EXHIBIT 2.1
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
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Securities Purchase Agreement (the "Agreement"), dated as of August
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20, 1999, by and among Blue Wave Systems Inc., a Delaware corporation (the
"Company"), and each of the purchasers set forth on the signature pages hereto
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(individually, a "Purchaser" and, collectively, the "Purchasers").
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WHEREAS, the Company proposes to issue and sell to the Purchasers for
cash an aggregate of 1,200,000 shares (individually, a "Share" and,
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collectively, the "Shares") of common stock, $0.01 par value, of the Company
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(the "Common Stock") and warrants to purchase shares of Common Stock (as further
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described below); and
WHEREAS, the Company, among other things, has agreed to provide
certain registration rights under the Securities Act of 1933 (the "Securities
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Act") with respect to the Shares, the shares of Common Stock issuable upon
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exercise of warrants that are being issued to the Purchasers pursuant to this
Agreement and certain shares of Common Stock issuable pursuant to this Agreement
or the Registration Rights Agreement (as hereinafter defined).
NOW THEREFORE, in consideration of the above recitals and the mutual
covenants set forth herein, the parties hereto agree as follows:
1. Sale of Stock and Delivery of Warrants; Closing.
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(a) Purchase and Sale. Subject to the terms and conditions hereof,
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the Company shall issue and sell to each of the Purchasers, and each Purchaser,
severally, shall purchase from the Company, the number of Shares set forth
opposite such Purchaser's name on Schedule 1 hereto at a purchase price of $2.50
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per Share. The Company shall deliver to each Purchaser warrants to purchase, at
an exercise price of $3.50 per share, such number of shares of Common Stock set
forth opposite such Purchaser's name on Schedule 1 hereto (the "Term A
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Warrants") and warrants to purchase, at an exercise price of $4.50 per share,
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such number of shares of Common Stock set forth opposite such Purchaser's name
on Schedule 1 hereto (the "Term B Warrants"). The Term A Warrants and the Term B
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Warrants are, hereinafter, collectively referred to as the "Warrants," and the
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shares of Common Stock issued or issuable upon exercise of the Warrants are
hereinafter referred to as the "Warrant Shares." The Term A Warrants and the
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Term B Warrants shall, respectively, be in the forms of Exhibit A and Exhibit B
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hereto.
(b) Closing. The closing of the purchase and sale of the Shares and
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Warrants (the "Closing") shall take place at the offices of Winston & Xxxxxx,
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000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, at 10:00 A.M. on August 24, 1999, or such
later date on which the conditions set forth in Sections 9 and 10 hereof shall
have been satisfied or
waived; provided, however, that the Closing, in no event, shall occur later than
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August 25, 1999. The date of the Closing shall be hereinafter referred to as the
"Closing Date."
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(c) Delivery. At the Closing, the Company shall deliver to each
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Purchaser a stock certificate representing the Shares purchased by such
Purchaser and the Warrants to be delivered to such Purchaser, against payment of
the purchase price therefor by cashiers check, payable to the order of the
Company, or by wire transfer of immediately available funds to the Company in
accordance with the Company's wiring instructions. In addition, the Company
shall deliver to each Purchaser such other agreements, documents, certificates
and opinions as specified in this Agreement or as may reasonably be requested by
such Purchaser.
2. Representations and Warranties of Purchasers. Each of the Purchasers
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represents, warrants and covenants, severally, to the Company as follows:
(a) Authorization. The Purchaser is duly organized, validly existing
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and in good standing under the laws of its jurisdiction. The Purchaser has the
necessary power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of, and the
performance under, this Agreement by the Purchaser will not conflict with any
rule, regulation, judgment or agreement applicable to the Purchaser.
(b) Investment Purpose. The Purchaser was not formed for the purpose
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of acquiring the Securities. The Purchaser is purchasing the Shares and
acquiring the Warrants, and will purchase the Warrant Shares (together with the
Shares and the Warrants, the "Securities"), for investment purposes and not with
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a present view to, or for sale in connection with, a distribution thereof within
the meaning of the Securities Act. The Purchaser understands that it may not be
able to sell or otherwise dispose of the Securities, and accordingly it must
bear the economic risk of this investment indefinitely.
(c) Reliance On Exemptions. The Purchaser understands that the
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Securities have not been registered under the Securities Act or any state
securities laws and are being offered and sold in reliance upon specific
exemptions from the registration requirements of Federal and state securities
laws and that the Company is relying upon the truth and accuracy of the
representations and warranties of the Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Purchaser to acquire the Securities.
(d) Information. The Purchaser has been furnished all documents
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relating to the business, finances and operations of the Company which the
Purchaser requested from the Company and has been able to evaluate the risks and
merits associated with an investment in the Securities to its satisfaction. The
Purchaser has been afforded the opportunity to ask questions of the Company's
representatives concerning the Company in making the decision to purchase the
Shares and acquire the Warrants, and
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such questions have been answered to its satisfaction. However, neither the
foregoing nor any other due diligence investigation conducted by the Purchaser
or on its behalf shall limit, modify or affect the representations and
warranties of the Company in Section 3 of this Agreement or the right of the
Purchaser to rely thereon.
(e) Governmental Review. The Purchaser understands that no Federal or
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state agency or any other government or governmental agency has passed upon or
made any recommendation or endorsement of the Securities.
(f) Purchaser's Qualifications. The Purchaser is an "accredited
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investor" as defined in Rule 501 under Regulation D of the Securities Act
("Regulation D"). The Purchaser is capable of evaluating the merits and risks of
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an investment in the Securities.
(g) Restrictions on Transfer. The Purchaser covenants and agrees that
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it shall not transfer any of the Securities unless such Securities are
registered under the Securities Act or unless an exemption from registration and
qualification requirements are available under the Securities Act and applicable
state securities laws and the Company has received an opinion of counsel
satisfactory to it stating that such registration and qualification is not
required; provided, that such transaction be effected in accordance with the
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assignment provisions of Section 11(e) hereof. The Purchaser understands that
certificates representing the Shares, the Warrants, the Warrant Shares, shares
of Common Stock issued pursuant to Sections 5 or 7 of this Agreement, and any
Default Shares (as such term is defined in the Registration Rights Agreement
attached hereto as Exhibit D (the "Registration Rights Agreement")) shall bear
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the following, or substantially similar, legends until such time as they have
been registered under the Securities Act or otherwise may be sold without volume
limitations under Rule 144 under the Securities Act:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") OR UNDER ANY STATE
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SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED WITHOUT (A) REGISTRATION UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR (B) RECEIPT BY THE COMPANY OF AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED.
A FULL STATEMENT OF THE RELATIVE RIGHTS, INTERESTS, PREFERENCES AND
RESTRICTIONS OF EACH CLASS OF STOCK WILL BE FURNISHED BY THE COMPANY TO ANY
SHAREHOLDER UPON WRITTEN REQUEST, WITHOUT CHARGE.
THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS SUBJECT TO
CERTAIN RESTRICTIONS PURSUANT TO A SECURITIES
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PURCHASE AGREEMENT BETWEEN THE HOLDER AND THE COMPANY, DATED AS OF AUGUST
20, 1999, WHICH AGREEMENT IS ON FILE WITH THE COMPANY. A COPY OF SUCH
AGREEMENT WILL BE FURNISHED WITHOUT CHARGE TO THE RECORD HOLDER HEREOF UPON
WRITTEN REQUEST.
(h) Residence. The Purchaser is a resident of the jurisdiction set
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forth under its name on the signature pages hereto.
3. Representations and Warranties of the Company. Except as set forth on
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the Schedule of Exceptions attached hereto as Exhibit C, the Company represents
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and warrants to each Purchaser as follows:
(a) Organization and Good Standing. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Delaware, and has all necessary corporate power and authority to own or lease
its assets and to carry on its business as now being conducted and presently
proposed to be conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which its
ownership or leasing of assets, or the conduct of its business, makes such
qualification necessary, except where the failure to be so qualified would not
result in a Material Adverse Change (as defined in Section 3(h) hereof)). Except
for any subsidiaries listed on Schedule 3(b) hereto, the Company has no
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subsidiaries and no equity interests in any corporation, partnership, joint
venture or other entity.
(b) Subsidiaries. Schedule 3(b) hereto sets forth each subsidiary of
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the Company, showing the jurisdiction of its incorporation or organization. Each
subsidiary is validly existing and in good standing under the laws of the state
or other jurisdiction of its incorporation or organization and has the requisite
corporate power to own, lease and operate its properties and assets and to
conduct its business as it is now being conducted. All of the outstanding shares
of capital stock of each subsidiary have been duly authorized and validly
issued, and are fully paid and nonassessable and are owned by the Company.
(c) Requisite Power and Authorization. The Company has all necessary
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corporate power and authority to execute and deliver this Agreement, the
Registration Rights Agreement and the Warrants (collectively, the "Transaction
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Documents") and to perform its obligations under each of the Transaction
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Documents, including without limitation the issuance of the Securities
hereunder. All corporate action of the Company required for the execution and
delivery of the Transaction Documents and the issuance and delivery of the
Securities has been duly and effectively taken, and no further actions,
authorizations or consents, including, without limitation, any consents of the
stockholders of the Company, are required. Each of the Transaction Documents
constitutes the valid and binding obligation of the Company, enforceable
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against the Company in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditor's rights, (ii) as limited
by general principles of equity that restrict the availability of equitable
remedies and (iii) as the indemnity provisions of the Registration Rights
Agreement may be limited by law. The Shares, when issued, delivered and paid for
in compliance with the provisions of this Agreement, will be validly issued,
fully paid and non-assessable, free and clear of any and all liens, charges,
claims or encumbrances. The Warrant Shares, if and when issued, delivered and
paid for in compliance with the provisions of this Agreement and the Warrants,
will be validly issued, fully paid and non-assessable, free and clear of any and
all liens, charges, claims or encumbrances. The Company has reserved a
sufficient number of shares of Common Stock necessary for issuance of the Shares
and the Warrant Shares.
(d) SEC Documents. The Company has filed with the Securities and
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Exchange Commission (the "SEC") all reports, statements, schedules and other
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documents (collectively, the "SEC Documents") required to be filed by it
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pursuant to the Securities Act and the Securities Exchange Act of 0000 (xxx
"Xxxxxxxx Xxx"). Since June 30, 1998, all SEC Documents required to be filed
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were timely filed. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder, 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. As of their respective dates, the financial statements
included in the SEC Documents (the "Financial Statements") complied as to form
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in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Except (i) as
may be indicated in the notes to the Financial Statements or (ii) in the case of
the unaudited interim statements, as permitted by Form 10-Q under the Exchange
Act, the Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied and fairly present in all
material respects the financial position of the Company and its subsidiaries as
of the dates thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
recurring year-end adjustments and footnotes). Except as set forth in the
Financial Statements filed with the SEC prior to the date hereof, neither the
Company nor any of its subsidiaries has any liabilities, whether absolute,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to the date of such Financial Statements, (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 Financial Statements, which liabilities and obligations
referred to in clauses (i) and (ii), individually or in the aggregate, are not
material to the financial condition or operating results of the Company or any
of its subsidiaries and (iii) liabilities and obligations incurred in connection
with the Transaction Documents and the transactions
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contemplated thereby.
(e) Capitalization. The capitalization of the Company as of the date
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hereof is set forth on Schedule 3(e), including (i) the authorized capital
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stock, (ii) the number of shares issued and outstanding, (iii) the number of
shares reserved for issuance pursuant to stock option, employee benefit or other
plans, (iv) the number of shares reserved for issuance or issuable pursuant to
securities exercisable for, or convertible into or exchangeable for, any shares
of Common Stock, (v) the number of shares of Common Stock reserved for issuance
with respect to the sale of the Shares, and (vi) the number of shares of Common
Stock reserved for issuance upon exercise of the Warrants. All outstanding
shares of capital stock have been duly authorized and validly issued and are
fully paid and non-assessable. Except as set forth on Schedule 3(e) and except
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for the Securities issued hereunder, the Company has (i) no outstanding
securities convertible into or exchangeable for any shares of capital stock of
the Company, (ii) no rights, options, warrants, calls or other agreements or
commitments of any nature whatsoever relating to the purchase or other
acquisition of any shares of its capital stock or securities convertible into or
exchangeable for any shares of its capital stock or (iii) no shares of its
capital stock reserved for issuance.
(f) No Conflicts. Neither the execution, delivery and performance by
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the Company of this Agreement, the other Transaction Documents, and all
instruments and documents to be delivered by the Company, nor the consummation
of the transactions contemplated by any of the foregoing (i) has constituted or
resulted in, or will constitute or result in, a default under or breach or
violation of any term or provision of the Certificate of Incorporation or bylaws
of the Company or material contracts or instruments to which the Company or any
of its subsidiaries is a party or Federal, state or local laws, rules or
regulations, writs, orders, judgments or decrees which are applicable to the
Company, any of its subsidiaries or their assets, (ii) will result in the
acceleration or termination of any rights under any contract or instrument to
which the Company or any of its subsidiaries is a party or (iii) will result in
the creation or imposition of any liens, charges or encumbrances upon any assets
of the Company or any of its subsidiaries.
(g) Consents. Other than any necessary approvals of the Board of
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Directors of the Company or the Company's shareholders that will be obtained
before the Closing, no approval, consent, order, authorization or other action
by, or notice to or filing with, any governmental authority or regulatory agency
or any other person or entity, and no lapse of a waiting period, is required in
connection with the execution, delivery or performance by the Company of this
Agreement, any other Transaction Document, the issuance and delivery of any of
the Securities or any other transactions contemplated by any of the Transaction
Documents except for (i) the filing of a Form D with the SEC, (ii) filings
required under applicable state "blue sky" laws (which shall be duly filed and
effective prior to the Closing if so required under such laws) and (iii) the
filing of a registration statement or statements pursuant to the Registration
Rights Agreement.
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(h) No Material Adverse Change. Since March 31, 1999, the business of
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the Company and each subsidiary has been operated in the ordinary course and
substantially consistent with past practice and there has not been any material
adverse change in the business, assets, financial condition, results of
operations, affairs or prospects of the Company or any of its subsidiaries (a
"Material Adverse Change").
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(i) Litigation. There is no claim, action, suit, proceeding or
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investigation pending or, to the Company's knowledge, currently threatened
against the Company or any of its subsidiaries, or any of their respective
directors or officers, in their capacities as such, (i) that questions the
validity of this Agreement or any other Transaction Document or the issuance of
the Securities, or the right of the Company to enter into this Agreement or any
other Transaction Document or to consummate the transactions contemplated by any
Transaction Document or (ii) that might result, either individually or in the
aggregate, in any Material Adverse Change or in any change in the current equity
ownership of the Company. The Company is not a party or subject to the
provisions of any order, writ, injunction, judgment, stipulation or decree of
any court, administrative agency, commission, regulatory authority, other
government agency or instrumentality.
(j) No Default. Neither the Company nor any of its subsidiaries is in
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violation of or default under any provision of its Articles of Incorporation or
bylaws or other constituent documents or is in default (or, with notice or the
lapse of time, would be in default) under any material agreement, contract,
commitment or instrument to which it is a party or by which it or its properties
or assets is bound or affected. To the Company's knowledge, no third party is in
material default under or in material breach or violation of any material
contract, commitment or instrument to which the Company or any of its
subsidiaries is a party or by which any of their properties or assets are bound
or affected.
(k) Compliance with Laws. The Company and each subsidiary is in
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compliance and has conducted its business and operations so as to comply with
all laws (including, without limitation, any environmental laws), ordinances,
rules and regulations, judgments, decrees or orders of any regulatory authority
or other governmental or administrative body or instrumentality, whether
domestic or foreign. The Company has not, since March 31, 1999, received any
notice relating to any violation or potential violation of applicable law or
regulations.
(l) Intellectual Property. The Company and each subsidiary owns or
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possesses adequate and enforceable rights to use, all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, permits, domain names, 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 the "Intangibles") necessary to conduct its
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business as heretofore conducted by it, as now being conducted by it , and as
proposed to be conducted by it. To the Company's knowledge, neither the Company
nor any of its subsidiaries has infringed, nor does it
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currently infringe, nor is it in conflict with any right of any other person
with respect to any Intangibles. To the knowledge of the Company, no person is
infringing on or violating the Intangibles owned or used by the Company or any
of its subsidiaries.
(m) Registration Rights. The only registration rights, including
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piggyback rights, granted (or agreed to be granted) to any person or entity
other than the Purchasers are set forth on the Schedule of Exceptions. None of
the registration rights disclosed on the Schedule of Exceptions are senior in
priority to the registration rights provided for in the Registration Rights
Agreement.
(n) Nasdaq National Market. The Common Stock is listed on the Nasdaq
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National Market, and there are no proceedings to revoke or suspend such listing.
The sale of the Securities as contemplated hereby will not result in a violation
of the Nasdaq rules and regulations.
(o) No Misrepresentation. No representation or warranty by the
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Company in this Agreement (including any Exhibit or Schedule hereto) and no
statements of the Company contained in any document, certificate, schedule or
other information furnished or to be furnished by or on behalf of the Company
pursuant to this Agreement or any other Transaction Document or in connection
with the transactions contemplated by any Transaction Document contains or shall
contain any untrue statement of material fact or omits or shall omit to state a
material fact required to be stated therein or necessary in order to make such
statements, in light of the circumstances under which they were made, not
misleading. Except for the transactions contemplated hereby, no event or
circumstance has occurred or exists with respect to the Company or any of its
subsidiaries or their respective business affairs, assets, properties,
prospects, operations or financial condition which has not been publicly
disclosed, but which, under applicable law, rule or regulation, would be
required to be disclosed by the Company in a registration statement filed on the
date hereof by the Company under the Securities Act with respect to the primary
issuance of the Company's securities. The Company has delivered true and
complete copies of all documents requested by the Purchasers.
(p) Anti-Dilution and Other Shares. No stockholder of the Company or
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other person or entity has any preemptive right of subscription or purchase or
contractual right of first refusal or similar right with respect to any of the
Securities. Issuance of the Securities will not result in the issuance of any
additional shares of Common Stock or the triggering of other anti-dilution or
similar rights contained in any options, warrants, debentures or other
securities or agreements of the Company.
(q) No Brokers or Finders. No person or entity has or will have, as a
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result of any engagement or contractual obligation incurred by the Company, any
right, interest or valid claim against any Purchaser for any commission, fee or
other compensation as a finder or broker, or in any similar capacity, in
connection with the transactions contemplated by this Agreement.
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(r) Change of Control Payments. Neither the execution, delivery and
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performance by the Company of any of the Transaction Documents nor the
consummation of any of the transactions contemplated thereby shall require any
payment by the Company, in cash or kind, under any agreement, plan, policy,
commitment or other arrangement. There are no agreements, plans, policies,
commitments or other arrangements with respect to any compensation, benefits or
consideration which will be materially increased, or the vesting of benefits of
which will be materially accelerated, as a result of the execution and delivery
of the Transaction Documents or the occurrence of any of the transactions
completed thereby. There are no payments or other benefits, the value of which
will be calculated on the basis of any of the transactions contemplated by this
Agreement or any other Transaction Document.
4. Registration Rights. At the Closing, the Company and the Purchasers
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shall enter into the Registration Rights Agreement.
5. Right of First Refusal for New Securities.
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(a) The Company hereby grants to each Purchaser a right of first
refusal to purchase shares of any New Securities (as defined below) which the
Company may, from time to time during the time period beginning on the date of
this Agreement and ending on August 20, 2001, propose to sell and issue. Such
right of first refusal shall allow each Purchaser to purchase its Proportionate
Share (as defined below) of the New Securities proposed to be issued, determined
with reference to the aggregate number of outstanding shares of Common Stock
(taking into account all shares of Common Stock issuable upon exercise of the
Warrants) held by the Purchasers or their permitted transferees before the
proposed issuance of New Securities. In the event that any Purchaser shall not
purchase any or all of its Proportionate Share of New Securities, the other
Purchasers shall have the right to purchase such unpurchased New Securities, as
described below. The right of first refusal granted hereunder with respect to a
particular offer of New Securities shall terminate as to a particular Purchaser
if such Purchaser's right shall not be exercised within 10 Business Days after
receipt of the notice described in Section 5(c) hereof. The Purchasers may
reallocate their right of first refusal among themselves. "Business Day" shall
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mean any day that is not a Saturday, a Sunday or a day on which banks are
required or permitted to be closed in the State of New York.
(b) "New Securities" shall mean any authorized but unissued shares,
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and any treasury shares, of capital stock of the Company and all rights, options
or warrants to purchase capital stock, and securities of any type whatsoever
that are, or may become, convertible into capital stock; provided, however, that
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the term "New Securities" does not include (i) securities issued pursuant to the
acquisition of another corporation or entity by the Company by merger, purchase
of all or substantially all of the assets or other reorganization whereby the
Company shall become the owner of more than 50% of the voting power of such
corporation or entity; (ii) shares of Common Stock issued in
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connection with any stock split or stock dividend of the Company; (iii) shares
of Common Stock issued pursuant to any public offering and sale of equity
securities of the Company pursuant to an effective registration statement under
the Securities Act; (iv) Warrant Shares delivered to the Purchasers upon
exercise of the Warrants; (v) Default Shares issued pursuant to the Registration
Rights Agreement; (vi) shares of Common Stock issued pursuant to the anti-
dilution provisions of Section 7 hereof; and (vii) options granted under, and
shares of Common Stock issued pursuant to the exercise of options granted under,
the current stock option plan of the Company. "Proportionate Share" shall be
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equal to a fraction, the numerator of which shall equal the total number of
shares of Common Stock (taking into account all shares of Common Stock issuable
upon exercise of the Warrants) then owned by such Purchaser and the denominator
of which shall equal the total number of shares of Common Stock outstanding
immediately prior to the issuance of the New Securities (assuming the exercise
of all Warrants, but not including options, warrants or other rights to acquire
Common Stock).
(c) If the Company shall propose to issue New Securities, it shall
give each Purchaser written notice thereof, describing the New Securities, the
number thereof to be issued, the purchase price therefor (which shall be payable
solely in cash) and the terms upon which the Company shall propose to issue the
same. Each Purchaser shall have 10 Business Days from the date such notice is
given to determine whether to purchase all or any portion of such Purchaser's
Proportionate Share of such New Securities for the purchase price and upon the
terms specified in the notice by giving written notice to the Company and
stating therein the number of New Securities to be purchased.
(d) If the Purchasers shall not have elected within such 10 Business
Day period to purchase all of the New Securities proposed to be issued, the
Company shall provide to each Purchaser, within five Business Days thereafter, a
schedule setting forth the following information: (i) the amount of New
Securities elected to be purchased; (ii) the purchasers thereof (the
"Participating Purchasers") and the specific amount of New Securities elected to
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be purchased by each such Participating Purchaser; and (iii) the amount of New
Securities not elected to be purchased. Each Participating Purchaser shall
thereafter have an additional 10 Business Days after such five Business Day
period has elapsed to determine whether to purchase all or any portion of such
Participating Purchaser's Residual Proportionate Share (as defined below) of
such remaining New Securities for the purchase price and upon the terms
specified in the notice by giving written notice to the Company and stating
therein the number of New Securities to be purchased. "Residual Proportionate
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Share" shall be equal to a fraction, the numerator of which shall equal the
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total number of shares of Common Stock (as determined in the definition of
Proportionate Share) then owned by such Participating Purchaser and the
denominator of which shall equal the total number of such shares owned by all
Participating Purchasers.
(e) If the Purchasers shall not have elected to purchase all of the
New Securities proposed to be issued (within the time period for notifying the
Company set
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xxxxx xxxxx), then the Company shall have 60 calendar days in which to complete
the proposed issuance of the portion of the New Securities not purchased by the
Purchasers at a price not less than that contained in the notice previously
given to the Purchasers and on terms and conditions not more favorable to the
third party than those contained in such notice. If, at the end of such 60-
calendar day period, the Company shall not have completed such issuance of New
Securities, the Company shall no longer be permitted to issue such New
Securities pursuant to this Section 5 without again fully complying with all of
the provisions of this Section 5.
6. Buy-In Rights.
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(a) In the event that (i) the Company shall fail for any reason to
deliver Warrant Shares to a Purchaser upon exercise of any Warrants within the
time period specified in paragraph (a) of such Warrants or the Company shall
fail to remove, or shall fail to cause its transfer agent to remove, any
restrictive legend on any certificates evidencing Shares, Warrant Shares,
Default Shares or shares of Common Stock issued pursuant to Sections 5 or 7 of
this Agreement (the "Buy-In Shares") as and when required under Section 8(f) of
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this Agreement and (ii) thereafter, such Purchaser shall purchase (in an open
market transaction or otherwise) shares of Common Stock to make delivery in
satisfaction of a sale by such Purchaser of (A) the Warrant Shares which such
Purchaser anticipated receiving upon such exercise or (B) such unlegended Buy-In
Shares, as the case may be (in each case, the "Sold Shares"), then the Company
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shall pay to such Purchaser (in addition to any other remedies available to the
Purchaser) the amount by which (x) such Purchaser's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased shall exceed (y) the net proceeds received by such Purchaser from the
sale of the Sold Shares.
(b) The Company shall make any payments required pursuant to this
Section 6 within five Business Days after receipt of written notice from the
Purchaser setting forth the correct calculation of the amount due hereunder.
Nothing contained herein shall relieve the Company from its continuing
obligation to deliver Warrant Shares upon any such exercise of the Warrants, or
the unlegended Buy-In Shares, as the case may be.
7. Anti-Dilution.
-------------
(a) If the Company, in a capital raising transaction (public or
private) that is consummated at any time before August 20, 2000, shall sell (i)
any shares of Common Stock or any Convertible Securities (as hereinafter
defined), whether or not the rights to exchange or convert thereunder shall be
immediately exercisable, or (ii) issue or sell any rights to subscribe for, or
any rights, options or warrants to purchase, shares of Common Stock or any stock
or other securities convertible into or exchangeable for such shares of Common
Stock (such convertible or exchangeable stock or securities being hereinafter
called "Convertible Securities"), whether or not such rights, options or
----------------------
warrants or the right to convert or exchange any such Convertible Securities
shall be
-11-
immediately exercisable, for a consideration per share (the "Per Share
---------
Selling Price") less than the purchase price per Share set forth in Section 1(a)
-------------
of this Agreement, the Company shall deliver to each Purchaser additional shares
of Common Stock as provided in this Section 7. The Company shall give each
Purchaser two Business Days' prior written notice of the closing of any such
transaction.
(b) For purposes of this Section 7, the term "Per Share Selling
Price" shall constitute the amount actually paid by third parties for each share
of Common Stock. The Per Share Selling Price of rights, options, warrants or
Convertible Securities shall include the exercise or conversion price thereof
(plus, in the case of any rights, options or warrants that relate to Convertible
Securities, any additional consideration received or receivable by the Company
upon the issue or sale of such Convertible Securities and the conversion
thereof). If the exercise price or conversion price of any such rights, options,
warrants or Convertible Securities shall be variable, except as provided by any
applicable anti-dilution provisions, the Per Share Selling Price shall be deemed
to be the lowest conversion or exercise price at which such securities are
converted or exercised or might have been converted or exercised. If shares of
Common Stock shall be issued in such capital raising transaction for a
consideration other than cash, the Per Share Selling Price shall be the fair
value of such consideration as determined in good faith by the Board of
Directors of the Company.
(c) The Company shall deliver to each Purchaser its pro rata share of
--- ----
such additional number of shares of Common Stock that such Purchaser shall be
entitled to receive pursuant to this Section 7 within five Business Days of the
closing of the transaction giving rise to the Company's obligation to deliver
such additional shares of Common Stock. Each Purchaser's pro rata share shall
--- ----
be equal to (i) the aggregate purchase price paid by such Purchaser for its
Shares pursuant to Section 1(a) of this Agreement divided by the Per Share
Selling Price minus (ii) the total number of Shares previously delivered to such
Purchaser pursuant to Section 1(a) of this Agreement.
8. Covenants of the Company. The Company hereby covenants that:
------------------------
(a) Exchange Act Filings. The Company shall use its best efforts to
--------------------
file in a timely manner all reports and other documents required to be filed by
it under the Exchange Act, and, promptly upon filing, deliver copies of such
reports to each Purchaser. The Company 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 promulgated thereunder would permit such
termination.
(b) Authorized Shares. The Company shall, from and at all times after
-----------------
the Closing, maintain a reserve of authorized shares of Common Stock sufficient
to cover the issuance of the Warrant Shares underlying the Warrants and the
issuance of any Default Shares pursuant to the terms of the Registration Rights
Agreement.
(c) Use of Proceeds. The Company shall use the net proceeds from
---------------
-12-
the sale of the Securities for the repayment of debt and general working capital
purposes.
(d) Nasdaq Requirements. The Company shall use its best efforts to
-------------------
continue to meet all requirements necessary for inclusion of the Common Stock in
the Nasdaq National Market. The Company shall use its best efforts, including,
without limitation, promptly filing any notification, application, form or other
information and paying any fees, to list on the Nasdaq National Market all
shares of Common Stock (including Shares, Default Shares and Warrant Shares)
that may be issued to the Purchasers.
(e) Certain Legal Expenses. The Company shall pay to Winston &
----------------------
Xxxxxx, counsel to the Purchasers, at the Closing, from the proceeds of the sale
of the Shares, its fees and expenses relating to the negotiation and
documentation of this Agreement and the other documents and transactions
contemplated hereby in an aggregate amount not to exceed $20,000.
(f) Removal of Legends. Any legend endorsed on a certificate
------------------
pursuant to Section 2(g) and any related stop transfer instructions with respect
to any Securities shall be removed, and the Company shall, within two (2)
Business Days, issue, or cause its transfer agent to issue, a certificate
without such legend to the holder thereof, if (i) such Securities shall be
registered under the Securities Act, (ii) such legend may be properly removed
under the terms of Rule 144 under the Securities Act or (iii) such holder shall
provide the Company with an opinion of counsel, satisfactory to the Company, to
the effect that a sale, transfer or assignment of such Securities may be made
pursuant to Rule 144(k) under the Securities Act.
9. Conditions to Obligations of the Purchasers at the Closing. The
----------------------------------------------------------
obligation of each Purchaser to purchase the Shares at the Closing shall be
subject to the fulfillment on or prior to the Closing Date of the following
conditions, any of which may be waived by such Purchaser:
(a) Certificates. The Company shall have delivered to each Purchaser
------------
a duly executed certificate representing the Shares and the Warrants issuable to
such Purchaser.
(b) Trading. The Common Stock shall be trading on the Nasdaq
-------
National Market.
(c) Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of the Company set forth in this Agreement and in
any other Transaction Document shall be true and correct when made, and shall be
true and correct on the Closing Date with the same force and effect as if they
had been made on and as of said date, except for representations and warranties
made as of a specific date which shall be true and correct as of such date. The
Company shall have performed, satisfied and complied with all obligations and
conditions required to be performed or
-13-
observed by it under this Agreement or any other Transaction Document on or
prior to the Closing Date.
(d) Consents and Waivers. The Company shall have made all filings and
--------------------
obtained any and all consents (including, without limitation, all governmental
or regulatory consents), approvals or authorizations, permits and waivers
necessary or appropriate for consummation of the transactions contemplated by
this Agreement and any other Transaction Document.
(e) No Litigation or Legislation. No Federal, state or local statute,
----------------------------
rule, regulation, decree, ruling or injunction shall have been enacted or
entered, and no litigation, proceeding, government inquiry or investigation
shall be pending, which challenges, prohibits or restricts, or seeks to prohibit
or restrict, the consummation of the transactions contemplated by this Agreement
or any other Transaction Document, or restricts or impairs the ability of any
Purchaser to own an equity interest in the Company.
(f) Compliance Certificate. The Company shall have delivered to the
----------------------
Purchasers a certificate, executed by the Chief Executive Officer of the
Company, dated as of the Closing Date, certifying to the fulfillment of the
conditions set forth in Sections 9(b), (c), (d), (e) and (h) and such other
matters as the Purchasers shall reasonably request.
(g) Opinion of Counsel. The Purchasers shall have received from
------------------
Xxxxxx & Xxxxxxx, counsel to the Company, an opinion addressed to the
Purchasers, dated as of the Closing Date, in substantially the form attached
hereto as Exhibit E.
---------
(h) No Material Adverse Change. There shall not have occurred
--------------------------
since the execution of any of the Transaction Documents any Material Adverse
Change.
(i) Registration Rights Agreement. At the Closing, the Company shall
-----------------------------
have executed and delivered the Registration Rights Agreement to the Purchasers.
(j) Fees and Expenses. The Company shall have provided for a portion
-----------------
of the purchase price paid by the Purchasers to be directed to the payment of
those fees and expenses of Winston & Xxxxxx described in Section 8(e).
10. Conditions to Obligation of the Company at the Closing. The
-------------------------------------------------------
obligation of the Company to sell and issue the Shares and the Warrants to the
Purchasers at the Closing shall be subject to the fulfillment on or prior to the
Closing Date of the following conditions, any of which may be waived by the
Company:
(a) Purchase Price. Each Purchaser shall have delivered the purchase
--------------
price for the Shares to be purchased by such Purchaser hereunder.
(b) Representations and Warranties. The representations and
------------------------------
warranties made by the Purchasers in this Agreement shall be true and correct
when
-14-
made, and shall be true and correct on the Closing Date with the same force and
effect as if they had been made on and as of said date.
(c) No Litigation or Legislation. No Federal, State or local
----------------------------
statute, rule, regulation, decree, ruling or injunction shall have been enacted
or entered, and no litigation, proceeding, government inquiry or investigation
shall be pending, which challenges, prohibits or restricts, or seeks to prohibit
or restrict, the consummation of the transactions contemplated by this Agreement
or any other Transaction Document, or restricts or impairs the ability of any
Purchaser to own an equity interest in the Company.
(d) No Material Adverse Change. There shall not have occurred since
--------------------------
the execution of any of the Transaction Documents any Material Adverse Change.
11. Miscellaneous.
-------------
(a) Survival. Unless waived in writing, the representations and
--------
warranties of the Company and the agreements and covenants set forth in this
Agreement shall survive the Closing notwithstanding any due diligence
investigation conducted by or on behalf of any Purchaser.
(b) Governing Law; Jury Waiver. This Agreement shall be governed by
--------------------------
and construed in accordance with the laws of the State of New York. Each of the
Company and the Purchasers irrevocably consent to the exclusive jurisdiction of
the United States Federal courts, located in New York County, New York, in any
suit or proceeding based on or arising under this Agreement and irrevocably
agree 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. Service of process on the
Company mailed by first class mail shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. Nothing
herein shall affect the right of any Purchaser to serve process in any manner
permitted by law. The parties hereto waive all right to trial by jury in any
action or proceeding to enforce or defend any rights under this Agreement.
(c) Finder's Fee. Each party shall indemnify and hold the other
------------
harmless from any liability for any commission or compensation in the nature of
a finder's or broker's fee (and the costs and expenses of defending against such
liability or asserted liability) for which such party or any of its officers,
partners, employees or representatives shall be responsible.
(d) Further Assurances. Each party, whether prior to or after the
------------------
Closing, shall execute, acknowledge and deliver all such other instruments and
documents, and shall take all such other actions, as may be reasonably requested
by any other party for the purpose of effecting and evidencing the consummation
of the transactions contemplated by this Agreement.
(e) Successors; Assignment. This Agreement shall be binding upon
----------------------
-15-
and inure to the benefit of the successors and permitted assigns of the parties
hereto; provided, however, that the rights of any Purchaser hereunder may be
-------- -------
transferred in connection with a transfer by such Purchaser to a Significant
Purchaser Transferee (as hereinafter defined) of all or part of the Securities
in accordance with the terms of this Agreement or the terms of the Warrants, as
the case may be, in a private transaction exempt from registration under the
Securities Act. Any transferee of any of the Securities to whom rights shall be
transferred in such a private transaction, other than an affiliate of the
Purchaser, shall be required, as a condition precedent to acquiring such
Securities, to agree in writing to make the representations set forth in and to
otherwise be bound by all the terms and conditions of this Agreement, including
the provisions of this Section 11(e). A Purchaser may not assign its rights
under this Agreement in connection with the sale of Shares or Warrant Shares
pursuant to a registration statement under the Securities Act or under Rule 144.
For purposes of this Agreement, a "Significant Purchaser Transferee" shall mean
--------------------------------
a person or entity which (i) is an "accredited investor" (as defined in
Regulation D) and (ii) acquires (together with any affiliates thereof), by
transfer from a Purchaser, at least 25% of the Shares and 25% of the Warrant
Shares issued or issuable upon exercise of the Warrants.
(f) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(g) Entire Agreement. This Agreement, including and incorporating
----------------
all Schedules and all Exhibits hereto and referred to herein, the Registration
Rights Agreement and the Warrants constitute and contain the entire agreements
and understandings of the parties regarding the subject matter of each such
agreement and supercede any and all prior negotiations, correspondence,
understandings and agreements, written or oral, among the parties with respect
to the subject matter of any of the foregoing agreements.
(h) Notices. All notices required to be given hereunder shall be
-------
given by personal delivery, facsimile transmission, nationally recognized
overnight carrier (prepaid) or registered or certified mail, postage prepaid
with return receipt requested. Notices shall be addressed, if to the Company,
at its principal corporate offices located at 0000 Xxxx Xxxx, Xxxxx 000,
Xxxxxxxxxx, XX 00000, Facsimile No. (000) 000-0000, Attention: Chief Executive
Officer and, if to a Purchaser, to the address set forth below such Purchaser's
name on the signature pages hereto. Notices delivered personally shall be
deemed given as of actual receipt; notices sent via facsimile transmission shall
be deemed given as of one business day following receipt by the sender of
written confirmation of transmission thereof; notices sent via overnight courier
shall be deemed given as of one business day following sending; and notices
mailed shall be deemed given as of five business days after proper mailing. A
party may change his or its address by written notice in accordance with this
Section 11(h).
(i) Amendments and Waivers. Except as otherwise provided therein,
----------------------
-16-
no provision of this Agreement or any other Transaction Document may be waived
or amended other than by an instrument in writing signed by the Company and
Purchasers owning or having the right to acquire a majority of the Shares and
the Warrant Shares.
(j) Severability. If one or more provisions of this Agreement shall
------------
be held to be unenforceable under applicable law, such provisions shall be
excluded from this Agreement to the extent unenforceable and the balance of this
Agreement shall be unaffected thereby and shall remain in full force and effect
to the fullest extent permitted by law.
(k) Expenses. Except as otherwise provided herein, the parties
--------
hereto shall pay their own costs and expenses.
(l) Publicity. The parties shall consult with each other, to the
---------
extent practicable, as to the form and content of any press releases and other
third party communications or disclosures relating to this Agreement or the
transactions contemplated hereby, except as may be required in SEC Documents,
and shall use reasonable efforts, acting in good faith, to agree upon disclosure
which shall be satisfactory to the parties hereto.
(m) Headings. The headings of this Agreement are for convenience of
--------
reference and shall not form a part of, or affect the interpretation of, this
Agreement.
(n) Termination of Covenants. The covenants of the Company set forth
------------------------
in Section 8 of this Agreement shall terminate at such time as the Purchasers
shall not own any Securities issued pursuant to this Agreement.
-17-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BLUE WAVE SYSTEMS INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxxx
Name: Xxxxxxx X. Xxxxxxxxxxx
Title: Vice President, Finance and
Chief Executive Officer
Address: 0000 Xxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
SPECIAL SITUATIONS FUND III, L.P.
By: /s/ Xxxxx X. Greenhouse
Name: Xxxxx X. Greenhouse
Title:
Address: 000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Residence: New York
SPECIAL SITUATIONS CAYMAN FUND, L.P.
By: /s/ Xxxxx X. Greenhouse
Name: Xxxxx X. Greenhouse
Title:
Address: 000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Residence: Cayman Islands
SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.
By: /s/ Xxxxx X. Greenhouse
Name: Xxxxx X. Greenhouse
Title:
Address: 000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Residence: New York
SPECIAL SITUATIONS TECHNOLOGY FUND, L.P.
By: /s/ Xxxxx X. Greenhouse
Name: Xxxxx X. Greenhouse
Title:
Address: 000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Residence: New York
Schedule 1
----------
Purchasers/Purchased Shares and Warrant Shares
----------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Purchaser Number of Shares Warrant Shares Warrant Shares Aggregate
--------- ---------------- -------------- -------------- ---------
Term A Term B Purchase Price
------ ------ --------------
Warrants Warrants
-------- --------
-------------------------------------------------------------------------------------------------------------------
Special Situations Fund 480,000 200,000 200,000 $1,200,000
III, L.P. Warrant Shares Warrant Shares
-------------------------------------------------------------------------------------------------------------------
Special Situations Cayman 160,000 66,667 66,667 $ 400,000
Fund, L.P. Warrant Shares Warrant Shares
-------------------------------------------------------------------------------------------------------------------
Special Situations Private 400,000 166,667 166,667 $1,000,000
Equity Fund, L.P. Warrant Shares Warrant Shares
-------------------------------------------------------------------------------------------------------------------
Special Situations Technology 160,000 66,666 66,666 $ 400,000
Fund, L.P. Warrant Shares Warrant Shares
------------------------------------------------------------------------------------------------------------------
EXHIBIT 2.1
Exhibit A
---------
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR UNDER ANY STATE SECURITIES LAWS.
THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED WITHOUT (A)
REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR (B)
RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
A FULL STATEMENT OF THE RELATIVE RIGHTS, INTERESTS, PREFERENCES AND
RESTRICTIONS OF EACH CLASS OF STOCK WILL BE FURNISHED BY THE COMPANY TO ANY
SHAREHOLDER UPON WRITTEN REQUEST, WITHOUT CHARGE.
THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS SUBJECT TO
CERTAIN RESTRICTIONS PURSUANT TO A SECURITIES PURCHASE AGREEMENT BETWEEN
THE HOLDER AND THE COMPANY, DATED AS OF AUGUST 20, 1999, WHICH AGREEMENT IS
ON FILE WITH THE COMPANY. A COPY OF SUCH AGREEMENT WILL BE FURNISHED
WITHOUT CHARGE TO THE RECORD HOLDER HEREOF UPON WRITTEN REQUEST.
________________________________________
WARRANT TO PURCHASE COMMON STOCK
OF
BLUE WAVE SYSTEMS INC.
________________________________________
FOR VALUE RECEIVED, ____________________________________, or its permitted
assigns (the "Holder"), is entitled to purchase, subject to the provisions of
this Warrant, from Blue Wave Systems Inc., a Delaware corporation (the
"Company"), up to
____________________ (_______) shares of Common Stock, par value $0.01, of the
Company (the "Common Stock") at any time or from time to time during the period
commencing on the date hereof and through and including the fifth anniversary of
the date hereof (the "Termination Date"), at a price per share equal to $3.50
(the "Exercise Price"). The Holder shall exercise this Warrant for a number of
Warrant Shares in a minimum amount equal to the lesser of (i) 25,000 Warrant
Shares and (ii) such number of Warrant Shares (including any fraction of a
share) that shall remain issuable upon exercise of the Warrant in full. The
number of shares of Common Stock to be received upon the exercise of this
Warrant and the Exercise Price may be adjusted from time to time as hereinafter
set forth. The shares of Common Stock deliverable upon any exercise of this
Warrant are hereinafter sometimes referred to as "Warrant Shares". This Warrant
is issued by the Company pursuant to the Securities Purchase Agreement dated as
of August 20, 1999 (the "Purchase Agreement") among the Company and each of the
purchasers named on the signature pages thereto and shall be entitled to the
rights set forth therein, including certain registration rights relating to the
Warrant Shares.
(a) EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part
-------------------
at any time or from time to time until the Termination Date; provided, that, if
--------
the date of exercise shall be a day on which banking institutions in the State
of New York shall be authorized by law to close, then the Warrant shall be
exercisable on the next succeeding day which shall not be such a day. This
Warrant may be exercised by presentation and surrender hereof to the Company at
its principal office, or at the office of its stock transfer agent, if any, with
the Purchase Form annexed hereto duly executed and accompanied by payment of the
Exercise Price for the number of Warrant Shares specified in such Form. As soon
as practicable after each such exercise, but not later than two business (2)
days following the date of such exercise, the Company shall issue and deliver to
the Holder a certificate or certificates for the Warrant Shares issuable upon
such exercise, registered in the name of the Holder or its designee(s). If this
Warrant shall be exercised in part, the Company shall, upon surrender of the
Warrant for cancellation, execute and deliver a new Warrant evidencing the
rights of the Holder thereof to purchase the balance of the Warrant Shares
purchasable hereunder. Upon receipt by the Company of the Warrant at its office,
or by the stock transfer agent of the Company at its office, in proper form for
exercise and accompanied by proper payment, the Holder shall be deemed to be the
holder of record of the Warrant Shares issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then have been physically delivered to the Holder.
(b) RESERVATION OF SHARES. The Company covenants and agrees that it shall
---------------------
at all times reserve for issuance and delivery upon exercise of the Warrant such
number of shares of Common Stock as shall be required for issuance and delivery
upon exercise of the Warrant. In addition, the Company further covenants and
agrees that all Warrant Shares, upon issuance, shall be duly and validly issued,
fully paid and non-assessable and no personal liability shall attach to the
Holder.
-2-
(c) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
-----------------
issued upon exercise of this Warrant. All fractional shares shall be eliminated
by rounding any fraction to the nearest whole number of shares of Common Stock.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant shall
-------------------------------------------------
be exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company, or at the office of its stock transfer
agent, for other Warrants of different denominations entitling the Holder
thereof to purchase in the aggregate the same number of shares of Common Stock
purchasable hereunder. Upon surrender of this Warrant to the Company or the
office of its stock transfer agent, with the Assignment Form annexed hereto duly
executed and funds sufficient to pay any transfer tax, the Company, without
charge, shall execute and deliver new Warrants in the name of the assignee named
in such instrument of assignment and this Warrant shall be cancelled promptly,
provided that the Company shall receive from the Holder an opinion of
--------
counsel satisfactory to the Company that such assignment, as contemplated by the
Holder, shall not violate applicable Federal or state securities laws. This
Warrant may be divided or combined with other Warrants which carry the same
rights upon presentation hereof at the principal office of the Company or the
office of its stock transfer agent, together with a written notice, signed by
the Holder hereof, specifying the names and denominations in which new Warrants
are to be issued. The term "Warrants" as used herein shall include any warrants
into which this warrant may be divided or exchanged. Upon receipt by the Company
of evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company shall execute and deliver a new Warrant of
like tenor and date.
(e) RIGHTS OF HOLDER. The Holder shall not, until the exercise hereof of
----------------
the Warrant, be entitled to any rights of a stockholder in the Company, either
at law or equity, and the rights of the Holder shall be limited to those
expressed herein.
(f) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and
------------------------
the number and kind of securities purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of any of
the following events:
(i) In the event that the Company shall issue or sell any shares of
Common Stock (except as provided in paragraph (f)(v) hereof) for a
consideration per share less than the greater of (A) the Exercise Price in
effect immediately prior to such issue or sale and (B) the Market Price (as
defined in Paragraph (f)(ii)(G) hereof) on the date of such issue or sale,
then the Exercise Price, as of the date of such issue or sale, shall be
reduced to such lesser price (calculated to the nearest cent) as shall be
determined by multiplying the Exercise Price in effect immediately prior
thereto by a fraction, the numerator of which shall be the sum of (x) the
number of shares of Common Stock outstanding immediately prior to the
issuance or sale of such additional shares and (y) the number of shares of
Common Stock which the aggregate consideration received for the issuance or
-3-
sale of such additional shares would purchase at the greater of the Market
Price on the date of such issue or sale or the Exercise Price then in
effect, and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after the issuance or sale of such
additional shares.
(ii) For the purposes of paragraph (f)(i) above, the following
subparagraphs (A) to (G), inclusive, shall be applicable:
(A) If at any time the Company shall issue or sell any rights to
subscribe for, or any rights or options to purchase, Common Stock or
any stock or other securities convertible into or exchangeable for
Common Stock (such convertible or exchangeable stock or securities
being hereinafter called "Convertible Securities"), whether or not
such rights or options or the right to convert or exchange any such
Convertible Securities shall be immediately exercisable, and the price
per share for which Common Stock shall be issuable upon the exercise
of such rights or options or upon conversion or exchange of such
Convertible Securities (determined by dividing (1) the total amount,
if any, received or receivable by the Company as consideration for the
granting of such rights or options, plus the minimum aggregate amount
of additional consideration payable to the Company upon the exercise
of such rights or options, plus, in the case of any such rights or
options which shall relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion
or exchange thereof, by (2) the total number of shares of Common Stock
issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable
upon the exercise of such rights or options) shall be less than the
greater of (x) the Exercise Price in effect immediately prior to the
time of the issue or sale of such rights or options and (y) the Market
Price on the date of such issue or sale, then the total number of
shares of Common Stock issuable upon the exercise of such rights or
options or upon conversion or exchange of the total amount of such
Convertible Securities issuable upon the exercise of such rights or
options shall (as of the date of granting of such rights or options)
be deemed to be outstanding and to have been issued for such price per
share, and except as provided in paragraph (f)(iv), no further
adjustments of the Exercise Price shall be made upon the actual issue
of such Common Stock or of such Convertible Securities, upon the
exercise of such rights or options or upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible
Securities.
(B) If at any time the Company shall issue or sell any
Convertible Securities, whether or not the rights to exchange or
convert thereunder shall be immediately exercisable, and the price per
share for which Common Stock shall be issuable upon such conversion or
exchange (determined by dividing (1) the total amount received or
receivable by the Company as consideration for the issue
-4-
or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof, by (2) the total number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the greater of (x) the
Exercise Price in effect immediately prior to the time of such issue
or sale and (y) the Market Price on the date of such issue or sale,
then the total number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall (as of
the date of the issue or sale of such Convertible Securities) be
deemed to be outstanding and to have been issued for such price per
share, and, except as provided in paragraph (f)(iv), no further
adjustments of the Exercise Price shall be made upon the actual issue
of such Common Stock, upon conversion or exchange of such Convertible
Securities. In addition, if any issue or sale of such Convertible
Securities shall be made upon exercise of any rights to subscribe for
or to purchase or any option to purchase any such Convertible
Securities for which adjustments of the Exercise Price shall have been
or shall be made pursuant to other provisions of this paragraph
(f)(ii), no further adjustment of the Exercise Price shall be made by
reason of such issue or sale.
(C) If at any time the Company shall declare and pay a dividend
or make any other distribution upon the Common Stock payable in Common
Stock or Convertible Securities, any such Common Stock or Convertible
Securities, as the case may be, issuable in payment of such dividend
or distribution shall be deemed to have been issued or sold without
consideration; provided, that this provision shall not apply to any
--------
shares of Common Stock issuable for additional consideration upon
conversion of such Convertible Securities.
(D) If at any time any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock
or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount
received by the Company therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions or
discounts paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any
rights or options to purchase any such Common Stock or Convertible
Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration as
determined by the Board of Directors, without deduction therefrom of
any expenses incurred or any underwriting commissions or concessions
or discounts paid or allowed by the Company in connection therewith.
In case any shares of Common Stock or Convertible Securities or any
rights or options to purchase any such Common Stock or Convertible
Securities shall be issued in connection with any merger of another
corporation into the Company, the amount of consideration therefor
shall
-5-
be deemed to be the fair value of such merged corporation as
determined by the Board of Directors reduced by all cash and other
consideration (if any) paid by the Company in connection with such
merger.
(E) If at any time the Company shall fail to set a record date
of the holders of Common Stock for the purpose of entitling them (1)
to receive a dividend or other distribution payable in Common Stock or
in Convertible Securities, or (2) to subscribe for or purchase Common
Stock or Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may
be.
(F) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the
account of the Company, provided that such shares are neither issued,
--------
sold or otherwise distributed by the Company.
(G) For purposes hereof, the "Market Price" shall mean the
closing sale price of the Common Stock on The Nasdaq National Market
or other principal market or national securities exchange on which the
Common Stock may be listed, or the closing bid price of the Common
Stock in the over-the-counter market, as the case may be, in each case
on the day prior to the date of determination of such "Market Price."
If at any time the Common Stock shall not be quoted or listed on the
Nasdaq National Market or other principal market or national
securities exchange, or traded in the over-the-counter market, the
"Market Price" of a share of Common Stock shall be deemed to be the
higher of (x) the book value thereof (as determined by any firm of
independent public accountants of nationally recognized standing
selected by the Board of Directors) as of the last day of any month
ending within 60 days preceding the date of determination, or (y) the
fair value thereof (as determined in good faith by the Board of
Directors) as of a date which shall be within 15 days of the date of
determination.
(iii) In case at any time the Company shall subdivide its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price
in effect immediately prior to such subdivision shall be proportionately
reduced. In case at any time the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination shall be
proportionately increased.
(iv) If the purchase or exercise price provided for in any right or
option referred to in paragraph (f)(ii)(A), or the rate at which any
Convertible Securities referred to in paragraph (f)(ii)(A) or (B) shall be
convertible into or exchangeable for Common
-6-
Stock, shall change or a different purchase or exercise price or rate shall
become effective at any time or from time to time, then, upon such change
becoming effective, the Exercise Price then in effect hereunder shall
forthwith be increased or decreased to such Exercise Price as would have
been in effect had the adjustments made upon the granting or issuance of
such rights or options or Convertible Securities been made upon the basis
of (A) the issuance of the number of shares of Common Stock theretofore
actually delivered upon the exercise of such options or rights or upon the
conversion or exchange of such Convertible Securities and (B) the granting
or issuance at the time of such change of any such options, rights or
Convertible Securities then still outstanding for the consideration, if
any, received by the Company therefor and to be received on the basis of
such changed price; provided, that no further adjustment will be made if
--------
the change in such purchase or exercise price or rate shall occur pursuant
to the anti-dilution provisions of such right or option or Convertible
Securities and there shall have already been a similar adjustment to the
Exercise Price or rate as a result of the same transaction that
precipitated the change in such purchase or exercise price or rate .
(v) The Company shall not be required to make any adjustment to the
Exercise Price in the case of:
(A) the granting, after the date hereof, by the Company of stock
options with respect to shares of Common Stock under stock option
plans of the Company, so long as the total number of shares of Common
Stock issuable pursuant to (i) stock options outstanding as of any
such date, including stock options then granted (but not including any
terminated or exercised options), and (ii) stock options available to
be granted, shall not exceed, in the aggregate, 15% of the total
outstanding number of shares of Common Stock as of any such date;
(B) the issuance of shares of Common Stock pursuant to the
exercise of the options referred to in paragraph (f)(v)(A) above;
(C) the issuance of shares of Common Stock pursuant to the
exercise of any options or warrants outstanding on the date hereof;
(D) the issuance of shares of Common Stock pursuant to the
Purchase Agreement or the Registration Rights Agreement; and
(E) the issuance of shares of Common Stock upon the exercise of
any of the Warrants.
(vi) Whenever the Exercise Price payable upon exercise of this Warrant
shall be adjusted pursuant to this paragraph (f), the number of Warrant
Shares purchasable upon exercise hereof simultaneously shall be adjusted by
multiplying the number of Warrant Shares issuable immediately prior to such
adjustment by the Exercise Price in
-7-
effect immediately prior to such adjustment and dividing the product so
obtained by the Exercise Price, as adjusted.
(g) OFFICER'S CERTIFICATE. The Company shall give notice to each record
---------------------
holder of the Warrants of any event or transaction that shall result in an
adjustment in the Exercise Price, within five (5) business days thereof, at such
Holder's address as the same appears on the books of the Company, including a
computation of such adjustment and any adjustment in the number of Warrant
Shares for which such Holder may exercise such Holder's Warrant and any further
information as shall be necessary to confirm the computation of such
adjustments.
(h) CERTAIN NOTICES TO HOLDERS. If (i) the Company shall pay any dividend
--------------------------
or make any distribution upon the Common Stock, (ii) the Company shall offer to
the holders of the Common Stock for subscription or purchase by them any share
of any class of capital stock or any other rights or (iii) any capital
reorganization of the Company, reclassification of the capital stock of the
Company, consolidation, merger or other business combination of the Company with
or into another corporation, sale, lease or transfer of all or substantially all
of the assets of the Company to another corporation, or voluntary or involuntary
dissolution, liquidation or winding up of the Company shall be effected, then in
any such case, the Company shall cause to be mailed by certified mail to the
Holder, at least twenty (20) days prior to the date specified in (x) or (y)
below, as the case may be, a notice containing a brief description of the
proposed action and stating the date on which (x) a record date shall be
established for the purpose of such dividend, distribution or rights offering or
(y) such reclassification, reorganization, consolidation, merger, conveyance,
sale, lease, transfer, dissolution, liquidation or winding up shall take place
and the date, if any to be fixed, as of which the holders of Common Stock or
other securities shall receive cash or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
(i) RECLASSIFICATION, REORGANIZATION, MERGER OR OTHER BUSINESS
----------------------------------------------------------
COMBINATION. In case of any reclassification, capital reorganization or other
-----------
change of outstanding shares of Common Stock, or in case of any consolidation,
merger or other business combination of the Company with or into another
corporation or other entity (other than a merger with a subsidiary in which
merger the Company shall be the continuing corporation and which shall not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation or
other entity of all or substantially all of the assets of the Company, the
Company shall cause effective provisions to be made so that the Holder, by
exercising this Warrant at any time after the consummation of such
reclassification, change, consolidation, merger, sale, lease or conveyance,
shall be entitled to receive the stock or other securities or property to which
such Holder would have been entitled upon such consummation if such Holder had
exercised this Warrant immediately prior to such consummation. Any such
provision shall include provisions for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this paragraph (i) shall similarly apply to
successive reclassifications,
-8-
capital reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales, leases or conveyances. In the event that, in
connection with any such capital reorganization or reclassification,
consolidation, merger, sale, lease or conveyance, additional shares of Common
Stock shall be issued in exchange, conversion, substitution or payment, in whole
or in part, for a security of the Company other than Common Stock, any such
issue shall be treated as an issue of Common Stock subject to the provisions of
paragraph (f) hereof.
(j) REDEMPTION. The Company, upon thirty (30) days' prior written notice
----------
to the Holder, may elect to redeem all or part of this Warrant at a price equal
to $0.01 per Warrant Share issuable upon the exercise hereof, if, but only if:
(i) the Market Price shall have exceeded $5.50 per share (adjusted as set forth
in paragraph (f)(iii) hereof) on each of the ten (10) trading days ending not
more than one business day prior to the date on which the notice of redemption
shall be mailed to the Holder, (ii) the registration statement required to be
filed under Section 2 of the Registration Rights Agreement, dated as of the date
hereof, by and among the Company and the other parties signatory thereto, shall
be effective and permit the sale of all Warrant Shares, and (iii) the Common
Stock shall be listed and trading on The Nasdaq National Market or a national
securities exchange. Any such redemption shall be effective on the thirtieth day
following the date of such notice; provided, however, that the Holder may elect
-------- -------
at any time prior to the effective date of redemption to exercise all or any
portion of this Warrant in accordance with the terms hereof; and provided
--------
further, that the Company's right to redeem this Warrant shall be suspended if
-------
the Warrant Shares may not be sold pursuant to an effective registration
statement for any reason whatsoever or the Common Stock shall not be listed and
trading on The Nasdaq National Market or a national securities exchange. The
notice period shall then be extended for a period of time equal to the number of
days during the notice period during which the registration statement shall not
have permitted the sale of such Warrant Shares or the Common Stock shall not
have been so listed and trading, as the case may be. The redemption price shall
be payable in full, in cash, on the effective date of any redemption pursuant to
this paragraph (j). A redemption notice delivered by the Company pursuant to
this paragraph (j) shall be irrevocable. Notwithstanding the foregoing, the
Company's right to redeem all or part of this Warrant may not be exercised if on
the date on which the Company gives notice of such exercise the Market Price
shall be less than $5.50 per share (adjusted as set forth in paragraph (f)(iii)
hereof).
(k) GOVERNING LAW. This Warrant shall be governed by and construed in
-------------
accordance with the law of the State of New York.
(l) NOTICES. Any notice required to be given or delivered to the Company
-------
under the terms of this Warrant shall be in writing and addressed to the Chief
Financial Officer of the Company at its principal corporate offices. Any notice
required to be given or delivered to the Holder shall be in writing and
addressed to the Holder at the address indicated in the Purchase Agreement or to
such other address as such party may designate in writing from time to time to
the Company. All notices shall be deemed to have been given or delivered upon
any of the following: (i) personal delivery; (ii) five (5) days after deposit in
the United States mail by
-9-
certified or registered mail (return receipt requested); (iii) one (1) business
day after deposit with any nationally recognized overnight courier (prepaid); or
(iv) one (1) business day after transmission by facsimile and receipt by the
sender of written facsimile confirmation.
-10-
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by the undersigned, each being duly authorized, as of the date
below.
Dated: August 24, 1999
BLUE WAVE SYSTEMS INC.
By:_______________________________
Name:
Title:
Attest:
________________________
Name:
Title:
-11-
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the Warrant to the
extent of purchasing ____________ shares of Common Stock and hereby makes total
payment of $______________ in payment of the Exercise Price multiplied by such
number of shares.
___________________
ASSIGNMENT FORM
FOR VALUE RECEIVED, _____________________________________ hereby sells,
assigns and transfers unto
Name: __________________________________
(print in block letters)
Social Security No. or
Federal Taxpayer Identification No.: _________________________________
Address: _____________________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
_________ shares of Common Stock as to which such right is exercisable and does
hereby irrevocably constitute and appoint _________________________ as Attorney,
to transfer the same on the books of the Company with full power of
substitution.
Date ____________________, ____ Signature: _______________________
Name:
-12-
Exhibit B
---------
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR UNDER ANY STATE SECURITIES LAWS.
THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED WITHOUT (A)
REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR (B)
RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
A FULL STATEMENT OF THE RELATIVE RIGHTS, INTERESTS, PREFERENCES AND
RESTRICTIONS OF EACH CLASS OF STOCK WILL BE FURNISHED BY THE COMPANY TO ANY
SHAREHOLDER UPON WRITTEN REQUEST, WITHOUT CHARGE.
THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS SUBJECT TO
CERTAIN RESTRICTIONS PURSUANT TO A SECURITIES PURCHASE AGREEMENT BETWEEN
THE HOLDER AND THE COMPANY, DATED AS OF AUGUST 20, 1999, WHICH AGREEMENT IS
ON FILE WITH THE COMPANY. A COPY OF SUCH AGREEMENT WILL BE FURNISHED
WITHOUT CHARGE TO THE RECORD HOLDER HEREOF UPON WRITTEN REQUEST.
__________________________________________
WARRANT TO PURCHASE COMMON STOCK
OF
BLUE WAVE SYSTEMS INC.
__________________________________________
FOR VALUE RECEIVED, ____________________________________, or its permitted
assigns (the "Holder"), is entitled to purchase, subject to the provisions of
this Warrant, from Blue Wave Systems Inc., a Delaware corporation (the
"Company"), up to __________________
(___________) shares of Common Stock, par value $0.01, of the Company (the
"Common Stock") at any time or from time to time during the period commencing on
the date hereof and through and including the fifth anniversary of the date
hereof (the "Termination Date"), at a price per share equal to $4.50 (the
"Exercise Price"). The Holder shall exercise this Warrant for a number of
Warrant Shares in a minimum amount equal to the lesser of (i) 25,000 Warrant
Shares and (ii) such number of Warrant Shares (including any fraction of a
share) that shall remain issuable upon exercise of the Warrant in full. The
number of shares of Common Stock to be received upon the exercise of this
Warrant and the Exercise Price may be adjusted from time to time as hereinafter
set forth. The shares of Common Stock deliverable upon any exercise of this
Warrant are hereinafter sometimes referred to as "Warrant Shares". This Warrant
is issued by the Company pursuant to the Securities Purchase Agreement dated as
of August 20, 1999 (the "Purchase Agreement") among the Company and each of the
purchasers named on the signature pages thereto and shall be entitled to the
rights set forth therein, including certain registration rights relating to the
Warrant Shares.
(a) EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part
-------------------
at any time or from time to time until the Termination Date; provided, that,if
--------
the date of exercise shall be a day on which banking institutions in the State
of New York shall be authorized by law to close, then the Warrant shall be
exercisable on the next succeeding day which shall not be such a day. This
Warrant may be exercised by presentation and surrender hereof to the Company at
its principal office, or at the office of its stock transfer agent, if any, with
the Purchase Form annexed hereto duly executed and accompanied by payment of the
Exercise Price for the number of Warrant Shares specified in such Form. As soon
as practicable after each such exercise, but not later than two business (2)
days following the date of such exercise, the Company shall issue and deliver to
the Holder a certificate or certificates for the Warrant Shares issuable upon
such exercise, registered in the name of the Holder or its designee(s). If this
Warrant shall be exercised in part, the Company shall, upon surrender of the
Warrant for cancellation, execute and deliver a new Warrant evidencing the
rights of the Holder thereof to purchase the balance of the Warrant Shares
purchasable hereunder. Upon receipt by the Company of the Warrant at its office,
or by the stock transfer agent of the Company at its office, in proper form for
exercise and accompanied by proper payment, the Holder shall be deemed to be the
holder of record of the Warrant Shares issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then have been physically delivered to the Holder.
(b) RESERVATION OF SHARES. The Company covenants and agrees that it shall
---------------------
at all times reserve for issuance and delivery upon exercise of the Warrant such
number of shares of Common Stock as shall be required for issuance and delivery
upon exercise of the Warrant. In addition, the Company further covenants and
agrees that all Warrant Shares, upon issuance, shall be duly and validly issued,
fully paid and non-assessable and no personal liability shall attach to the
Holder.
-2-
(c) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
-----------------
issued upon exercise of this Warrant. All fractional shares shall be eliminated
by rounding any fraction to the nearest whole number of shares of Common Stock.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant shall
-------------------------------------------------
be exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company, or at the office of its stock transfer
agent, for other Warrants of different denominations entitling the Holder
thereof to purchase in the aggregate the same number of shares of Common Stock
purchasable hereunder. Upon surrender of this Warrant to the Company or the
office of its stock transfer agent, with the Assignment Form annexed hereto duly
executed and funds sufficient to pay any transfer tax, the Company, without
charge, shall execute and deliver new Warrants in the name of the assignee named
in such instrument of assignment and this Warrant shall be cancelled promptly,
provided that the Company shall receive from the Holder an opinion of
--------
counsel satisfactory to the Company that such assignment, as contemplated by the
Holder, shall not violate applicable Federal or state securities laws. This
Warrant may be divided or combined with other Warrants which carry the same
rights upon presentation hereof at the principal office of the Company or the
office of its stock transfer agent, together with a written notice, signed by
the Holder hereof, specifying the names and denominations in which new Warrants
are to be issued. The term "Warrants" as used herein shall include any warrants
into which this warrant may be divided or exchanged. Upon receipt by the Company
of evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company shall execute and deliver a new Warrant of
like tenor and date.
(e) RIGHTS OF HOLDER. The Holder shall not, until the exercise hereof of
----------------
the Warrant, be entitled to any rights of a stockholder in the Company, either
at law or equity, and the rights of the Holder shall be limited to those
expressed herein.
(f) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and
------------------------
the number and kind of securities purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of any of
the following events:
(i) In the event that the Company shall issue or sell any shares of
Common Stock (except as provided in paragraph (f)(v) hereof) for a
consideration per share less than the greater of (A) the Exercise Price in
effect immediately prior to such issue or sale and (B) the Market Price (as
defined in Paragraph (f)(ii)(G) hereof) on the date of such issue or sale,
then the Exercise Price, as of the date of such issue or sale, shall be
reduced to such lesser price (calculated to the nearest cent) as shall be
determined by multiplying the Exercise Price in effect immediately prior
thereto by a fraction, the numerator of which shall be the sum of (x) the
number of shares of Common Stock outstanding immediately prior to the
issuance or sale of such additional shares and (y) the number of shares of
Common Stock which the aggregate consideration received for the issuance or
-3-
sale of such additional shares would purchase at the greater of the Market
Price on the date of such issue or sale or the Exercise Price then in
effect, and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after the issuance or sale of such
additional shares.
(ii) For the purposes of paragraph (f)(i) above, the following
subparagraphs (A) to (G), inclusive, shall be applicable:
(A) If at any time the Company shall issue or sell any rights to
subscribe for, or any rights or options to purchase, Common Stock or
any stock or other securities convertible into or exchangeable for
Common Stock (such convertible or exchangeable stock or securities
being hereinafter called "Convertible Securities"), whether or not
such rights or options or the right to convert or exchange any such
Convertible Securities shall be immediately exercisable, and the price
per share for which Common Stock shall be issuable upon the exercise
of such rights or options or upon conversion or exchange of such
Convertible Securities (determined by dividing (1) the total amount,
if any, received or receivable by the Company as consideration for the
granting of such rights or options, plus the minimum aggregate amount
of additional consideration payable to the Company upon the exercise
of such rights or options, plus, in the case of any such rights or
options which shall relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion
or exchange thereof, by (2) the total number of shares of Common Stock
issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable
upon the exercise of such rights or options) shall be less than the
greater of (x) the Exercise Price in effect immediately prior to the
time of the issue or sale of such rights or options and (y) the Market
Price on the date of such issue or sale, then the total number of
shares of Common Stock issuable upon the exercise of such rights or
options or upon conversion or exchange of the total amount of such
Convertible Securities issuable upon the exercise of such rights or
options shall (as of the date of granting of such rights or options)
be deemed to be outstanding and to have been issued for such price per
share, and except as provided in paragraph (f)(iv), no further
adjustments of the Exercise Price shall be made upon the actual issue
of such Common Stock or of such Convertible Securities, upon the
exercise of such rights or options or upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible
Securities.
(B) If at any time the Company shall issue or sell any
Convertible Securities, whether or not the rights to exchange or
convert thereunder shall be immediately exercisable, and the price per
share for which Common Stock shall be issuable upon such conversion or
exchange (determined by dividing (1) the total amount received or
receivable by the Company as consideration for the issue
-4-
or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof, by (2) the total number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the greater of (x) the
Exercise Price in effect immediately prior to the time of such issue
or sale and (y) the Market Price on the date of such issue or sale,
then the total number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall (as of
the date of the issue or sale of such Convertible Securities) be
deemed to be outstanding and to have been issued for such price per
share, and, except as provided in paragraph (f)(iv), no further
adjustments of the Exercise Price shall be made upon the actual issue
of such Common Stock, upon conversion or exchange of such Convertible
Securities. In addition, if any issue or sale of such Convertible
Securities shall be made upon exercise of any rights to subscribe for
or to purchase or any option to purchase any such Convertible
Securities for which adjustments of the Exercise Price shall have been
or shall be made pursuant to other provisions of this paragraph
(f)(ii), no further adjustment of the Exercise Price shall be made by
reason of such issue or sale.
(C) If at any time the Company shall declare and pay a dividend
or make any other distribution upon the Common Stock payable in Common
Stock or Convertible Securities, any such Common Stock or Convertible
Securities, as the case may be, issuable in payment of such dividend
or distribution shall be deemed to have been issued or sold without
consideration; provided, that this provision shall not apply to any
shares of Common Stock issuable for additional consideration upon
conversion of such Convertible Securities.
(D) If at any time any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock
or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount
received by the Company therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions or
discounts paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any
rights or options to purchase any such Common Stock or Convertible
Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration as
determined by the Board of Directors, without deduction therefrom of
any expenses incurred or any underwriting commissions or concessions
or discounts paid or allowed by the Company in connection therewith.
In case any shares of Common Stock or Convertible Securities or any
rights or options to purchase any such Common Stock or Convertible
Securities shall be issued in connection with any merger of another
corporation into the Company, the amount of consideration therefor
shall
-5-
be deemed to be the fair value of such merged corporation as
determined by the Board of Directors reduced by all cash and other
consideration (if any) paid by the Company in connection with such
merger.
(E) If at any time the Company shall fail to set a record date
of the holders of Common Stock for the purpose of entitling them (1)
to receive a dividend or other distribution payable in Common Stock or
in Convertible Securities, or (2) to subscribe for or purchase Common
Stock or Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may
be.
(F) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the
account of the Company, provided that such shares are neither issued,
--------
sold or otherwise distributed by the Company.
(G) For purposes hereof, the "Market Price" shall mean the
closing sale price of the Common Stock on The Nasdaq National Market
or other principal market or national securities exchange on which the
Common Stock may be listed, or the closing bid price of the Common
Stock in the over-the-counter market, as the case may be, in each case
on the day prior to the date of determination of such "Market Price."
If at any time the Common Stock shall not be quoted or listed on the
Nasdaq National Market or other principal market or national
securities exchange, or traded in the over-the-counter market, the
"Market Price" of a share of Common Stock shall be deemed to be the
higher of (x) the book value thereof (as determined by any firm of
independent public accountants of nationally recognized standing
selected by the Board of Directors) as of the last day of any month
ending within 60 days preceding the date of determination, or (y) the
fair value thereof (as determined in good faith by the Board of
Directors) as of a date which shall be within 15 days of the date of
determination.
(iii) In case at any time the Company shall subdivide its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price
in effect immediately prior to such subdivision shall be proportionately
reduced. In case at any time the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination shall be
proportionately increased.
(iv) If the purchase or exercise price provided for in any right or
option referred to in paragraph (f)(ii)(A), or the rate at which any
Convertible Securities referred to in paragraph (f)(ii)(A) or (B) shall be
convertible into or exchangeable for Common
-6-
Stock, shall change or a different purchase or exercise price or rate shall
become effective at any time or from time to time, then, upon such change
becoming effective, the Exercise Price then in effect hereunder shall
forthwith be increased or decreased to such Exercise Price as would have
been in effect had the adjustments made upon the granting or issuance of
such rights or options or Convertible Securities been made upon the basis
of (A) the issuance of the number of shares of Common Stock theretofore
actually delivered upon the exercise of such options or rights or upon the
conversion or exchange of such Convertible Securities and (B) the granting
or issuance at the time of such change of any such options, rights or
Convertible Securities then still outstanding for the consideration, if
any, received by the Company therefor and to be received on the basis of
such changed price; provided, that no further adjustment will be made if
--------
the change in such purchase or exercise price or rate shall occur pursuant
to the anti-dilution provisions of such right or option or Convertible
Securities and there shall have already been a similar adjustment to the
Exercise Price or rate as a result of the same transaction that
precipitated the change in such purchase or exercise price or rate.
(v) The Company shall not be required to make any adjustment to the
Exercise Price in the case of:
(A) the granting, after the date hereof, by the Company of stock
options with respect to shares of Common Stock under stock option plans of
the Company, so long as the total number of shares of Common Stock issuable
or issued pursuant to such options, when added to the total number of
shares issuable pursuant to options outstanding under such plans as of such
date (after taking into account any terminated options), shall not exceed,
in the aggregate, 15% of the total outstanding shares of Common Stock (on a
fully diluted basis) as of such date;
(B) the issuance of shares of Common Stock pursuant to the
exercise of the options referred to in paragraph (f)(v)(A) above;
(C) the issuance of shares of Common Stock pursuant to the
exercise of any options or warrants outstanding on the date hereof;
(D) the issuance of shares of Common Stock pursuant to the
Purchase Agreement or the Registration Rights Agreement; and
(E) the issuance of shares of Common Stock upon the exercise of
any of the Warrants.
(vi) Whenever the Exercise Price payable upon exercise of this Warrant
shall be adjusted pursuant to this paragraph (f), the number of Warrant
Shares purchasable upon exercise hereof simultaneously shall be adjusted by
multiplying the number of Warrant Shares issuable immediately prior to such
adjustment by the Exercise Price in
-7-
effect immediately prior to such adjustment and dividing the product so
obtained by the Exercise Price, as adjusted.
(g) OFFICER'S CERTIFICATE. The Company shall give notice to each record
---------------------
holder of the Warrants of any event or transaction that shall result in an
adjustment in the Exercise Price, within five (5) business days thereof, at such
Holder's address as the same appears on the books of the Company, including a
computation of such adjustment and any adjustment in the number of Warrant
Shares for which such Holder may exercise such Holder's Warrant and any further
information as shall be necessary to confirm the computation of such
adjustments.
(h) CERTAIN NOTICES TO HOLDERS. If (i) the Company shall pay any dividend
--------------------------
or make any distribution upon the Common Stock, (ii) the Company shall offer to
the holders of the Common Stock for subscription or purchase by them any share
of any class of capital stock or any other rights or (iii) any capital
reorganization of the Company, reclassification of the capital stock of the
Company, consolidation, merger or other business combination of the Company with
or into another corporation, sale, lease or transfer of all or substantially all
of the assets of the Company to another corporation, or voluntary or involuntary
dissolution, liquidation or winding up of the Company shall be effected, then in
any such case, the Company shall cause to be mailed by certified mail to the
Holder, at least twenty (20) days prior to the date specified in (x) or (y)
below, as the case may be, a notice containing a brief description of the
proposed action and stating the date on which (x) a record date shall be
established for the purpose of such dividend, distribution or rights offering or
(y) such reclassification, reorganization, consolidation, merger, conveyance,
sale, lease, transfer, dissolution, liquidation or winding up shall take place
and the date, if any to be fixed, as of which the holders of Common Stock or
other securities shall receive cash or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up .
(i) RECLASSIFICATION, REORGANIZATION, MERGER OR OTHER BUSINESS
----------------------------------------------------------
COMBINATION. In case of any reclassification, capital reorganization or other
-----------
change of outstanding shares of Common Stock, or in case of any consolidation,
merger or other business combination of the Company with or into another
corporation or other entity (other than a merger with a subsidiary in which
merger the Company shall be the continuing corporation and which shall not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation or
other entity of all or substantially all of the assets of the Company, the
Company shall cause effective provisions to be made so that the Holder, by
exercising this Warrant at any time after the consummation of such
reclassification, change, consolidation, merger, sale, lease or conveyance,
shall be entitled to receive the stock or other securities or property to which
such Holder would have been entitled upon such consummation if such Holder had
exercised this Warrant immediately prior to such consummation. Any such
provision shall include provisions for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this paragraph (i) shall similarly apply to
successive reclassifications,
-8-
capital reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales, leases or conveyances. In the event that, in
connection with any such capital reorganization or reclassification,
consolidation, merger, sale, lease or conveyance, additional shares of Common
Stock shall be issued in exchange, conversion, substitution or payment, in whole
or in part, for a security of the Company other than Common Stock, any such
issue shall be treated as an issue of Common Stock subject to the provisions of
paragraph (f) hereof.
(j) REDEMPTION. The Company, upon thirty (30) days' prior written notice
----------
to the Holder, may elect to redeem all or part of this Warrant at a price equal
to $0.01 per Warrant Share issuable upon the exercise hereof, if, but only if:
(i) the Market Price shall have exceeded $6.50 per share (adjusted as set forth
in paragraph (f)(iii) hereof) on each of the ten (10) trading days ending not
more than one business day prior to the date on which the notice of redemption
shall be mailed to the Holder, (ii) the registration statement required to be
filed under Section 2 of the Registration Rights Agreement, dated as of the date
hereof, by and among the Company and the other parties signatory thereto, shall
be effective and permit the sale of all Warrant Shares, and (iii) the Common
Stock shall be listed and trading on The Nasdaq National Market or a national
securities exchange. Any such redemption shall be effective on the thirtieth day
following the date of such notice; provided, however, that the Holder may elect
-------- -------
at any time prior to the effective date of redemption to exercise all or any
portion of this Warrant in accordance with the terms hereof; and provided
--------
further, that the Company's right to redeem this Warrant shall be suspended if
-------
the Warrant Shares may not be sold pursuant to an effective registration
statement for any reason whatsoever or the Common Stock shall not be listed and
trading on The Nasdaq National Market or a national securities exchange. The
notice period shall then be extended for a period of time equal to the number of
days during the notice period during which the registration statement shall not
have permitted the sale of such Warrant Shares or the Common Stock shall not
have been so listed and trading, as the case may be. The redemption price shall
be payable in full, in cash, on the effective date of any redemption pursuant to
this paragraph (j). A redemption notice delivered by the Company pursuant to
this paragraph (j) shall be irrevocable. Notwithstanding the foregoing, the
Company's right to redeem all or part of this Warrant may not be exercised if on
the date on which the Company gives notice of such exercise the Market Price
shall be less than $6.50 per share (adjusted as set forth in paragraph (f)(iii)
hereof).
(k) GOVERNING LAW. This Warrant shall be governed by and construed in
-------------
accordance with the law of the State of New York.
(l) NOTICES. Any notice required to be given or delivered to the Company
-------
under the terms of this Warrant shall be in writing and addressed to the Chief
Financial Officer of the Company at its principal corporate offices. Any notice
required to be given or delivered to the Holder shall be in writing and
addressed to the Holder at the address indicated in the Purchase Agreement or to
such other address as such party may designate in writing from time to time to
the Company. All notices shall be deemed to have been given or delivered upon
any of the following: (i) personal delivery; (ii) five (5) days after deposit in
the United States mail by
-9-
certified or registered mail (return receipt requested); (iii) one (1) business
day after deposit with any nationally recognized overnight courier (prepaid); or
(iv) one (1) business day after transmission by facsimile and receipt by the
sender of written facsimile confirmation.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by the undersigned, each being duly authorized, as of the date
below.
Dated: August 24, 1999
BLUE WAVE SYSTEMS INC.
By:_______________________________
Name:
Title:
Attest:
________________________
Name:
Title:
-10-
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the Warrant to the
extent of purchasing ____________ shares of Common Stock and hereby makes total
payment of $______________ in payment of the Exercise Price multiplied by such
number of shares.
___________________
ASSIGNMENT FORM
FOR VALUE RECEIVED, _____________________________________ hereby sells,
assigns and transfers unto
Name: __________________________________
(print in block letters)
Social Security No. or
Federal Taxpayer Identification No.: _________________________________
Address: _____________________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
_________ shares of Common Stock as to which such right is exercisable and does
hereby irrevocably constitute and appoint _________________________ as Attorney,
to transfer the same on the books of the Company with full power of
substitution.
Date ____________________, ____ Signature: _______________________
Name:
-11-
Schedule 3(b)
List of Subsidiaries
--------------------
The Company has the following direct wholly owned subsidiary:
Blue Wave Systems Ltd., a company registered in England and Wales
The following are wholly owned subsidiaries of Blue Wave Systems Ltd.:
Blue Wave Systems GmbH (Germany)
Blue Wave Systems SARL (France)
Loughborough Sound Images Inc. (Massachusetts)
Schedule 3(e)
Capitalization
--------------
As of August 20, 1999:
Shares Authorized, Reserved and Outstanding
-------------------------------------------
(i) the Company has 50,000,000 shares of common stock , $.01 par value
("Common Stock"), and 1,000,000 shares of preference stock, $.01 par value
("Preferred Stock"), authorized for issuance.
(ii) 13,141,980 shares of Common Stock are outstanding, including 223,142
shares of Common Stock held by the Company's employee stock ownership plan
(the "ESOP"); no Preferred Shares are outstanding.
(iii) 2,502,500 shares of Common Stock are reserved for issuance under the
Company's current stock option plans (522,403 of which remain available
for issuance), which includes 223,142 shares of Common Stock reserved for
issuance by the ESOP.
(iv) No other shares are reserved for issuance under any other convertible
securities issued by the Company.
(v) 1,200,000 shares of Common Stock are reserved for issuance as Shares.
(vi) 1,000,000 shares of Common Stock are reserved for issuance as Warrant
Shares, subject to increase if applicable anti-dilution provisions apply.
Prior and Existing Stock Option Plans
-------------------------------------
Old LSI Plan Old Mizar Plan ESOP Total
Total authorized for 564,001 2,502,500 223,142 3,289,643
issuance
Total granted 564,001 1,980,097 223,142 2,767,240
Total cancellations 0 0 0 0
Total exercised 0 1,477,322 0 1,477,322
Total available for 0 522,403 0 522,403
future grant
Total outstanding 564,001 502,775 223,142 1,289,918
Exhibit C
---------
Schedule of Exceptions
----------------------
3(h) No Material Adverse Change. The Company experienced losses in the amount
--------------------------
of approximately $830,000 in its fourth quarter ended June 30, 1999, which
was due to production issues on products sold to military and aerospace
customers, as disclosed in the press release dated June 17, 1999 (a copy of
which is attached as Schedule I hereto). This loss, combined with existing
significant bank debt, has led to a serious cash flow problem for the
Company. In addition, the Company is in violation of each of its financial
covenants with Fleet Bank, which the bank has refused to waive. The
Company currently has outstanding $858,000 under such loan. If the Company
continues to experience significant operating losses and can not maintain
adequate bank financing, the Company would likely suffer a Material Adverse
Change.
3(j) No Default. See (h) above.
----------
3(m) Registration Rights. Pursuant to its stock option plans, the Company has
-------------------
registered the shares of Common Stock of the Company issuable upon exercise
of options granted under such plans.
3(o) No Misrepresentation. See (h) above.
--------------------
3(p) Anti-Dilution and Other Shares. None other than those granted to the
------------------------------
Purchasers.
Schedule I to Exhibit C
-----------------------
Corporate Contact:
Xxxxxxx X. Xxxxxxxxxxx
Chief Financial Officer
(000) 000-0000
xxx@xxxxxx.xxx
Blue Wave Systems Inc. Sees Subcontractor Delays
Impacting Fourth Quarter Revenues
Dallas, Texas (June 16, 1999)-Blue Wave Systems Inc. (NASDAQ/NMS:BWSI), the
leading board-level DSP solutions provider, today announced that its fourth
quarter revenues will be adversely effected by subcontractor delays. As
disclosed on April 30, 1999, the Company has experienced supplier delays that
impact $1.3 million of initial product deliveries into two military/aerospace
programs. Due to continued delays, the vast majority of these orders are now
expected to be fulfilled in the Company's first fiscal quarter ending September
30, 1999. As a result, the Company will report a loss during its fourth fiscal
quarter ending June 30, 1999.
"Our efforts are focused on mitigating the extent of the delays and supporting
our customers' development efforts on these two new programs," stated Xxxxxxx X.
Xxxxxxxxxxx, Chief Financial Officer. "Although supply chain delays are not
acceptable, these high value products are complex and thus inherently more
susceptible to delays during their introductory stage."
Blue Wave's DSP-based Solutions
Blue Wave Systems (NASDAQ/NMS:BWSI) is the world's leading supplier of board-
level DSP solutions and provides digital signal processing (DSP) boards and
subsystems to more than one-half of the world's top 40 industrial companies.
Blue Wave Systems is principally involved in the development and sale of
embedded DSP computers for a variety of industries. The Company resulted from
the merger of Mizar, Inc. and Loughborough Sound Images Ltd. in April 1998.
This press release contains forward-looking statements which are based on
expectations of the Company but involve a number of risks and uncertainties,
including, but not limited to, technological change, quarterly fluctuations,
integration of Mizar and Loughborough Sound Images, dependence on the defense
industry, dependence on key suppliers and employees, competition, and Year 2000
compliance. The foregoing list should not be construed as exhaustive and the
Company disclaims any obligation subsequently to revise forward-looking
statements to reflect unanticipated events. For a further explanation of risk
factors please see the Company's most recent SEC filings. The Company further
cautions users who may utilize published bookings and backlog information as
tools to forecast the company's revenue during a given timeframe since certain
purchase orders may be subject to 1) cancellation and, 2) revision to delivery
schedules.
Exhibit D
---------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
Registration Rights Agreement, dated as of August 24, 1999, by and
among Blue Wave Systems, Inc., a Delaware corporation ("Company"), and the other
-------
parties signatory hereto.
WHEREAS, Company and the other parties signatory hereto have entered
into that certain Securities Purchase Agreement, dated as of August 20, 1999
(the "Purchase Agreement"), pursuant to which Company has agreed to issue and
------------------
sell to such parties, and such parties have agreed to purchase from Company, an
aggregate of 1,200,000 shares (each a "Share" and collectively, the "Shares") of
----- ------
Company's common stock, par value $0.01 per share (the "Common Stock"), and
------------
warrants (the "Warrants") to purchase an aggregate of 1,000,000 shares of Common
--------
Stock (the "Warrant Shares"); and
--------------
WHEREAS, in order to induce the parties signatory hereto to enter into
the Purchase Agreement and to purchase the Shares and the Warrants, Company has
agreed to provide registration rights with respect thereto.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, terms defined in
-----------
the Purchase Agreement are used herein as therein defined, and the following
shall have (unless otherwise provided elsewhere in this Registration Rights
Agreement) the following respective meanings:
"Agreement" shall mean this Registration Rights Agreement, including
all amendments, modifications and supplements and any exhibits or schedules to
any of the foregoing, and shall refer to the Agreement as the same may be in
effect at the time such reference shall become operative.
"Business Day" shall mean any day that is not a Saturday, a Sunday or
a day on which banks are required or permitted to be closed in the State of New
York.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"Holder" shall mean any holder of Registrable Securities.
"NASD" shall mean the National Association of Securities Dealers,
Inc., or any successor corporation thereto.
"Registrable Securities" shall mean the Shares and all shares of
Common Stock issued or issuable as Warrant Shares, and all shares of Common
Stock issued or issuable, from time to time (with any adjustments), as a
distribution on, in exchange for or otherwise with respect to the Shares or
Warrant Shares.
"Requisite Holders" shall mean Holders, holding at the time, a
majority of the Registrable Securities.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
2. Required Registration.
---------------------
(a) Within thirty (30) days following the Closing Date, Company
shall file a Registration Statement under the Securities Act on Form S-3 (or, if
not available, on such Form as is then available to effect a registration of all
Registrable Securities) covering, and shall obtain all such qualifications and
compliances as may be required and as would permit the sale and distribution of,
all Registrable Securities. Company shall use its best commercial efforts to
secure the effectiveness of such registration statements no later than one
hundred twenty (120) days following the Closing Date. If the actual number of
shares of Common Stock for which the Registrable Securities are exercisable
shall exceed the number of shares of Common Stock initially registered under
this Section 2, Company shall have sixty (60) days to file an amendment to the
Registration Statement described herein, or an additional Registration
Statement, covering such shares, and shall use its best commercial efforts to
cause such amendment or Registration Statement to be declared effective as soon
as possible, but, in no event, later than sixty (60) days after filing.
(b) Only one registration shall be effected pursuant to this
Section 2.
(c) Company shall use its best commercial efforts to cause the
Registration Statement or Registration Statements filed pursuant to this Section
2 to remain effective until the earlier of (i) the date on which all Registrable
Securities shall have been sold
2
or (ii) the date on which all Registrable Securities may be sold immediately to
the public, without volume limitations, pursuant to Rule 144(k) under the
Securities Act.
3. Registration Piggyback.
----------------------
(a) If Company at any time proposes to file on its behalf and/or
on behalf of any of its security holders (the "demanding security holders") a
Registration Statement under the Securities Act on any form (other than a
Registration Statement on Form S-4 or S-8 or any successor form) for the general
registration of securities, Company will give written notice to all Holders at
least 30 days before the initial filing with the Commission of such Registration
Statement, which notice shall set forth the intended method of disposition of
the securities proposed to be registered by Company. The notice shall offer to
include in such filing the aggregate number of shares of Registrable Securities
as may be requested by such Holders.
(b) Each Holder desiring to have Registrable Securities registered
under this Section 3 shall advise Company in writing within 10 Business Days
after the date of receipt of such offer from Company, setting forth the amount
of such Registrable Securities for which registration shall be requested.
Company shall thereupon include in such filing the number of shares of
Registrable Securities for which registration shall be requested, subject to the
next sentence, and shall use its best commercial efforts to effect registration
under the Securities Act of such shares. If the managing underwriter of a
proposed public offering shall advise Company that, in such underwriter's
opinion, the distribution of the Registrable Securities requested to be included
in the registration concurrently with the securities being registered by Company
or such demanding security holders would adversely affect the distribution or
marketability of such securities being registered by Company, then all selling
security holders shall reduce the amount of securities each intended to
distribute through such offering on a pro rata basis. If a Holder shall decide
not to include all of its Registrable Securities in such Registration Statement,
such Holder nevertheless shall continue to have the right to include any
Registrable Securities in any subsequent Registration Statement or Registration
Statements as may be filed by the Company, in each instance upon the terms and
conditions set forth herein. The right to registration of Registrable Securities
under this Section 3 shall not be construed to limit in any way the obligation
of the Company to register the Registrable Securities under Section 2.
4. Registration Procedures.
-----------------------
(a) If Company shall be required by the provisions of Section 2 or
3 to effect the registration of any Registrable Securities, Company will,
as expeditiously as possible:
3
(i) prepare and file with the Commission a Registration
Statement with respect to such Registrable Securities and use its best
commercial efforts to cause such Registration Statement to become and
remain effective for the period of time specified in Section 2(b) hereof;
(ii) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all Registrable Securities
covered by such Registration Statement until the time specified in Section
2(b) hereof;
(iii) furnish to each selling Holder such number of copies of a
summary prospectus or other prospectus, including a preliminary prospectus,
in conformity with the requirements of the Securities Act, and such other
documents, as such selling Holder may reasonably request;
(iv) take all reasonable actions required to prevent the entry of
any stop order issued or threatened by the Commission or any state
regulatory authority with respect to any Registration Statement covering
Registrable Securities, and take all reasonable actions to remove it if
entered;
(v) use its best commercial efforts to register or qualify the
Registrable Securities covered by such Registration Statement under such
other securities or blue sky laws of such jurisdictions within the United
States as shall be reasonably requested by each Holder (provided, however,
-------- -------
that Company shall not be obligated to qualify as a foreign corporation to
do business under the laws of any jurisdiction in which it shall not then
be qualified or to file any general consent to service or process), and do
such other reasonable acts and things as may be required to enable such
Holder to consummate the disposition in such jurisdiction of the
Registrable Securities covered by such Registration Statement;
(vi) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such
Registrable Securities;
4
(vii) otherwise use its best commercial efforts to comply with
all applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, but not later
than 18 months after the effective date of the Registration Statement, an
earnings statement covering the period of at least 12 months beginning with
the first full month after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act; and
(viii) use its best commercial efforts to cause all Registrable
Securities to be listed on any securities exchange, quotation system,
market or over-the-counter bulletin board, if any, on which the Common
Stock shall then be listed.
(b) It shall be a condition precedent to the obligation of Company
to take any action pursuant to this Agreement in respect of the Registrable
Securities to be registered at the request of any Holder that such Holder shall
furnish to Company such information regarding the Registrable Securities held by
such Holder and the intended method of disposition thereof as shall be
reasonably requested by Company and as shall be required in connection with the
action taken by Company and that such Holder executes and delivers the form of
underwriting agreement and any other questionnaires, powers of attorney or other
typical underwriting documents required by the managing underwriter, if any,
with respect to the registration in which such Holder is participating.
5. Default Shares.
--------------
(a) In the event that the Registration Statement or Registration
Statements required to be filed pursuant to Section 2 relating to the
Registrable Securities shall not be filed within thirty (30) days from the
Closing Date, Company shall issue and deliver, free of charge and without cost,
to the Holders (i) within ten (10) days of the end of such thirty (30) day
period, certificates representing a number of fully paid, non-assessable shares
of Common Stock equal to the aggregate of 1% of the Shares and the Warrant
Shares (with additional shares issued pursuant to this Section 5(a) referred to
as "Default Shares") and (ii) within ten (10) days of the first sixty (60) day
--------------
period, beginning on the Closing Date, if such Registration Statement shall not
have been filed by the end of such sixty (60) day period, additional
certificates representing a number of fully paid, non-assessable shares of
Common Stock equal to the aggregate of 3% of such Shares and Warrant Shares. In
addition, in the event that the Registration Statement or Registration
Statements required to be filed pursuant to Section 2 hereof shall not be
declared effective by the Commission within one hundred twenty (120) days from
the Closing Date, Company shall issue and deliver, free of charge and without
cost, to the Holders within ten (10) days of the end of such time period,
certificates representing a number of
5
fully paid, non-assessable shares of Common Stock equal to the aggregate of 3%
of the Shares and the Warrant Shares.
(b) Any Default Shares shall be allocated pro rata among the
Holders based on the number of Shares purchased by each under the Purchase
Agreement. Any and all shares of Common Stock issued and delivered by the
Company pursuant to this Section 5 shall constitute "Registrable Securities,"
and the Company shall be required to register them under the Securities Act in
accordance with the provisions of this Agreement.
(c) The remedies provided for in this Section 5 shall be in
addition to any other remedies available to Purchasers under this Agreement, at
law or in equity.
6. Expenses. All expenses incurred in complying with this Agreement,
--------
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the NASD), printing expenses, fees and
disbursements of counsel for Company, expenses of any special audits incident to
or required by any such registration and expenses of complying with the
securities or blue sky laws of any jurisdiction pursuant to Section 4, shall be
paid by Company, except that Company shall not be liable for any fees, discounts
or commissions to any underwriter.
7. Indemnification and Contribution.
--------------------------------
(a) In the event of any registration of any Registrable Securities
under the Securities Act pursuant to this Agreement, Company shall indemnify and
hold harmless the Holder of such Registrable Securities, such Holder's
directors, officers, partners and agents, and each other person (including each
underwriter) who participated in the offering of such Registrable Securities and
each other person, if any, who controls such Holder or such participating person
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such Holder or any such director,
officer, partner, agent or participating person or controlling person may become
subject under the Securities Act or any other statute or at common law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue or alleged untrue statement of any
material fact contained, on the effective date thereof, in any Registration
Statement under which such securities were registered under the Securities Act,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse such Holder or such
director, officer, partner, agent or participating person or controlling person
for any legal or any other expenses reasonably incurred by such Holder or such
director, officer or participating person or controlling person in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that Company not be liable in any such case
-------- -------
6
to the extent that any such loss, claim, damage or liability arises out of or is
based upon any untrue or alleged untrue statement or omission or alleged
omission made in such Registration Statement, preliminary prospectus, prospectus
or amendment or supplement in reliance upon and in conformity with written
information furnished to Company by such Holder specifically for use therein or
so furnished for such purpose by any underwriter. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such Holder or such director, officer, partner, agent or participating person or
controlling person, and shall survive the transfer of such Registrable
Securities by such Holder.
(b) Each Holder shall indemnify and hold harmless Company, its
directors and officers and each other person, if any, who controls Company
within the meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which Company or any such director or officer
or any such person may become subject under the Securities Act or any other
statute or at common law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon information in
writing provided to Company by such Holder specifically for use in the following
documents and contained, on the effective date thereof, in any Registration
Statement under which securities were registered under the Securities Act at the
request of such Holder, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto. Notwithstanding the provisions
of this paragraph (b), no Holder shall be required to indemnify any person
pursuant to this Section 7 in an amount in excess of the amount of the aggregate
net proceeds received by such Holder in connection with any such registration
under the Securities Act .
(c) If any claim, action, suit or proceeding (a "Proceeding")
----------
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall notify the
-----------------
Person from whom indemnity shall be sought (the "Indemnifying Party") in
------------------
writing, and the Indemnifying Party shall assume the defense thereof and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination shall not
be subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party. An Indemnified Party
shall have the right to employ separate counsel in any such Proceeding and to
participate in the defense thereof if (1) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding or (2) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised in writing by counsel, a copy of which shall be provided
to Indemnifying Party, that a conflict of interest will exist if the same
counsel were to represent
7
such Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it shall elect
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, which shall not be unreasonably withheld, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
shall be a party, unless such settlement shall include an unconditional release
of such Indemnified Party from all liability on claims that are the subject
matter of such Proceeding. All fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection
with investigating or preparing to defend such Proceeding in a manner not
inconsistent herewith) shall be paid to the Indemnified Party, as incurred,
within ten (10) Business Days of written notice thereof to the Indemnifying
Party (regardless of whether it shall be ultimately determined that an
Indemnified Party shall not be entitled to indemnification hereunder;
provided, that the Indemnifying Party may require such Indemnified Party
--------
to undertake to reimburse all such fees and expenses to the extent it shall be
finally judicially determined that such Indemnified Party shall not be entitled
to indemnification hereunder).
(d) If the indemnification provided for in this Section 7 from
the Indemnifying Party is unavailable to an Indemnified Party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact,
shall have been made by, or shall relate to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding. The parties hereto agree that
it would not be just and equitable if contribution pursuant to this Section 7(d)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to herein.
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. Notwithstanding
anything to the contrary
8
contained herein, a Holder shall be liable or required to contribute under this
Section 7(d) for only that amount as shall not exceed the net proceeds to such
Holder as a result of the sale of Registrable Securities pursuant to such
Registration Statement.
8. Rule 144. As long as any Holder shall own Registrable Securities,
--------
Company, at all times while it shall be reporting under the Exchange Act,
covenants to file timely (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by Company
after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act and
to promptly furnish the Holders with true and complete copies of all such
filings. Company further covenants that it will take such further action as any
Holder may reasonably request, all to the extent required from time to time to
enable such Holder to sell shares of Common Stock held by such Holder without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including providing
any legal opinions. Upon the request of any Holder, Company shall deliver to
such Holder a written certification of a duly authorized officer as to whether
it has complied with such requirements.
9. Miscellaneous.
-------------
(a) No Inconsistent Agreements. Company will not hereafter enter
--------------------------
into any agreement with respect to its securities which is inconsistent with the
rights granted to the Holders in this Agreement. Company has not previously
entered into any agreement with respect to any of its securities granting any
registration rights to any person that is currently in effect, except as set
forth in the Schedules to the Purchase Agreement.
(b) Remedies. Each Holder, in addition to being entitled to
--------
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Agreement and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate. In any action or proceeding brought to enforce
any provision of this Agreement or where any provision hereof shall be validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
(c) Amendments and Waivers. Except as otherwise provided herein,
----------------------
the provisions of this Agreement may not be amended, modified or supplemented,
and waivers or consents to departure from the provisions hereof may not be given
unless Company has obtained the written consent of the Requisite Holders.
9
(d) Notice Generally. Any notice, demand, request, consent,
----------------
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Agreement shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid, or
by telecopy and confirmed by telecopy answerback, addressed as follows:
(i) If to any Holder, at its last known address appearing on the
books of Company maintained for such purpose.
(ii) If to Company, at
Blue Wave Systems Inc.
0000 Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback or three Business Days after the same shall have been deposited in
the United States mail.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the parties
hereto, including any person to whom Registrable Securities shall be transferred
in a private transaction exempt from registration, subject to the restrictions
set forth in the Purchase Agreement.
(f) Headings. The headings in this Agreement are for convenience
--------
of reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law; Jurisdiction. This Agreement shall be governed
---------------------------
by, construed and enforced in accordance with the laws of the State of New York
without giving effect to the conflict of laws provisions thereof. Each of the
parties hereby submits to personal jurisdiction and waives any objection as to
venue in the County of New York, State of New York. Service of process on the
parties in any action arising out of or relating to this Agreement shall be
effective if mailed to the parties in accordance with Section 9(d) hereof. The
parties hereto waive all right to trial by jury in any action or proceeding to
enforce or defend any rights hereunder.
10
(h) Severability. Wherever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(i) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement, represents the complete agreement and understanding of the parties
hereto in respect of the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to the subject matter hereof.
(j) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
11
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first above written.
BLUE WAVE SYSTEMS INC.
By:__________________________________
Name:
Title:
SPECIAL SITUATIONS FUND III, L.P.
By:__________________________________
Name:
Title:
SPECIAL SITUATIONS CAYMAN FUND, L.P.
By:__________________________________
Name:
Title:
SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.
By:__________________________________
Name:
Title:
SPECIAL SITUATIONS TECHNOLOGY FUND, L.P.
By:__________________________________
Name:
Title:
Exhibit E
---------
Form of Legal Opinion
---------------------
August 24, 1999
To each of the Purchasers named
in the Purchase Agreement
referred to below
Gentlemen:
We have acted as counsel to Blue Wave Systems Inc., a Delaware corporation
(the "Company") in connection with the execution and delivery of the Securities
-------
Purchase Agreement dated as of August 24, 1999 (the "Purchase Agreement") among
------------------
the Company and each of the purchasers set forth on the signature pages thereto
(individually, a "Purchaser" and, collectively, the "Purchasers"), pursuant to
--------- ----------
which the Company is issuing and selling the Shares and Warrants. This opinion
is provided to you pursuant to Section 9(g) of the Purchase Agreement.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to them in the Purchase Agreement.
We have examined originals or copies of such corporate records of the
Company, public records, agreements and other instruments, certificates of
public officials, certificates of officers and representatives of the Company
and such other documents as we have deemed relevant in connection with the
rendering of this opinion. As to various questions of fact material to such
opinions, we have relied upon certificates of, and conversations with, officers
of the Company and other appropriate persons, and the representations and
warranties of the Company and the Purchasers contained in the Purchase
Agreement, without investigating the factual representations contained therein.
Notwithstanding the foregoing, as of the date hereof, no information has come to
our attention which would give us actual knowledge of any facts which would be
contrary to the statements so qualified.
Based upon the foregoing, and subject to the exceptions and qualifications
hereinafter stated, it is our opinion that:
1. The Company (i) is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware; (ii) is duly qualified
as a foreign corporation and is in good standing under the laws of each
jurisdiction listed on Schedule A hereto; (iii) has the requisite corporate
----------
power and authority to own or lease and to operate its properties, and to
conduct its current business as described in the SEC Documents; and (iv) has all
requisite corporate power and authority to enter into and perform its
obligations under the Transaction Documents.
2. The authorized, issued and outstanding shares of capital stock of the
Company are as set forth in Schedule 3(e) to the Purchase Agreement. All of
-------------
such issued and
outstanding shares are duly authorized, validly issued, fully paid and non-
assessable. All of the outstanding shares of capital stock of each subsidiary
are owned by the Company. The Company has reserved a sufficient number of shares
of Common Stock necessary for issuance as Warrant Shares. All such shares of
Common Stock will, upon issuance after exercise of the applicable Warrant(s), be
duly authorized, validly issued, fully paid and non-assessable.
3. The Purchase Agreement and each other Transaction Document to which
the Company is a party have been duly authorized by all necessary corporate
action, duly executed and delivered by or on behalf of the Company, and
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except that (a)
the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, or other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be brought and
(b) any rights to indemnity or contribution thereunder may be limited by federal
and state law and public policy considerations.
4. The execution, delivery and performance by the Company of the Purchase
Agreement and the other Transaction Documents to which the Company is a party
and the consummation by the Company of the transactions contemplated thereby,
including, without limitation, the issuance of the Securities, does not and will
not (a) constitute or result in a default under or breach or violation of (i)
any term or provision of the Certificate of Incorporation or bylaws of the
Company or (ii) material contracts or instruments known to us to which the
Company or any of its subsidiaries is a party (which contracts and instruments
are listed on Schedule B hereto) or (iii) assuming compliance with all
----------
applicable state securities or "Blue Sky" laws and assuming the accuracy of the
representations and warranties of the Purchasers in the Purchase Agreement, any
provision of any law, rule or regulation or any judgment, order or decree
applicable to the Company or any of its subsidiaries and their respective
assets, which, in our experience, is normally applicable both to general
business corporations that are not engaged in regulated business activities and
to transactions of the type contemplated by the Transaction Documents (but
without our having made any special investigation as to other laws); (b) result
in the acceleration or termination of any rights under any contract or
instrument known to us to which the Company or any of its subsidiaries is a
party (which contracts and instruments are listed on Schedule B hereto); or (c)
----------
to our knowledge, result in the creation or imposition of any liens, charges or
encumbrances upon any assets of the Company or any of its subsidiaries.
2
5. To our knowledge, after due inquiry, no approval, consent, order,
authorization of or designation, declaration or filing with any governmental
authority or regulatory agency or any other person or entity, and no lapse of a
waiting period, is required in connection with the valid execution, delivery or
performance by the Company of the Purchase Agreement, any other Transaction
Document, the issuance and delivery of the Securities or any other transactions
contemplated by any of the Transaction Documents, except as may be required
under applicable state securities or "Blue Sky" laws, as to which we express no
opinion.
6. To our knowledge, no action, suit, proceeding, inquiry or
investigation is now pending or threatened against the Company or any of its
subsidiaries, or any of their respective directors or officers, in their
capacities as such, at law, in equity or otherwise, before any court, board,
commission, agency or instrumentality of any federal, state, or local
government, or of any agency or subdivision thereof, or before any arbitrator or
panel of arbitrators, which, if determined adversely, could result in a Material
Adverse Change or questions the validity, enforceability or the authority of the
Company to perform its obligations under the Purchase Agreement or any other
Transaction Document to which the Company is a party or any action taken or to
be taken pursuant thereto. To our knowledge, the Company is not a party or
subject to the provisions of any order, writ, injunction, judgment, stipulation
or decree of any court, administrative agency, commission, regulatory authority,
other government agency or instrumentality.
7. The offering, sale and delivery of the Securities by the Company in
the manner contemplated by the Purchase Agreement, assuming the accuracy of the
representations and warranties of the Purchasers in the Purchase Agreement,
constitute transactions that are exempt from the registration requirements of
the Securities Act.
The opinions expressed herein are subject to the following exceptions,
limitations and qualifications:
A. The words "to our knowledge" or "known to us" with reference to
matters of fact means that considering the actual knowledge of those attorneys
in our firm who have given substantive attention to the transactions
contemplated by the Transaction Documents and after receipt and review of
certificates from officers of the Company and its subsidiaries, but not
including any constructive or imputed notice of any information, we find no
reason to believe that the opinions expressed herein are factually incorrect.
Beyond that, we have made no independent factual investigation for the purpose
of rendering an opinion with respect to such matters.
B. We have assumed that the Purchase Agreement and the other documents
executed in connection therewith by the Purchasers have been duly authorized,
executed and delivered on their behalf and are legally binding upon and
enforceable against each of the Purchasers to the extent that each such document
purports to be.
C. With respect to the opinions expressed in Paragraphs 4 and 6, we have
not conducted any search of any indexes, dockets or other records of any
federal, state or
3
local court, administrative agency or body or of any arbitrator, and have
relied, with respect to factual matters, solely upon a certificate of officers
of the Company.
D. We are members of the Bar of the State of Texas only, and do not
purport to be experts on, generally familiar with, or qualified to express legal
conclusions based on, laws of states other than the State of Texas, the
corporate laws of the State of Delaware and the federal securities laws. We
express no opinion as the validity and binding effect of the Purchase Agreement
or the other Transaction Documents under the substantive law of the State of New
York, the jurisdiction whose law has been chosen by the parties as governing
such agreement, and we express no opinion as to whether New York law will in
fact be the choice of law applied by a court with respect to the Purchase
Agreement. In expressing the opinions set forth in Paragraph 3 above, we have
assumed that the substantive laws of the state of New York are not materially
different from the substantive laws of the State of Texas.
E. We have assumed the genuineness of all signatures, the authenticity of
all documents submitted to us as originals, the conformity to authentic
originals of all documents submitted to us as copies and the accuracy of all
factual recitations contained in certificates or similar documents examined by
us.
F. The opinions expressed in Paragraph 1 regarding the existence and good
standing of the Company are rendered solely on the basis of certificates issued
by the appropriate Secretaries of States in which the Company is qualified to do
business as a foreign corporation, as the case may be.
G. The opinions expressed in Paragraphs 3 and 4 are subject to (i) the
General Qualifications set forth in the Legal Opinion Accord of the ABA Section
of Business Law (1991), and (ii) the Other Common Texas Qualifications set forth
in the Report of the Legal Opinions Committee Regarding Legal Opinions in
Business Transactions (June 1, 1992) of the Business Law Section of the State
Bar of Texas, a copy of which qualifications are attached as Schedule C to this
----------
opinion letter. Further, the indemnification and contribution provisions of the
Transaction Documents may be subject to or limited by federal and state
securities laws and public policy embodied therein or related thereto.
The opinions expressed herein are limited to the matters specifically
addressed, and no opinion is implied or may be inferred beyond the matters so
specifically addressed.
The opinions expressed in this letter are based upon the law in effect on
the date hereof, and we assume no obligation to revise or supplement this
opinion should such law be changed by legislative action, judicial decision or
otherwise.
This opinion is being furnished to you solely for your benefit and only
with respect to the transactions recited herein. Accordingly, it may not be
relied upon by, or quoted in any manner or delivered to, any person or entity
without, in each instance, our prior written consent.
Very truly yours,
4
SCHEDULE A
----------
Foreign Jurisdictions
---------------------
California
New Hampshire
North Carolina
Texas
5
SCHEDULE B
Material Contracts
------------------
1. Share Purchase Agreement, dated November 17, 1997, between the Company
and Loughborough Sound Images Limited (formerly Loughborough Sound Images plc);
and the Letter Agreement dated March 24, 1998, between the Company and
Loughborough Sound Images Limited.
2. Form of Indemnification and Hold Harmless Agreement for directors of
the Company.
3. Employment Agreement, dated January 1, 1999, between the Company and
Xxxxx Xxxxx.
4. Credit Agreement, dated December 11, 1998, between the Company and
Fleet National Bank, a national banking association.
5. Advice of Borrowing Terms, dated December 16, 1998, by and between
National Westminister Bank plc and the Company.
6
SCHEDULE C
Other Common Texas Qualifications
---------------------------------
Other provisions which may be excepted from the Remedies Opinion by Texas
lawyers and which are not found in the Other Common Qualifications under the ABA
Accord, include the following (herein referred to as the "Other Common Texas
Qualifications"):
(a) provisions restricting access to courts or to legal or equitable
remedies or purporting to affect the jurisdiction or venue of courts;
(b) provisions purporting to establish evidentiary standards for suits or
proceedings to enforce the Transaction Documents;
(c) provisions purporting to waive rights to notice, legal defenses,
statutes of limitations, or other benefits that cannot be waived under
applicable law;
(d) provisions granting powers of attorney or authority to execute
documents or to act by power of attorney on behalf of the Client;
(e) self-help remedies provided for in the Transaction Documents (other
than those remedies available pursuant to an exercise in accordance
with the provisions of Section 51.002 of the Property Code or Chapter
9 of the Texas Business and Commerce Code);
(f) provisions providing that remedies are cumulative;
(g) provisions that decisions by a party are conclusive;
(h) provisions purporting to provide remedies inconsistent with the UCC,
to the extent the UCC is applicable thereto;
(i) provisions purporting to grant to or limit rights of third parties;
and
(j) provisions purporting to create a trust or constructive trust without
compliance with applicable trust law.
7
