Initial Investors if any of them holds
Registrable Securities included in such Registration Statement), if the
Investors are entitled to indemnification hereunder, or by the Company, if the
Company is entitled to
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31
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification or
other obligations under this Agreement) by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. REPORTS UNDER THE EXCHANGE ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
a. file with the SEC in a timely manner and make and keep
available all reports and other documents required of the Company under the
Securities Act and the Exchange Act so long as the Company remains subject to
such requirements (it being understood that nothing herein shall limit the
Company's obligations under Section 5(c) of the Securities Purchase Agreement)
and the filing and availability of such reports and other documents as is
required for the applicable provisions of Rule 144; and
b. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
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32
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
assignable by each Investor to any permitted transferee of the Registrable
Securities (i) in the case of an assignment of all Registrable Securities held
by such Investor without the consent of the Company and (ii) in the case of an
assignment of less than all Registrable Securities held by such Investor with
the consent of the Company (which consent shall not be unreasonably withheld),
if: (a) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company after such
assignment, (b) the Company is furnished with written notice of (x) the name and
address of such transferee or assignee and (y) the securities with respect to
which such registration rights are being transferred or assigned, (c) following
such transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, (d) the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein and applicable
provisions of the Securities Purchase Agreement relating to the transfer of any
Securities, and (e) such transfer shall have been made in accordance with the
applicable requirements of the Securities Purchase Agreement. In addition, and
notwithstanding anything to the contrary contained in this Agreement or the
Securities Purchase Agreement, the Shares may be pledged, and all rights of the
Investors under this Agreement or any other agreement or document related to the
transaction contemplated hereby may be assigned, without further consent of the
Company, to a bona fide pledgee in connection with an Investor's margin or
brokerage accounts.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), by the Company and Investors (excluding
Investors who are affiliates of the Company) who hold a majority in interest of
the Registrable Securities (excluding Registrable Securities held by affiliates
of the Company) or, in the case of a waiver, with the written consent of the
party charged with the enforcement of any such provision. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five (5) days after being
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33
placed in the mail, if mailed, or upon receipt or refusal of receipt, if
delivered personally or by courier confirmed telecopy or e-mail, in each case
addressed to a party. The addresses for such communications shall be:
If to the Company:
Gadzoox Networks, Inc.
0000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx, President and
Chief Executive Officer
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx and Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxx X. XxXxxxxx, Esq.
If to an Investor, at such address as such Investor shall have provided in
writing to the Company or such other address as such Investor furnishes by
notice given in accordance with this Section 11(b), with a copy to:
Shoreline Pacific
0 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
Chief Executive Officer
Each party hereto may from time to time change its address or facsimile
number for notices under this Section 11(b) by giving at least ten (10) days'
prior written notice of such changed address or facsimile number, in the case of
the Investors to the Company, and in the case of the Company to all of the
Investors.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver
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34
thereof.
d. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts made
and to be performed in the State of California. The Company irrevocably consents
to the jurisdiction of the United States federal courts and state courts located
in the State of California in any suit or proceeding based on or arising under
this Agreement and irrevocably agrees that all claims in respect of such suit or
proceeding may be determined in such courts. The Company irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The Company further agrees that service of process upon the Company mailed by
first class mail to the address set forth in Section 11(b) shall be deemed in
every respect effective service of process upon the Company in any such suit or
proceeding. Nothing herein shall affect an Investor's right to serve process in
any other manner permitted by law. The Company agrees that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
e. This Agreement and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and understandings
among the parties hereto and thereto with respect to the subject matter hereof
and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents, approvals and other determinations to be made
by the Investors pursuant to this Agreement shall be made by the Investors
holding at least a majority of the Registrable Securities then held by all
Investors.
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35
k. The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable Securities
included thereon shall be registered on behalf of each Investor pro rata based
on the number of Registrable Securities held by each Investor at the time of
such establishment or increase, as the case may be. In the event an Investor
shall sell or otherwise transfer any of such holder's Registrable Securities,
each transferee shall be deemed to have registered on its behalf a pro rata
portion of the number of Registrable Securities included on a Registration
Statement for such transferor. Any shares of Common Stock included on a
Registration Statement on behalf of any person or entity which does not hold any
Registrable Securities shall be deemed registered on behalf of the remaining
Investors, pro rata based on the number of shares of Registrable Securities then
held by such Investors. For the avoidance of doubt, no provision of this
subsection shall operate to reduce the number of Registrable Securities
registered on behalf of any Investor pursuant to the first sentence of this
subsection.
l. For purposes of this Agreement, the term "business day" means
any day other than a Saturday or Sunday or a day on which banking institutions
in the State of New York are authorized or obligated by law, regulation or
executive order to close.
m. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
holders of Registrable Securities and permitted assigns of Registrable
Securities any legal or equitable right, remedy or claim under this Agreement,
but this Agreement shall be for the sole and exclusive benefit of the Company,
the holder and the permitted assigns of this Agreement.
n. Aggregation of Registrable Securities. All of the Registrable
Securities held or acquired by affiliated entities or persons shall be
aggregated together for the purpose of determining the availability of rights
under this Agreement.
o. Termination. Notwithstanding anything to the contrary herein,
the Company's obligations shall terminate as of the date which is five (5) years
from the date hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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36
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
GADZOOX NETWORKS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
DATE:
-----------------------------------
INITIAL INVESTORS:
XXXXX HILL PARTNERS, L.P.
By: Xxxxx Xxxx Capital, LLC
General Partner
By:
-------------------------------------
Name: Xxxxx Xxxxxxx
-----------------------------------
Title: Manager
----------------------------------
DATE:
-----------------------------------
BALBOA FUND, L.P.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
DATE:
-----------------------------------
GALLEON TECHNOLOGY PARTNERS, L.P.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
DATE:
-----------------------------------
37
GALLEON TECHNOLOGY PARTNERS II, L.P.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
DATE:
-----------------------------------
GALLEON TECHNOLOGY OFFSHORE, LTD.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
DATE:
-----------------------------------
ADMIRALS, L.P.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
DATE:
-----------------------------------
GALLEON MANAGEMENT, LP
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
DATE:
-----------------------------------
38
EXHIBIT B
TO SECURITIES PURCHASE AGREEMENT
[Form of Xxxxxx Xxxxxxx Opinion]
1. The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware with all requisite corporate power and
authority to own or lease its property, to conduct its business as described in
its Annual Report on Form 10-K for the fiscal year ended March 31, 2000 as
presently conducted by it and to execute, deliver and perform its obligations
under the Transaction Documents.
2. Each of the Transaction Documents has been duly authorized, executed
and delivered by the Company, is the valid and binding obligation of the Company
and is enforceable against the Company in accordance with its terms.
3. The issuance, sale and delivery of the Shares have been duly
authorized by all requisite corporate action of the Company, and when the Shares
are issued, sold and delivered in accordance with the Agreement and on receipt
of the consideration to be paid on the Closing Date pursuant to the Agreement,
the Shares will be validly issued, fully paid, and nonassessable.
4. To our knowledge, no consent, approval, authorization or order of any
governmental agency or body not obtained or in effect as of the date hereof is
required for the execution and delivery by the Company of the Transaction
Documents and the issuance of the Shares as contemplated by the Agreement,
except a filing under Regulation D under the Securities Act of 1933, as amended
(the "Securities Act"), and except for such consents, approvals, authorizations,
registration or qualification as may be required under applicable state
securities laws.
5. The execution and delivery by the Company of the Transaction
Documents, the issuance by the Company of the Shares and the consummation of the
transactions contemplated thereby will not violate, contravene, or constitute a
default under, any provision of (i) applicable law or governmental regulation,
(ii) the Articles of Incorporation or the By-laws of the Company or (iii) to our
knowledge, any judgment, injunction, order, or decree binding upon the Company.
6. The offer, issuance, sale and delivery of the Shares to the
Purchasers pursuant to, and in the manner contemplated by the Agreement do not
require registration under the Securities Act.
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39
EXHIBIT C
Schedule of Purchasers
Purchaser Investment Amount & No. of Shares
Balboa Fund, L.P. $1,325,000 500,000 shares
c/o Banc of America Securities LLC
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
Xxxxx Xxxx Partners, L.P. $2,915,000 1,100,000 shares
c/o Goldman, Sachs & Company
Xxx Xxx Xxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx
Galleon Technology Partners, L.P. $296,800 112,000 shares
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Galleon Technology Partners II, L.P. $2,226,000 840,000 shares
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Galleon Technology Offshore, Ltd. $5,321,200 2,008,000 shares
c/o The Bank of Bermuda Limited
0 Xxxxx Xxxxxx
Xxxxxxxx XX 11
Bermuda
Admirals, L.P. $1,325,000 500,000 shares
000 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Galleon Management, LP $1,431,000 540,000 shares
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
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40
COMPANY
DISCLOSURE SCHEDULES
These Company Disclosures Schedules have been prepared and delivered in
connection with the Securities Purchase Agreement, dated as of May 25, 2001 (the
"Agreement") between Gadzoox Networks, Inc., a Delaware corporation (the
"Company") and the purchasers set forth on the execution pages of the Agreement.
Except as otherwise defined herein, capitalized terms used herein have the
meanings assigned thereto in the Agreement.
The descriptive headings herein are inserted for convenience of
reference only and shall in no way be construed to define, limit, describe,
explain, modify, amplify, or add to the interpretation, construction or meaning
of any matter disclosed in these Company Disclosure Schedules.
Certain matters are described in these Disclosure Schedules for
information purposes notwithstanding the fact that, because they do not rise
above applicable materiality thresholds or otherwise, they are not required to
be listed by the terms of the Agreement. In no event shall the inclusion of such
matters in these Disclosure Schedules be deemed or interpreted to broaden or
otherwise amplify the representations and warranties contained in the Agreement.
No inclusion of a matter on the Disclosure Schedules shall constitute an
admission that a matter is "material" or would have a Material Adverse Effect.
These Disclosure Schedules are arranged by schedule corresponding to the
numbered and lettered paragraphs of the Agreement and any matter described in
response to one section of the Agreement shall be deemed to be described in
response to all applicable sections of the Agreement, whether or not there is an
express cross-reference.
41
SCHEDULE 4(a)
ORGANIZATION AND QUALIFICATION
The Company is incorporated in the State of Delaware.
The Company currently is not in good standing in the State of Massachusetts
because the Company did not pay its 2000 annual tax xxxx of $85. The Company
currently is in the process of refiling with the State of Massachusetts.
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42
SCHEDULE 4(c)
CAPITALIZATION
See capitalization table attached hereto.
There are certain restrictions on the disposition of shares held by
Seagate Technology, Inc. and 3Com Corporation and their acquisition of
additional shares of Gadzoox stock, as more particularly described in that
certain First Amended and Restated Series F, G and H Preferred Stockholders'
Agreement dated as of October 12, 1998 and filed as Exhibit 10.14 to the
Company's Registration Statement on Form S-1.
The Company entered into a First Amended and Restated Registration and
Information Rights Agreement dated as of October 12, 1998 (the "Rights
Agreement") pursuant to which certain of the Company's stockholders have the
right to cause the Company to register its securities. Pursuant to the Rights
Agreement, the Company may not grant registration rights to any third party
unless such registration rights are subordinate to the registration right
granted under the Rights Agreement. Accordingly, the registration rights granted
hereunder are expressly made subordinate to the registration rights granted in
the Rights Agreement.
The Company's current set of Bylaws are attached to the Secretary's
Certificate delivered to the Purchasers in connection with the Closing.
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43
SCHEDULE 4(e)
NO CONFLICTS
The Company entered into a First Amended and Restated Registration and
Information Rights Agreement dated as of October 12, 1998 (the "Rights
Agreement") pursuant to which certain of the Company's stockholders have the
right to cause the Company to register its securities. Pursuant to the Rights
Agreement, the Company may not grant registration rights to any third party
unless such registration rights are subordinate to the registration rights
granted under the Rights Agreement. Accordingly, the registration rights granted
hereunder are expressly made subordinate to the registration rights granted in
the Rights Agreement.
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SCHEDULE 4(l)
INSURANCE
The Company does not maintain "key employee" insurance.
-5-
45
SCHEDULE 4(o)
TAX STATUS
The Company did not pay its Massachusetts 2000 annual tax xxxx of $85.
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46
SCHEDULE 4(s)
DISCLOSURE
The Company's independent auditors have not yet made a determination as
to whether they will issue a "going concern" qualification to their audit
opinion with respect to their audit report to be filed with the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 2001.
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