<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No.__) 1
Number Nine Visual Technology Corporation
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(Name of Issuer)
Common Stock, $.01 par value per share
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(Title of Class of Securities)
67052W105
-----------------------------
(CUSIP Number)
William M. Kelly
Senior Vice President, Corporate Operations
Silicon Graphics, Inc.
2011 North Shoreline Boulevard
Mountain View, CA 94043-1389
(650) 960-1980
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
May 8, 1998
-----------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule-13G to report
the acquisition which is the subject of this Schedule-13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule-13d-7(b) for other
parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 9 Pages)
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1. The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE> 2
SCHEDULE 13D
CUSIP No. 6705W105 Page 2 of 9 Pages
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1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
(ENTITIES ONLY)
Silicon Graphics, Inc.
I.R.S. No. 94-2789662
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)* (a)
(b)
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3 SEC USE ONLY
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4 SOURCE OF FUNDS (SEE INSTRUCTIONS)*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
3,395,454
NUMBER OF
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SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 0
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EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 3,395,454
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WITH 10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,395,454
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS)*
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
26.8%
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14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)*
CO
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<PAGE> 3
SCHEDULE 13D
CUSIP No. 6705W105 Page 3 of 9 Pages
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ITEM 1. SECURITY AND ISSUER
The title of the class of equity securities to which this Schedule-13D
relates is common stock, $0.01 par value per share of Number Nine Visual
Technology Corporation, a Delaware corporation. The principal executive offices
of the Issuer are located at 18 Hartwell Avenue, Lexington, Massachusetts 02173.
ITEM 2. IDENTITY AND BACKGROUND
This Schedule 13D is filed on behalf of Silicon Graphics, Inc., a
Delaware corporation, with its principal executive office at 2011 N. Shoreline
Boulevard, Mountain View, California 94043-1389. The Reporting Person designs,
manufactures, markets and distributes visual computing systems.
The attached Schedule I is a list of the executive officers and
directors of the Reporting Person, which Schedule-I is incorporated herein by
reference. Such list contains the following information with respect to each
such person:
(a) Name;
(b) Business Address;
(c) Present principal occupation or employment and the name,
principal business and address of any corporation or other
organization in which such employment is conducted; and
(d) Citizenship.
During the last five years, neither the Reporting Person nor, to the
best of the Reporting Person's knowledge, any person named on Schedule I has
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The Reporting Person has funded all advances made by the Reporting
Person to the Issuer, and intends to fund all subsequent advances, under a
secured subordinated convertible loan from internally generated working capital.
The agreement to make the secured subordinated convertible loan is
evidenced by a Securities Purchase Agreement dated May 7, 1998. The Reporting
Person's initial advance to the Issuer was made on May 8, 1998. The loan
provides for periodic advances from time to time up to an aggregate commitment
of Nine Million Dollars ($9,000,000), with each advance to be evidenced by a
promissory note convertible into shares of the Issuer's convertible preferred
stock at a conversion price of $2.75 per share. The preferred stock is
convertible into the common stock of the Issuer on a one-for-one basis, subject
to adjustment as provided in the terms of the preferred stock. The securities
purchase agreement, form of promissory note, security agreement and the terms of
the preferred stock are attached as exhibits hereto. With respect to advances
made by the Reporting Person under the loan, Issuer has executed and delivered
to Reporting Person (a) a secured convertible promissory note dated May 7, 1998
in the amount of Three Million Dollars ($3,000,000), convertible into
approximately
<PAGE> 4
SCHEDULE 13D
CUSIP No. 6705W105 Page 4 of 9 Pages
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1,131,818 shares of convertible preferred stock of the Issuer (convertible into
the common stock of the Issuer on a one-for-one basis) and (b) a secured
convertible promissory note dated May 13, 1998 in the amount of Two Million
Dollars ($2,000,000), convertible into approximately 754,545 shares of
convertible preferred stock of the Issuer (convertible into the common stock of
the Issuer on a one-for-one basis). In addition, the Issuer has also issued to
the Reporting Person a three-year warrant exercisable for shares of convertible
preferred stock equal to three percent (3%) of the Issuer's common stock at an
exercise price of $2.75 per share. The warrant is exercisable only if the Issuer
pays any amount outstanding under the loan and the Reporting Person has not
converted any portion of the loan into preferred stock.
ITEM 4. PURPOSE OF TRANSACTION
The Reporting Person has made the loan to the Issuer for investment
purposes, principally to enable the Issuer to fund its ongoing product
development efforts. The Reporting Person and the Issuer intend to explore the
further development of a business relationship focused on advanced visualization
technologies in personal computer markets. In connection therewith, the parties
have entered into product development, marketing and license agreements, which
provide, in part, for the development and marketing of a graphics board product.
The parties contemplate that an extension of this relationship, if any, may
include additional loans and/or acquisition of securities, and/or negotiation of
broader product and technology agreements. There is no assurance that the
parties will decide to extend the current relationship or, if so, whether they
will be able to reach agreement on the terms thereof.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Assuming that the Issuer requests the advance of the total amount of
the loan and the Reporting Person fully converts the promissory notes into
preferred stock of the Issuer, the Reporting Person would beneficially own an
aggregate of approximately 3,395,454 shares of the Issuer's common stock, or
28.6% of the total number of shares of the Issuer's common stock issued and
outstanding on May 7, 1998. The number of shares beneficially owned by the
Reporting Person assumes that (i) the Reporting Person will not demand payment
of the promissory notes until September 30, 1998, the maturity date thereof;
(ii) interest will accrue on the promissory notes at the rate of 9% per annum
from the date of issuance through the maturity date; and (iii) the Reporting
Person will elect to convert both the outstanding principal and accrued interest
thereon into shares of preferred stock at a price of $2.75 per share and
provides notice to the Issuer to convert the preferred shares into common stock
on a one-for-one basis. Due to the conditions precedent applicable to the
Reporting Person's right to exercise of the warrants, the Reporting Person does
not currently have the right to acquire beneficial ownership of any of the
Issuer's securities under the warrant within 60 days in accordance with
Rule 13d-3(d)(1) and, as a result, the number of shares beneficially owned by
the Reporting Person does not include any shares of common stock of the Issuer
which could be acquired by the Reporting Person under the warrant.
The Reporting Person will have sole power to vote and dispose of all
such shares, assuming such shares are issued. The Reporting Person will not have
shared voting or dispositive power with respect to any of the Issuer's
securities. To the best of the Reporting Person's knowledge, no person named on
Schedule I is the beneficial owner of any of the Issuer's securities. Neither
the Reporting Person nor, to the best of the Reporting Person's knowledge, any
person named on Schedule I has effected any transaction in the Issuer's
securities during the past 60 days. The Reporting Person has no present
intention to convert any of the promissory notes into shares of preferred stock.
<PAGE> 5
SCHEDULE 13D
CUSIP No. 6705W105 Page 5 of 9 Pages
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ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIP WITH RESPECT TO
SECURITIES OF THE ISSUER
The Securities Purchase Agreement, the Terms of the Preferred Stock and
the Investor Rights Agreement contain various agreements and restrictions
relating to the Issuer's securities. This summary does not purport to be
complete, and it is subject to, and qualified in its entirety by reference to,
all of the provisions of the Securities Purchase Agreement, the Terms of the
Preferred Stock and the form of Investor Rights Agreement, which documents are
incorporated herein by reference.
The Purchase Agreement sets forth certain rights of the Reporting
Person to (a) purchase securities of the Issuer if offered for sale by the
Issuer to third parties other than the Reporting Person; and (b) observe board
of directors meetings in a non-voting capacity. See the Purchase Agreement
attached as an exhibit hereto for a further description of these provisions.
The Terms of the Preferred Stock set forth certain restrictions on
corporate actions by the Issuer without the prior consent of at least two-thirds
of the holders of the preferred stock, including (a) creating any additional
classes or series of capital stock senior to the preferred stock; and
(b) consenting to any merger, consolidation, sale, lease, abandonment, transfer
or other disposition of all or substantially all of the Issuer's assets. The
Terms of the Preferred Stock also provide that, as long as the Reporting Person
holds shares of preferred stock equal to at least five percent (5%) of the
Issuer's common stock, (i) the Issuer will not increase the size of its board of
directors to a number in excess of seven and (ii) the holders of preferred stock
will be entitled to elect one director to the Issuer's board of directors. No
shares of preferred stock are currently issued and outstanding, and,
accordingly, none of these rights are in effect. See the Terms of Preferred
Stock attached as an exhibit hereto for a further description of these
provisions.
The Investor Rights Agreement, which is to be executed by the Issuer
and the Reporting Person concurrently with the Reporting Person's conversion of
any of the promissory notes or exercise of the warrant, sets forth certain
rights of the Reporting Person relating to the registration of the Issuer's
securities. In addition, the Investor Rights Agreement provides that, if the
Reporting Person holds shares of preferred stock equal to at least five percent
(5%) of the Issuer's common stock, the holders of preferred stock will be
entitled to elect one director to the Issuer's board of directors. No shares of
preferred stock are currently issued and outstanding and, accordingly, none of
these rights are in effect. See the form of Investor's Rights Agreement attached
as an exhibit hereto for a further description of these provisions.
<PAGE> 6
SCHEDULE 13D
CUSIP No. 6705W105 Page 6 of 9 Pages
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit Description
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No.
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A Securities Purchase Agreement dated May 7, 1998 between Silicon
Graphics, Inc. and Number Nine Visual Technology Corporation
B Form of Secured Subordinated Convertible Promissory Note
C Series A Convertible Preferred Stock Purchase Warrant
D Security Agreement dated May 7, 1998 between Silicon Graphics,
Inc. and Number Nine Visual Technology Corporation
E Form of Preferred Stock Terms
F Form of Investor Rights Agreement
<PAGE> 7
SCHEDULE 13D
CUSIP No. 6705W105 Page 7 of 9 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: May 18, 1998 SILICON GRAPHICS, INC.
By: /s/ William M. Kelly
----------------------------------
William M. Kelly
Senior Vice President,
Corporate Operations
<PAGE> 8
SCHEDULE 13D
CUSIP No. 6705W105 Page 8 of 9 Pages
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SCHEDULE I
Set forth below are the names, positions, business addresses and principal
occupations of each executive officer and director of Silicon Graphics, Inc.
Each of the persons named below is a citizen of the United States of America,
except for Mr. Bishop, who is a citizen of Australia, and Mr. Watson, who is a
citizen of New Zealand.
<TABLE>
<CAPTION>
BUSINESS ADDRESS AND PRINCIPAL
NAME OCCUPATION OR EMPLOYMENT
<S> <C>
Robert R. Bishop Chairman of the Board,
Director Silicon Graphics World Trade Corporation
18, Avenue Louis Casai
CH-1209, Geneva, Switzerland
Allen F. Jacobson Former Chairman of the Board and Chief Executive Officer
Director 3M Corporation
3050 Minnesota World Trade Center
30 Seventh Street East
St. Paul, Minnesota 55101-4901
C. Richard Kramlich Managing General Partner
Director New Enterprise Associates
2490 Sand Hill Road
Menlo Park, California 94025
Robert A. Lutz Vice Chairman, Chrysler Corporation
Director CIMS 485-15-20
1000 Chrysler Drive
Auburn Hills, Michigan 48326
James A. McDivitt Former Senior Vice President,
Director Rockwell International Corporation
c/o Silicon Graphics, Inc.
2011 North Shoreline Boulevard
Mountain View, California 94043-1389
Lucille Shapiro, Ph.D. Professor of Developmental Biology,
Director Stanford School of Medicine
Stanford University School of Medicine
Stanford, California 94305
Robert B. Shapiro Chairman and Chief Executive Officer,
Director Monsanto Company
The Merchant Mart
200 World Trade Center, Suite 900
Chicago, Illinois 60654
James G. Treybig Former President and Chief Executive Officer,
Director Tandem Computers, Inc.
c/o Silicon Graphics, Inc.
2011 North Shoreline Boulevard
Mountain View, California 94043-1389
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
SCHEDULE 13D
CUSIP No. 6705W105 Page 9 of 9 Pages
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<S> <C>
Richard E. Belluzzo Silicon Graphics, Inc.
Chairman of the Board and Chief Executive Officer 2011 North Shoreline Boulevard
Mountain View, California 94043-1389
Robert H. Ewald Silicon Graphics, Inc.
Executive Vice President, Computer Systems 2011 North Shoreline Boulevard
Mountain View, California 94043-1389
Keith H. Watson Silicon Graphics, Inc.
Executive Vice President, Worldwide Sales and Marketing 2011 North Shoreline Boulevard
Mountain View, California 94043-1389
Kenneth L. Coleman Silicon Graphics, Inc.
Senior Vice President, Worldwide Customer and 2011 North Shoreline Boulevard
Professional Services Mountain View, California 94043-1389
Steven J. Gomo Silicon Graphics, Inc.
Senior Vice President and Chief Financial Officer 2011 North Shoreline Boulevard
Mountain View, California 94043-1389
William M. Kelly Silicon Graphics, Inc.
Senior Vice President, Corporate Operations 2011 North Shoreline Boulevard
Mountain View, California 94043-1389
Forest Baskett Silicon Graphics, Inc.
Senior Vice President, Research and Development, 2011 North Shoreline Boulevard
and Chief Technology Officer Mountain View, California 94043-1389
</TABLE>
<PAGE> 1
EXHIBIT A
NUMBER NINE VISUAL TECHNOLOGY CORPORATION
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is made and
entered into as of May 7, 1998, by and between Number Nine Visual Technology
Corporation, a Delaware corporation (the "COMPANY"), and Silicon Graphics, Inc.,
a Delaware corporation (the "INVESTOR").
RECITALS
WHEREAS, the Company and the Investor entered into a Securities
Purchase Agreement dated as of April 17, 1998 (the "PURCHASE AGREEMENT")
pursuant to which the Company sold and the Investor purchased a promissory note
in the aggregate principal amount of Three Million Dollars ($3,000,000) (the
"ORIGINAL NOTE") and the Company issued to the Investor warrants (collectively
the "ORIGINAL WARRANTS") convertible into 1,031,489 shares and 486,000 shares
respectively, of the Company's Series A Convertible Preferred Stock, $.01 par
value per share ("SERIES A CONVERTIBLE PREFERRED STOCK");
WHEREAS, subject to the terms and conditions set forth herein, the
Investor desires to loan to the Company an aggregate amount of Nine Million
Dollars ($9,000,000) (the "AGGREGATE COMMITMENT") in such installments and under
such conditions set forth herein;
WHEREAS, in consideration of the Aggregate Commitment and upon receipt
of each installment of the Aggregate Commitment from the Investor, the Company
shall issue to Investor a secured subordinated convertible promissory note
issuable upon receipt of each installment of the Aggregate Commitment (each a
"NOTE" and, collectively, the "NOTES"), which Notes shall be convertible into
shares of Series A Convertible Preferred Stock as described herein
(collectively, the "PREFERRED SHARES");
WHEREAS, the first installment of the Aggregate Commitment shall be
made on the date hereof by surrender of the Original Note and the Original
Warrants by the Investor to the Company for cancellation, and, in connection
therewith the Company shall issue a new Note in the aggregate principal amount
of Three Million Dollars ($3,000,000) (the "INITIAL NOTE) pursuant to the terms
and conditions set forth in this Agreement and the Company shall issue to
Investor a warrant exercisable for shares of Series A Convertible Preferred
Stock on the terms and conditions set forth therein (the "WARRANT");
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
<PAGE> 2
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1. AUTHORIZATION, ISSUANCE, SALE AND DELIVERY OF THE NOTES AND THE
WARRANT.
1.1 Authorization. As of the Initial Closing (as defined below), the
Company's Board of Directors will have authorized the issuance and sale,
pursuant to the terms and conditions of this Agreement, of the Notes (including
the Initial Note) and the Warrant.
1.2 Agreement to Loan Aggregate Commitment. Subject to the terms and
conditions set forth herein, the Investor hereby agrees to loan the Company the
Aggregate Commitment.
1.3 Agreement to Purchase, Sell and Deliver the Notes and the
Warrant. The Company hereby agrees to issue and sell to the Investor at the
Initial Closing and each Subsequent Closing, and the Investor agrees to purchase
from the Company at the Initial Closing and each Subsequent Closing, the Notes
in the aggregate principal amount equal to the Aggregate Commitment. The Company
hereby agrees to issue and sell to the Investor at the Initial Closing, and the
Investor agrees to purchase from the Company at the Initial Closing, the Initial
Note, in the aggregate principal amount of $3,000,000 by surrender of the
Original Note and the Original Warrants by the Investor to the Company for
cancellation. The Company shall also issue to the Investor the Warrant
exercisable for such number of shares of Series A Convertible Preferred Stock
(the "WARRANT SHARES") and pursuant to such terms and conditions as set forth in
the Warrant, which is attached hereto as EXHIBIT B.
2. CLOSING.
2.1 The Initial Closing. The purchase and sale of the Initial Note
and the issuance of the Warrant will take place on May 7, 1998 at the offices of
Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125 High Street, Boston,
Massachusetts 02110, at 4:00 p.m. Boston time, subject to the satisfaction of
the conditions set forth in Articles 6 and 7, or at such other time and place as
the Company and the Investor mutually agree upon (which time and place are
referred to in this Agreement as the "INITIAL CLOSING"). At the Initial Closing,
the Company will deliver to the Investor the Initial Note, against delivery to
the Company by the Investor of the Original Note and the Original Warrants for
cancellation.
2.2 Subsequent Closings.
(a) From and after the Initial Closing, the Company may
request additional installments (subject to Section 2.2(b) herein) of the
Aggregate Commitment at one or more subsequent closings (individually, a
"SUBSEQUENT CLOSING" and collectively, the "SUBSEQUENT CLOSINGS"). The Company
shall request a Subsequent Closing by delivering a written notice to the
Investor no less than two (2) days prior to the intended Subsequent Closing,
specifying the amount (subject to Section 2.2(b) herein) and date of the
applicable installment and certifying that all representations and warranties of
the Company set forth in Section 4 remain true and correct (except as to such
changes as have occurred in the ordinary course of the Company's business and
which do not have, individually or in the aggregate, a Material Adverse Effect)
and all conditions set forth in Section 8 herein have been satisfied. At each
such
<PAGE> 3
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Subsequent Closing, the Investor shall advance the requisite installment of the
Aggregate Commitment, it being understood that the advancement of such
installment by the Investor shall constitute an express representation by the
Investor that all conditions set forth in Section 9 herein have been satisfied.
At each such Subsequent Closing, the Company shall issue and deliver to the
Investor a Note against advancement to the Company by the Investor of the
installment amount of the Aggregate Commitment. The Company will not sell
additional Notes to any person other than the Investor without the prior written
consent of the Investor.
(b) The Company shall not request an advance of an installment
at any Subsequent Closing in an amount in which the principal, and any accrued
interest thereon, of a Note shall be convertible into greater than 19.9% of the
Company's issued and outstanding Common Stock (assuming conversion of the
Preferred Shares) as of the date of the advance of such installment (the
"THRESHOLD RESTRICTION"); provided, however, that there shall be no such
Threshold Restriction if the Company has complied with the Stockholder Notice
set forth in Section 8.6 herein.
3. THE NOTES.
3.1 Form of Note. Each Note to be issued by the Company to the
Investor hereunder at the Initial Closing and each Subsequent Closing shall be
substantially in the form attached hereto as EXHIBIT A. Each such Note shall be
identical in form, except that the principal amount of each Note shall be
modified to reflect the amount and original issue date of the applicable
installment of the Aggregate Commitment. Each of the Notes shall be secured by
all of the Company's assets and intellectual property as evidenced by a Security
Agreement by and between the Company and the Investor entered into as of the
date hereof, such Security Agreement to be in the form attached hereto as
EXHIBIT C.
3.2 Conversion of Note. Subject to the terms, conditions and
obligations of the parties herein and the terms and conditions set forth in the
Notes, which terms and conditions are incorporated herein by reference, Investor
may convert all or a portion of the principal outstanding under the Note and
accrued interest thereon into shares of Series A Convertible Preferred Stock in
accordance with Section 4 of the Note.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Investor that the statements in this Section 4
are true and correct, except as set forth in the Disclosure Letter from the
Company dated as of the date hereof (the "DISCLOSURE LETTER"). The term
"CLOSING" used herein shall refer to the Initial Closing or any subsequent
Closing as the case may be.
4.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all corporate power and authority required to
(a) own and hold its properties; (b) carry on its business as presently
conducted; (c) enter into this Agreement, the Notes, the Warrant, the Security
Agreement and the Technology Agreements (as defined in Section 6.8 herein)
(collectively, the "TRANSACTION DOCUMENTS") and to consummate the transactions
<PAGE> 4
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contemplated hereby and thereby; and (d) to issue, sell and deliver the Notes,
the Warrant, the Preferred Shares and the Warrant Shares and the shares of the
Company's Common Stock, $.01 par value per share (the "COMMON STOCK") issuable
upon conversion of the Preferred Shares and the Warrant Shares (the "CONVERSION
SHARES," and, together with the Notes, the Warrant, the Preferred Shares and the
Warrant Shares, are hereinafter the "SECURITIES"). The Company is qualified to
do business and is in good standing in each jurisdiction in which the failure to
so qualify would have a Material Adverse Effect. As used in this Agreement,
"MATERIAL ADVERSE EFFECT" means a material adverse effect on, or a material
adverse change in, the business, operations, financial condition, results of
operations, assets or liabilities of the Company.
4.2 Capitalization. As of the date hereof, the capitalization of the
Company is as follows:
(a) Preferred Stock. 5,000,000 authorized shares of Preferred
Stock, $.01 par value, of which 3,400,000 shares have been approved by the Board
of Directors and, upon filing of a Certificate of Designation with the Secretary
of State of Delaware, will be designated as Series A Convertible Preferred
Stock, the terms of which are set forth in EXHIBIT D attached hereto, none of
which is issued or outstanding.
(b) Common Stock. 20,000,000 authorized shares of Common Stock
of which 9,291,925 shares are issued and outstanding. All of such outstanding
shares are validly issued, fully paid and non-assessable. No such outstanding
shares were issued in violation of any preemptive right.
(c) Options, Warrants, Reserved Shares. Except for the
Transaction Documents and the Securities and the plans set forth in the SEC
Documents (as defined below) (the "PLANS"), there are not outstanding any
options, warrants, rights (including conversion or preemptive rights) or
agreements for the purchase or acquisition from the Company of any shares of its
capital stock or any securities convertible into or ultimately exchangeable or
exercisable for any shares of the Company's capital stock. Except for the rights
granted to Investor under the Transaction Documents and the Securities and any
stock repurchase rights of the Company under the Plans, no shares of the
Company's outstanding capital stock, or stock issuable upon exercise, conversion
or exchange of any outstanding options, warrants or rights, or other stock
issuable by the Company, are subject to any rights of first refusal or other
rights to purchase such stock (whether in favor of the Company or any other
person), pursuant to any agreement, commitment or other obligation of the
Company.
4.3 Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, partnership,
limited liability company, trust, joint venture, association or other entity.
4.4 Due Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution, delivery of, and the performance of all obligations of
the Company under the Transaction Documents, and the authorization, issuance,
reservation for issuance and delivery of all of the Securities being sold or
issued under this Agreement has been taken or will be taken prior to the
Closing, and this
<PAGE> 5
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Agreement constitutes, valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as may be limited by (a) applicable bankruptcy, insolvency,
reorganization or others laws of general application relating to or affecting
the enforcement of creditors' rights generally, (b) the effect of rules of law
governing the availability of equitable remedies and (c) the fact that any
indemnification or contribution provision contained in the Transaction Documents
may be unenforceable insofar as the enforceability of such provision may be
sought under United States federal or state securities laws.
4.5 Valid Issuance of Securities.
(a) The Preferred Shares and the Warrant Shares have been duly
reserved for issuance upon conversion of the Notes and the exercise of the
Warrant, the Conversion Shares have been duly reserved for issuance upon
conversion of the Preferred Shares and the Warrant Shares, and the Preferred
Shares, the Warrant Shares and the Conversion Shares when so issued, will be
duly authorized, validly issued, fully paid and nonassessable shares of capital
stock with no personal liability attaching to the ownership thereof and will be
free and clear of all liens, charges, restrictions, claims and encumbrances
imposed by or through the Company except as set forth in the Transaction
Documents.
(b) Based in part on the representations made by the Investor
in Section 4 hereof, the Notes, and the Preferred Shares, the Warrant Shares and
the Conversion Shares, when so issued, will be issued in compliance with the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended (the "1933 ACT"), or in compliance with applicable exemptions
therefrom, and the registration and qualification requirements of all applicable
securities laws of the Commonwealth of Massachusetts and the State of
California, as applicable.
(c) The issuance of the Notes and the Warrant hereunder do not
require, and the Preferred Shares, the Warrant Shares and the Conversion Shares,
when so issued, will not require the approval of the stockholders of the Company
under the rules of The Nasdaq National Market.
4.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any United States federal, state or local governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for the filing of such
qualifications or filings under the 1933 Act and the regulations thereunder,
under The Nasdaq National Market rules and all applicable United States federal
and state securities laws as may be required in connection with the transactions
contemplated by this Agreement. All such qualifications will be effective on the
Closing and all such filings have been or will be made within the time
prescribed by law.
4.7 Non-Contravention. The execution, delivery and performance of
the Transaction Documents by the Company, and the consummation by the Company of
the transactions contemplated hereby and thereby, do not and will not (i)
contravene or conflict with
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the Certificate of Incorporation or By-laws of the Company; (ii) constitute a
material violation of any provision of any United States federal, state, local
or, to the Company's knowledge, foreign (non-United States) law binding upon or
applicable to the Company; or (iii) constitute a default or require any consent
under, give rise to any right of termination, cancellation or acceleration of,
or to a loss of any benefit to which the Company is entitled under, or result in
the creation or imposition of any lien, claim or encumbrance on any assets of
the Company under, any contract to which the Company is a party or any permit,
license or similar right relating to the Company or by which the Company may be
bound or affected in such a manner as would have Material Adverse Effect.
4.8 Litigation. Except as disclosed in the SEC Documents, there is
no action, suit, proceeding, claim, arbitration or investigation ("ACTION")
pending: (a) against the Company, its activities, properties or assets or, to
the best of the Company's knowledge, against any officer, director or employee
of the Company in connection with such officer's, director's or employee's
relationship with, or actions taken on behalf of, the Company which is
reasonably likely to have a Material Adverse Effect, (b) that seeks to prevent,
enjoin, alter or delay the transactions contemplated by this Agreement or the
Investor Rights Agreement. Except as individually or in the aggregate is not
reasonably likely to have a Material Adverse Effect, (i) there is no Action
pending or, to the best of the Company's knowledge, threatened, relating to the
current or prior employment of any of the Company's current or former employees
or consultants, their use in connection with the Company's business of any
information, technology or techniques allegedly proprietary to any of their
former employers, clients or other parties, or their obligations under any
agreements with prior employers, clients or other parties, and (ii) the Company
is not a party to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality. No
Action by the Company is currently pending nor does the Company have a current
intent to initiate any Action which is reasonably likely to have a Material
Adverse Effect.
4.9 Intellectual Property.
(a) Ownership or Right to Use. To the Company's knowledge, the
Company has title to and owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents or patent applications, software,
know-how, registered or unregistered trademarks and service marks and any
applications therefor, registered or unregistered copyrights, trade names, and
any applications therefor, trade secrets or other confidential or proprietary
information ("INTELLECTUAL PROPERTY") necessary to enable the Company to carry
on its business as currently conducted or as presently proposed to be conducted,
except where any deficiency therein would not have a Material Adverse Effect.
(b) Licenses; Other Agreements. The Company is not currently
subject to any exclusive licenses (whether such exclusivity is temporary or
permanent) to any material portion of the Intellectual Property of the Company.
To the Company's knowledge, there are not outstanding any licenses or agreements
of any kind relating to any Intellectual Property of the Company, except for
agreements with OEM's and other customers of the Company entered into in the
ordinary course of the Company's business. The Company is not
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obligated to pay any royalties or other payments to third parties with respect
to the marketing, sale, distribution, manufacture, license or use of any
Intellectual Property, except as the Company may be so obligated in the ordinary
course of its business or as disclosed in the Company's SEC Documents (as
defined below) or where the failure to make such payments would not have a
Material Adverse Effect.
(c) No Infringement. To the Company's knowledge, the Company
has not violated or infringed and is not currently violating or infringing, and
the Company has not received any communications alleging that the Company (or
any of its employees or consultants) has violated or infringed, any Intellectual
Property of any other person or entity, to the extent that any such violation or
infringement, either individually or together with all other such violations and
infringements, would have a Material Adverse Effect.
(d) Employees and Consultants. To the Company's knowledge, no
employee of or consultant to the Company is in default under any term of any
employment contract, agreement or arrangement relating to Intellectual Property
of the Company or any non-competition arrangement, other contract, or any
restrictive covenant relating to the Intellectual Property of the Company, which
default would have a Material Adverse Effect.
4.10 Compliance with Law and Charter Documents. The Company is not
in violation or default of any provisions of its Certificate of Incorporation or
By-laws, both as amended, and except for any violations that would not, either
individually or in the aggregate, have a Material Adverse Effect. The Company
has complied and is in compliance with all applicable statutes, laws, and
regulations and executive orders of the United States of America, and all
states, and, to the Company's knowledge, foreign countries (non-United States)
and other governmental bodies and agencies having jurisdiction over the
Company's business or properties except where such noncompliance would not,
either individually or in the aggregate, have a Material Adverse Effect.
4.11 Registration Rights. Except as provided in the Investor Rights
Agreement or as described in, or filed as exhibits to, the SEC Documents (as
defined below) effective upon the Closing, the Company is not currently subject
to any grant or agreement to grant to any person or entity any rights (including
piggyback registration rights) to have any securities of the Company registered
with the Securities and Exchange Commission ("SEC") or any other governmental
authority.
4.12 SEC Documents.
(a) The Company has furnished to the Investor prior to the
date hereof copies of its Annual Report on Form 10-K, as amended, for the fiscal
year ended December 27, 1997 ("FORM 10-K"), and all other registration
statements, reports and proxy statements filed by the Company with the SEC on or
after December 27, 1997 (the Form 10-K and such registration statements, reports
and proxy statements, are collectively referred to herein as the "SEC
DOCUMENTS"). Each of the SEC Documents, as of the respective date thereof, did
not, and each of the registration statements, reports and proxy statements filed
by the Company with the SEC after the date hereof and prior to the Closing will
not, as of the date thereof, contain any untrue
<PAGE> 8
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statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, except as may have been corrected in a
subsequent SEC Document. The Company is not a party to any material contract,
agreement or other arrangement which was required to have been filed as an
exhibit to the SEC Documents that is not so filed.
(b) The Company has provided the Investor with its audited
financial statements (the "AUDITED FINANCIAL STATEMENTS") for the fiscal year
ended December 27, 1997 (the "BALANCE SHEET DATE") and its unaudited financial
statements as of March 28, 1998. Since December 28, 1997, the Company has duly
filed with the SEC all registration statements, reports and proxy statements
required to be filed by it under the Securities Exchange Act of 1934, as
amended, and the 1933 Act. The audited and unaudited consolidated financial
statements of the Company included in the SEC Documents filed prior to the date
hereof fairly present, in conformity with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial position of the
Company and its consolidated subsidiaries as at the date thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject to normal year and audit adjustments in the case of unaudited
interim financial statements).
(c) Except as and to the extent reflected or reserved against
in the Company's Audited Financial Statements and the unaudited financial
statements as of March 28, 1998 (including the notes thereto), the Company has
no material liabilities (whether accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined or determinable) other than: (i)
liabilities incurred in the ordinary course of business since the Balance Sheet
Date that are consistent with the Company's past practices, (ii) liabilities
with respect to agreements to which the Investor is a party, and (iii) other
liabilities that either individually, or in the aggregate, would not result in a
Material Adverse Effect.
4.13 Absence of Certain Changes Since Balance Sheet Date. Since the
Balance Sheet Date, and, except as set forth in the Disclosure Letter, the
business and operations of the Company have been conducted in all material
respects in the ordinary course consistent with past practice and there has not
been:
(a) any declaration, setting aside or payment of any dividend
or other distribution of the assets of the Company with respect to any shares of
capital stock of the Company, or any repurchase, redemption or other acquisition
by the Company or any subsidiary of the Company of any outstanding shares of the
Company's capital stock;
(b) any damage, destruction or casualty loss, whether or not
covered by insurance, except for such occurrences that have not resulted, and
are not expected to result, in a Material Adverse Effect;
(c) any waiver by the Company of a valuable right or of a
material debt owed to it, except for such waivers that have not resulted, and
are not expected to result, in a Material Adverse Effect;
<PAGE> 9
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(d) any material change or amendment to, or any waiver of any
material rights under, a material contract or arrangement by which the Company
or any of its assets or properties is bound or subject, except for changes,
amendments, or waivers that are expressly provided for or disclosed in this
Agreement or that have not resulted, and are not expected to result, in a
Material Adverse Effect;
(e) any change by the Company in its accounting principles,
methods or practices or in the manner it keeps its accounting books and records,
except any such change required by a change in GAAP; and
(f) any other event or condition of any character, except for
such events and conditions that have not resulted, and are not expected to
result, in a Material Adverse Effect.
4.14 Full Disclosure. This Agreement, the Disclosure Letter and the
SEC Documents with respect to the business, operations, assets, results of
operations and financial condition of the Company, and the transactions
contemplated by the Transaction Documents do not contain any untrue statement of
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
5. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE INVESTOR. The
Investor hereby represents and warrants to the Company, and agrees that:
5.1 Authorization. This Agreement has been duly authorized by all
necessary corporate action on the part of the Investor. This Agreement
constitutes the Investor's valid and legally binding obligations, enforceable in
accordance with its respective terms, except as may be limited by (a) applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the enforcement of creditors' rights generally, (b) the
effect of rules of law governing the availability of equitable remedies, and (c)
the fact that any indemnification or contribution provision contained in the
Transaction Documents may be unenforceable insofar as the enforceability of such
provision may be sought under United States federal, or state securities laws.
The Investor has full corporate power and authority to enter into the
Transaction Documents.
5.2 Purchase for Own Account. The Securities are being acquired for
investment for the Investor's own account, not as a nominee or agent, and not
with a view to the public resale or distribution thereof within the meaning of
the 1933 Act, and the Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. The Investor also
represents that it has not been formed for the specific purpose of acquiring the
Securities.
5.3 Non-Contravention. The execution, delivery and performance of
this Agreement by the Investor, and the consummation by the Investor of the
transactions contemplated hereby and thereby, do not and will not (i) contravene
or conflict with the Certificate of Incorporation or By-laws of the Investor;
(ii) constitute a material violation of any
<PAGE> 10
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provision of any United States federal, state, local or, to the Investor's
knowledge, foreign (non-United States) law binding upon or applicable to the
Investor; or (iii) constitute a default or require any consent under, give rise
to any right of termination, cancellation or acceleration of, or to a loss of
any benefit to which the Investor is entitled under, or result in the creation
or imposition of any lien, claim or encumbrance on any assets of the Investor
under, any contract to which the Investor is a party or any permit, license or
similar right relating to the Investor or by which the Investor may be bound or
affected in such a manner as would have Material Adverse Effect.
5.4 Investment Experience. The Investor understands that the
purchase of the Securities involves substantial risk. The Investor has
experience as an investor in securities of companies and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment in the
Securities and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of this investment
in the Securities and protecting its own interests in connection with this
investment.
5.5 Accredited Investor Status. The Investor is an "ACCREDITED
INVESTOR" within the meaning of Regulation D promulgated under the 1933 Act.
5.6 Restricted Securities. The Investor understands that the
Securities to be issued to the Investor hereunder are characterized as
"RESTRICTED SECURITIES" under the 1933 Act inasmuch as they are being acquired
from the Company in a transaction not involving a public offering and that under
the 1933 Act and applicable regulations thereunder such securities may be resold
without registration under the 1933 Act only in certain limited circumstances.
The Investor is familiar with Rule 144 of the SEC, as presently in effect, and
understands the resale limitations imposed thereby and by the 1933 Act. The
Investor understands that the Company is under no obligation to register any of
the securities sold hereunder except as provided in the Investor Rights
Agreement.
5.7 Further Limitations on Disposition. Without in any way limiting
the representations set forth above, the Investor further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) there is then in effect a registration statement under the
1933 Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) the Investor has notified the Company of the proposed
disposition and has furnished the Company with a statement of the circumstances
surrounding the proposed disposition, and the Investor has furnished the
Company, at the expense of the Investor or its transferee, with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition will not
require registration of such securities under the 1933 Act.
Notwithstanding the provisions of paragraphs (a) and (b) of this Section 4.7, no
such registration statement will be required for any transfer of the Securities
in compliance with Rule 144,
<PAGE> 11
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Rule 144A or Rule 145(d) of the SEC, or if such transfer otherwise is exempt, in
the reasonable opinion of the Company's legal counsel, from the registration
requirements of the 1933 Act.
5.8 Legends. Certificates evidencing the Preferred Shares, the
Warrant Shares and the Conversion Shares, when so issued, will bear each of the
legends set forth below:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
(b) THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS SPECIFIED IN A CERTAIN INVESTOR RIGHTS AGREEMENT BETWEEN
THE COMPANY AND THE ORIGINAL HOLDER OF SUCH SHARES DATED AS OF [ ], A COPY OF
WHICH IS AVAILABLE FOR EXAMINATION AT THE ISSUER'S PRINCIPAL OFFICE.
(c) Any Legends required by any applicable state securities
laws.
The Legend set forth in Section 5.8(a) hereof will be removed by the Company
from any certificate evidencing the Preferred Shares, the Warrant Shares or
Conversion Shares upon delivery to the Company of an opinion by counsel,
reasonably satisfactory to the Company, that a registration statement under the
1933 Act is at that time in effect with respect to the legended security or that
such security can be freely transferred in a public sale without such a
registration statement being in effect and that such transfer will not
jeopardize the exemption or exemptions from registration pursuant to which the
Company issued such securities.
6. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT THE INITIAL CLOSING. The
obligations of the Investor under Sections 1 and 2 of this Agreement are subject
to the fulfillment or waiver, on or before the Initial Closing, of each of the
following conditions:
6.1 Representations and Warranties True. Each of the representations
and warranties of the Company contained in Section 4 will be true and correct on
and as of the date hereof and on and as of the date of the Initial Closing,
except as set forth in the Disclosure Letter, as amended through the Initial
Closing, with the same effect as though such representations and warranties had
been made as of the Initial Closing.
<PAGE> 12
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6.2 Performance. The Company will have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Initial Closing
and will have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
6.3 Securities Exemptions. The offer, sale and issuance of the
Securities to the Investor pursuant to this Agreement will be exempt from the
registration requirements of the 1933 Act and the registration and/or
qualification requirements of all applicable state securities laws.
6.4 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Initial Closing and all
documents incident thereto will be reasonably satisfactory in form and substance
to the Investor, and the Investor will have received all such counterpart
originals and certified or other copies of such documents as it may reasonably
request. Such documents shall include (but not be limited to) the following:
(a) Certified Charter Documents. A copy of (i) the Certificate
of Incorporation and (ii) the By-laws of the Company (each as amended through
the date of the Initial Closing) certified by the Secretary of the Company as
true and correct copies thereof as of the Initial Closing.
(b) Board Resolutions. A copy, certified by the Secretary of
the Company, of the resolutions of the Board of Directors of the Company
providing for the approval of the Transaction Documents and the issuance of the
Securities and the other matters contemplated hereby.
6.5 Opinion of Company Counsel. The Investor will have received an
opinion on behalf of the Company, dated as of the date of the Initial Closing,
from counsel to the Company, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC,
in form and substance reasonably satisfactory to the Investor.
6.6 Series A Convertible Preferred Stock Terms. The rights,
privileges and preferences of the Preferred Shares and the Warrant Shares shall
be as set forth in the terms of the Series A Convertible Preferred Stock set
forth in EXHIBIT E hereto, which terms shall have been approved and authorized
by the Board of Directors of the Company as of the date hereof.
6.7 Security Agreement. The Company shall have executed a Security
Agreement substantially in the form attached hereto as EXHIBIT D in favor of the
Investor and Marine Midland Bank shall have consented to Investor's security
interest in all of the Company's assets and intellectual property in accordance
with the Security Agreement.
6.8 Technology Agreements. The Company shall have entered into the
Product Development & Marketing Agreement, the Patent License and the Agreement
for the Disclosure of SGI Restricted Confidential Information substantially in
the forms attached hereto as EXHIBIT F (collectively, the "TECHNOLOGY
AGREEMENTS").
<PAGE> 13
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6.9 Marine Midland Bank; Extension of Forbearance Agreement. The
Company shall have obtained an extension of its forbearance agreement with
Marine Midland Bank until September 30, 1998 satisfactory in form and substance
to the Investor.
7. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT THE INITIAL CLOSING. The
obligations of the Company to the Investor under this Agreement are subject to
the fulfillment or waiver on or before the Initial Closing, of each of the
following conditions:
7.1 Representations and Warranties True. The representations and
warranties of the Investor contained in Section 5 will be true and correct on
and as of the date hereof and on and as of the date of the Initial Closing with
the same effect as though such representations and warranties had been made as
of the Initial Closing.
7.2 Cancellation of Original Note and Original Warrants. The
Investor will have delivered to the Company the Original Note and Original
Warrants for cancellation as specified in Section 1.3.
7.3 Securities Exemptions. The offer and sale of the Securities to
the Investor pursuant to this Agreement will be exempt from the registration
requirements of the 1933 Act and the registration and/or qualification
requirements of all applicable state securities laws.
7.4 Technology Agreements; Security Agreement. The Investor shall
have entered into the Technology Agreements and have agreed to and acknowledged
the Security Agreement.
7.5 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Initial Closing and all
documents incident thereto will be reasonably satisfactory in form and substance
to the Company and to the Company's legal counsel, and the Company will have
received all such counterpart originals and certified or other copies of such
documents as it may reasonably request.
8. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT SUBSEQUENT CLOSINGS. The
obligations of the Investor under Sections 1 and 2 of this Agreement with
respect to Subsequent Closings are subject to the fulfillment or waiver, on or
before each such Subsequent Closing, of each of the following conditions (except
for 8.6 which shall be applicable if the Company requests an advance of an
installment of the Aggregate Commitment greater than the Threshold Restriction):
8.1 Representations and Warranties True. Each of the representations
and warranties of the Company contained in Section 4 (including in the
Disclosure Letter) will be true and correct on and as of the date of the
Subsequent Closing, (except as to such changes as have occurred in the ordinary
course of the Company's business and which do not have, individually or in the
aggregate, a Material Adverse Effect).
8.2 Performance. The Company will have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be
<PAGE> 14
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performed or complied with by it on or before the Subsequent Closing and will
have obtained all approvals, consents and qualifications necessary to complete
the purchase and sale described herein.
8.3 Securities Exemptions. The offer, sale and issuance of the
Securities to the Investor at such Subsequent Closing will be exempt from the
registration requirements of the 1933 Act and the registration and/or
qualification requirements of all applicable state securities laws.
8.4 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Subsequent Closing and
all documents incident thereto will be reasonably satisfactory in form and
substance to the Investor, and the Investor will have received all such
counterpart originals and certified or other copies of such documents as it may
reasonably request.
8.5 No Material Adverse Effect. Between the Initial Closing and each
Subsequent Closing, there shall not have occurred any Material Adverse Effect.
8.6 Stockholder Notice. If the Company requests an advance of an
installment of the Aggregate Commitment in an amount greater than the Threshold
Restriction, the Company shall mail to all stockholders of the Company not later
than ten (10) days before the date of the intended Subsequent Closing a letter
complying with Rule 4460(i) of The Nasdaq National Market.
9. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT SUBSEQUENT CLOSINGS. The
obligations of the Company to the Investor under this Agreement are subject to
the fulfillment or waiver on or before each Subsequent Closing, of each of the
following conditions:
9.1 Representations and Warranties True. The representations and
warranties of the Investor contained in Section 5 will be true and correct on
and as of the date of each Subsequent Closing.
9.2 Payment of Installment of Aggregate Commitment. The Investor
will have delivered to the Company the requisite installment of the Aggregate
Commitment required to be delivered by it in connection with the Subsequent
Closing.
9.3 Securities Exemptions. The offer and sale of the Securities to
the Investor at such Subsequent Closing will be exempt from the registration
requirements of the 1933 Act and the registration and/or qualification
requirements of all applicable state securities laws.
9.4 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto will be reasonably satisfactory in form and substance
to the Company and to the Company's legal counsel, and the Company will have
received all such counterpart originals and certified or other copies of such
documents as it may reasonably request.
<PAGE> 15
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10. INDEMNIFICATION.
10.1 Agreement to Indemnify.
(a) Company Indemnity. The Investor, its Affiliates (as
defined below), and each officer and director, of any of the foregoing
(collectively, the "INVESTOR INDEMNITEES") shall each be indemnified and held
harmless to the extent set forth in this Section 10 by the Company with respect
to any and all Damages (as defined below) incurred by any Investor Indemnitee as
a result of any inaccuracy or misrepresentation in, or breach of, any
representation, warranty, covenant or agreement made by the Company in this
Agreement or the Investor Rights Agreement (including any Exhibits and Schedules
hereto).
(b) Investor Indemnity. The Company, its Affiliates, and each
officer and director, of any of the foregoing (collectively, the "COMPANY
INDEMNITEES") shall each be indemnified and held harmless to the extent set
forth in this Section 10, by the Investor, in respect of any and all Damages
incurred by any Company Indemnitee as a result of any inaccuracy or
misrepresentation in, or breach of, any representation, warranty, covenant or
agreement made by the Investor in this Agreement or the Investor Rights
Agreement (including any Exhibits and Schedules hereto).
(c) Equitable Relief. Nothing set forth in this Section 10
shall be deemed to prohibit or limit any Investor Indemnitee's or Company
Indemnitee's right at any time before, on or after the Closing Date, to seek
injunctive or other equitable relief for the failure of any Indemnifying Party
to perform or comply with any covenant or agreement contained herein.
10.2 Survival. All representations and warranties of the Investor
and the Company contained herein, and all claims of any Investor Indemnitee or
Company Indemnitee in respect of any inaccuracy or misrepresentation in or
breach thereof, shall survive the Closing until twelve (12) months from the date
of this Agreement, regardless of whether the applicable statute of limitations,
including extensions thereof, may expire (except to the extent any such covenant
or agreement shall expire by its terms). All covenants and agreements of the
Investor and the Company contained herein or in the Investor Rights Agreement
shall survive the Closing in perpetuity (except to the extent any such covenant
or agreement shall expire by its terms). All claims of any Investor Indemnitee
or Company Indemnitee in respect of any breach of such covenants or agreements
shall survive the Closing until the expiration of twelve (12) months following
the non-breaching party's obtaining actual knowledge of such breach.
10.3 Claims for Indemnification. If any Investor Indemnitee or
Company Indemnitee (an "INDEMNITEE") shall believe that such Indemnitee is
entitled to indemnification pursuant to this Section 10 in respect of any
Damages, such Indemnitee shall give the appropriate Indemnifying Party (which
for purposes hereof, in the case of an Investor Indemnitee, means the Company,
and in the case of a Company Indemnitee, means the Investor) prompt written
notice thereof. Any such notice shall set forth in reasonable detail and to the
extent then known the basis for such claim for indemnification. The failure of
such Indemnitee to give notice of any claim for indemnification promptly shall
not adversely affect such Indemnitee's right to indemnity hereunder except to
the extent that such failure adversely affects the right of the
<PAGE> 16
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Indemnifying Party to assert any reasonable defense to such claim. Each such
claim for indemnity shall expressly state that the Indemnifying Party shall have
only the twenty (20) business day period referred to in the next sentence to
dispute or deny such claim. The Indemnifying Party shall have twenty (20)
business days following its receipt of such notice either (a) to acquiesce in
such claim by giving such Indemnitee written notice of such acquiescence or (b)
to object to the claim by giving such Indemnitee written notice of the
objection. If Indemnifying Party does not object thereto within such twenty (20)
business day period, such Indemnitee shall be entitled to be indemnified for all
Damages reasonably incurred by such Indemnitee in respect of such claim. If the
Indemnifying Party objects to such claim in a timely manner, the senior
management of the Company and the Investor shall meet to attempt to resolve such
dispute. If the dispute cannot be resolved by the senior management either party
may make a written demand for formal dispute resolution and specify therein the
scope of the dispute. Within thirty days after such written notification, the
parties agree to meet for one day with an impartial mediator and consider
dispute resolution alternatives other than litigation. If an alternative method
of dispute resolution is not agreed upon within thirty days after the one day
mediation, either party may begin litigation proceedings. Nothing in this
section shall be deemed to require arbitration.
10.4 Defense of Claims. In connection with any claim that may give
rise to indemnity under this Section 10 resulting from or arising out of any
claim or Proceeding (as defined below) against an Indemnitee by a person or
entity that is not a party hereto, the Indemnifying Party may but shall not be
obligated to (unless such Indemnitee elects not to seek indemnity hereunder for
such claim), upon written notice to the relevant Indemnitee, assume the defense
of any such claim or proceeding if the Indemnifying Party with respect to such
claim or Proceeding acknowledges to the Indemnitee the Indemnitee's right to
indemnity pursuant hereto to the extent provided herein (as such claim may have
been modified through written agreement of the parties or arbitration hereunder)
and provides assurances, reasonably satisfactory to such Indemnitee, that the
Indemnifying Party will be financially able to satisfy such claim to the extent
provided herein if such claim or Proceeding is decided adversely; provided,
however, that nothing set forth herein shall be deemed to require the
Indemnifying Party to waive any crossclaims or counterclaims the Indemnifying
Party may have against the Indemnified Party for damages. The Indemnified Party
shall be entitled to retain separate counsel, reasonably acceptable to the
Indemnifying Party, if the Indemnified Party shall reasonably determine, upon
the written advice of counsel, that an actual or potential conflict of interest
exists between the Indemnifying Party and the Indemnified Party in connection
with such Proceeding. The Indemnifying Party shall be obligated to pay the
reasonable fees and expenses of such separate counsel to the extent the
Indemnified Party is entitled to indemnification by the Indemnifying Party with
respect to such claim or Proceeding under this Section 10.4. If the Indemnifying
Party assumes the defense of any such claim or Proceeding, the Indemnifying
Party shall select counsel reasonably acceptable to such Indemnitee to conduct
the defense of such claim or Proceeding, shall take all steps reasonably
necessary in the defense or settlement thereof and shall at all times diligently
and promptly pursue the resolution thereof. If the Indemnifying Party shall have
assumed the defense of any claim or Proceeding in accordance with this Section
10.4, the Indemnifying Party shall be authorized to consent to a settlement of,
or the entry of any judgment arising from, any such claim or Proceeding, with
the prior written consent of such
<PAGE> 17
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Indemnitee, not to be unreasonably withheld; provided, however, that the
Indemnifying Party shall pay or cause to be paid all amounts arising out of such
settlement or judgment concurrently with the effectiveness thereof; provided,
further, that the Indemnifying Party shall not be authorized to encumber any of
the assets of any Indemnitee or to agree to any restriction that would apply to
any Indemnitee or to its conduct of business; and provided, further, that a
condition to any such settlement shall be a complete release of such Indemnitee
and its Affiliates, directors, officers, employees and agents with respect to
such claim, including any reasonably foreseeable collateral consequences
thereof. Such Indemnitee shall be entitled to participate in (but not control)
the defense of any such action, with its own counsel and at its own expense.
Each Indemnitee shall, and shall cause each of its Affiliates, directors,
officers, employees and agents to, cooperate fully with the Indemnifying Party
in the defense of any claim or Proceeding being defended by the Indemnifying
Party pursuant to this Section 10.4. If the Indemnifying Party does not assume
the defense of any claim or Proceeding resulting therefrom in accordance with
the terms of this Section 10.4, such Indemnitee may defend against such claim or
Proceeding in such manner as it reasonably may deem appropriate, including
settling such claim or proceeding after giving reasonable notice of the same to
the Indemnifying Party, on such terms as such Indemnitee may deem appropriate.
If any Indemnifying Party seeks to question the manner in which such Indemnitee
defended such claim or Proceeding or the amount of or nature of any such
settlement, such Indemnifying Party shall have the burden to prove by a
preponderance of the evidence that such Indemnitee did not defend such claim or
Proceeding in a reasonably prudent manner.
10.5 Certain Definitions. As used in this Section 10, (a)
"AFFILIATE" means, with respect to any person or entity, any person or entity
directly or indirectly controlling, controlled by or under direct or indirect
common control with such other person or entity; (b) "DAMAGES" means all
damages, costs, expenses, or amounts paid in settlement to third parties,
including (1) interest on cash disbursements in respect of any of the foregoing
at the prime rate as published in the Wall Street Journal, as in effect from
time to time, compounded quarterly, from the date each such cash disbursement is
made until the date the party incurring such cash disbursement shall have been
indemnified in respect thereof, and (2) reasonable out-of-pocket costs, fees and
expenses (including reasonable costs, fees and expenses of attorneys,
accountants and other agents of, or other parties retained by, such party), and
(c) "PROCEEDING" means any action, suit, hearing, arbitration, proceeding
(public or private) or investigation that is brought or initiated by or against
any United States federal, state, local or foreign governmental authority or any
other person or entity.
11. COVENANTS OF THE PARTIES. The Company covenants and agrees with
the Investor, that for so long as (a) any of the Notes are outstanding, or (b)
the Investor continues to hold Preferred Shares (or Notes convertible for
Preferred Shares), based upon the then applicable conversion price, equal to at
least five percent (5%) of the then issued and outstanding shares of the
Company's Common Stock (provided, however, that such percentage shall not apply
to Section 11.10 herein), and, with respect to Sections 11.7 and 11.8, the
Investor covenants and agrees with the Company, that:
<PAGE> 18
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11.1 Financial Statements, Reports, Etc. The Company shall furnish
to the Investor:
(a) annually no later than prior to the start of each fiscal
year, consolidated capital and operating expense budgets, cash flow projections
and income and loss projections for the Company and its subsidiaries, if any, in
respect of such fiscal year, which shall have been approved by the Board of
Directors, all itemized in reasonable detail and prepared on a quarterly basis
(and on a monthly basis through September 30, 1998), and, promptly after
preparation, any revisions to any of the foregoing;
(b) promptly following receipt by the Company, each audit
response letter, accountant's management letter and other written report
submitted to the Company by its independent public accountants in connection
with an annual or interim audit of the books of the Company and its
subsidiaries;
(c) promptly after the commencement thereof, notice of all
actions, suits, claims, proceedings, investigations and inquiries of the type
described in Section 4.8 which is reasonably like to have a Material Adverse
Effect;
(d) promptly upon sending, making available or filing the
same, all press releases, reports and financial statements that the Company
sends or makes available to its stockholders or directors or files with the SEC;
and
(e) promptly, from time to time, such other information
regarding the business, prospects, financial condition, operations, property or
affairs of the Company and its subsidiaries as the Investor reasonably may
request.
Investor agrees to maintain all such information provided by the Company
pursuant to this Section 11.1 on a confidential basis.
11.2 Inspection, Consultation and Advice. The Company shall permit
and cause each of its subsidiaries to permit the Investor and such persons as it
may designate, at such Investor's expense, to visit and inspect any of the
properties of the Company and its subsidiaries, examine their books and take
copies and extracts therefrom, discuss the affairs, finances and accounts of the
Company and its subsidiaries with their officers, employees and public
accountants (and the Company hereby authorizes said accountants to discuss with
such Investor and such designees such affairs, finances and accounts), and
consult with and advise the management of the Company and its subsidiaries as to
their affairs, finances and accounts, all at reasonable times and upon
reasonable notice, and subject to the Investor's obligation to maintain the
confidentiality of such information.
11.3 Use of Proceeds. The Company shall use the principal amount of
the Notes for working capital purposes and certain capital expenditures as
described in the Disclosure Letter.
<PAGE> 19
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11.4 Activities of Subsidiaries. The Company will not organize or
acquire any entity that is a subsidiary unless such subsidiary is wholly-owned
(directly or indirectly) by the Company. The Company shall not permit any
subsidiary to consolidate or merge into or with or sell or transfer all or
substantially all its assets, except that any subsidiary may (i) consolidate or
merge into or with or sell or transfer assets to any other subsidiary, or (ii)
merge into or sell or transfer assets to the Company. The Company shall not sell
or otherwise transfer any shares of capital stock of any subsidiary, except to
the Company or another subsidiary, or permit any subsidiary to issue, sell or
otherwise transfer any shares of its capital stock or the capital stock of any
subsidiary, except to the Company or another subsidiary. The Company shall not
permit any subsidiary to purchase or set aside any sums for the purchase of, or
pay any dividend or make any distribution on, any shares of its stock, except
for dividends or other distributions payable to the Company or another
subsidiary.
11.5 Right of First Refusal. (a) Subject to 11.5(b), the Company
shall, prior to any proposed issuance by the Company of any of its securities
(other than debt securities with no equity feature), offer to the Investor by
written notice the right, for a period of fifteen (15) days, to purchase for
cash at an amount equal to the price or other consideration for which such
securities are to be issued, any and all such securities; provided, however,
that the participation rights of the Investor pursuant to this Section 11.5
shall not apply to securities issued (A) as a stock dividend or upon any
subdivision of shares of Common Stock, provided that the securities issued
pursuant to such stock dividend or subdivision are limited to additional shares
of Common Stock, (B) pursuant to any subscriptions, warrants, options,
convertible securities, or other rights which are listed in the SEC Documents or
Disclosure Letter as being outstanding or authorized on the date of this
Agreement, (C) solely in consideration for the acquisition (whether by merger or
otherwise) by the Company or any of its subsidiaries of all or substantially all
of the stock or assets of any other entity, (D) pursuant to a firm commitment
public offering, and (E) pursuant to the exercise of options to purchase Common
Stock (appropriately adjusted to reflect stock splits, stock dividends,
combinations of shares and the like with respect to the Common Stock) granted to
directors, officers, employees or consultants of the Company in connection with
their service to the Company under the Plans or any Plan to be approved in the
future or issued pursuant to subscriptions, warrants, options, convertible
securities, or other rights outstanding or authorized on the date of this
Agreement and listed on the SEC Documents or the Disclosure Letter pursuant to
clause (B) above (the shares exempted by this clause (E) being hereinafter
referred to as the "RESERVED EMPLOYEE SHARES"). The Company's written notice to
the Investor shall describe the securities proposed to be issued by the Company
and specify the number, price and payment terms. The Investor may accept the
Company's offer as to the any or all of the securities offered to it, by written
notice thereof given by it to the Company prior to the expiration of the
aforesaid fifteen (15) day period, in which event the Company shall promptly
sell and such Investor shall buy, upon the terms specified, the number of
securities to be purchased by such Investor. The Company shall be free at any
time prior to one hundred twenty (120) days after the date of its notice of
offer to the Investor, to offer and sell to any third party or parties the
remainder of such securities proposed to be issued by the Company (including but
not limited to the securities not agreed by the Investor to be purchased by it),
at a price and on payment terms no less favorable to the Company than those
specified in such notice of offer to the Investor. However, if such third party
sale or sales are not consummated within such one hundred twenty (120) day
period,
<PAGE> 20
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the Company shall not sell such securities as shall not have been purchased
within such period without again complying with this Section 11.5.
(b) Notwithstanding the foregoing, the Investor's right set
forth in 11.5(a) herein shall not apply to (i) any issuance by the Company of
any of its securities pursuant to a registration statement filed with the SEC on
or after August 31, 1998 and (ii) any issuance by the Company of its securities
after September 30, 1998, provided, however, if Investor has elected to convert
the principal and/or interest outstanding under any of the Notes and Investor
continues to hold Preferred Shares, based on the then applicable conversion
price, equal to at least five percent (5%) of the then issued and outstanding
shares of Common Stock, Investor shall maintain its rights under Section 11.5(a)
to participate on a pro-rata basis with respect to any such issuance of
securities by the Company after September 30, 1998.
11.6 No Solicitation. Except to the extent the Board of Directors of
the Company, after having consulted with and considered the advice of outside
counsel, determines in good faith that the failure to take such actions would
constitute a breach of fiduciary duties of the members of such Board of
Directors to its stockholders under applicable law, the Company will not
directly or indirectly at any time prior to September 30, 1998 (or authorize its
agents, investment bankers, officers, directors, employees, affiliates or
representatives of any of their respective family members to) solicit,
entertain, negotiate or discuss with any person or entity (other than Investor)
the sale or licensing of the Company's products (other than transactions
consistent with the Company's ordinary course of business) or the sale or
transfer of the Company or the Company's business, whether by asset sale, stock
sale, merger or otherwise or enter into any agreement or understanding with
respect thereto (and except with respect to any transaction permitted under
Section 11.5(b)(i)). If the Company (or any of its agents, investment bankers,
officers, directors, employees, affiliates or representatives or any of their
respective family members) shall receive any bona fide offer or proposal
concerning the above, the Company shall promptly deliver notice thereof to
Investor.
11.7 Public Announcements; Disclosure. Investor and the Company
shall consult with each other before issuing any press release or otherwise
making any public statements (including, without limitation, any statement
contained in, or any filing of a Transaction Document as an exhibit to, any
filing with the SEC) with respect to the transactions contemplated hereby and
shall not issue any such press release or make any such public statement without
the prior written consent of both parties, except as may be required by law. In
the event any such public statement is required by law, each party shall make a
good faith effort to consult with the other party, and in any event shall notify
the other party in advance, prior to making such public statement. The Investor
shall designate a representative to respond to inquiries from the media and
press concerning the transactions contemplated by the Transaction Documents
which representative shall be subject to the terms of this Section 11.7.
11.8 Certificate of Designation; Investor Rights Agreement. At such
time as Investor determines that it expects to convert a Note or exercise the
Warrant, the Investor may request in writing that the Company file a Certificate
of Designation pursuant to its corporate charter setting forth the terms of the
Series A Convertible Preferred Stock, and the Company
<PAGE> 21
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shall promptly file such Certificate of Designation with the Secretary of State
of Delaware. At such time as the Investor first converts a Note or exercises the
Warrant, the Company and the Investor shall enter into the Investor Rights
Agreement substantially in the form attached to this Agreement as EXHIBIT D.
11.9 Board Observer Rights.
(a) During the period from the date hereof until the Investor
holds Preferred Shares, based upon the then applicable conversion price, equal
to at least five percent (5%) of the then issued and outstanding shares of the
Company's Common Stock, based on the then applicable conversion price of such
securities, Investor shall be entitled to appoint a non-voting observer (the
"OBSERVER") to the Company's Board of Directors who is acceptable to the
Company; and such Observer shall be entitled to attend all meetings of the
Company's Board of Directors and committees thereof (other than the audit,
nomination, governance, and compensation committees) and shall receive notice of
all meetings and all materials furnished to members of the Company's Board of
Directors in their capacities as such at the same time and in the same manner as
such notice and materials are provided to the Board of Directors, unless the
Board of Directors of the Company shall in good faith determine, after having
consulted with and considered the advice of outside counsel, that delivery of
such notice and/or materials to Investor would constitute a breach of fiduciary
duties of the members of such Board of Directors to its stockholders under
applicable law. Upon the request of the Board of Directors of the Company, the
Observer will excuse himself or herself from any portion of the Board or
committee meetings if the Board of Directors shall reasonably determine that the
Observer's presence may violate the attorney-client privilege, create a conflict
of interest or otherwise constitute a breach of fiduciary duties of the members
of such Board of Directors to its stockholders under applicable law. The
materials furnished to Investor and the discussions and presentations in
connection with or at such meetings shall be considered confidential information
and Investor shall not disclose such materials and discussions to any third
party; provided, however, that the foregoing shall not limit in any manner the
rights of Investor under the Technology Agreements.
(b) The Investor acknowledges that the use or disclosure of
any information which is material and non-public ("INSIDE INFORMATION"), or
trading in the securities of the Company on the basis of such Inside
Information, may result in civil and criminal penalties and enforcement
proceedings commenced by the SEC and others in the event the Investor, its
affiliates or any of its employees engages in transactions involving the capital
stock of the Company. Because of receipt of the confidential information
provided to the Investor and its Nominee, the Investor and its Nominee may be
deemed to have Inside Information regarding the Company.
(c) The Company acknowledges that the Observer will likely
have, from time to time, information that may be of interest to the Company
("INFORMATION") regarding a wide variety of matters including, by way of example
only, (a) Investor's technologies, plans and services, and plans and strategies
relating thereto, (b) current and future investments Investor has made, may
make, may consider or may become aware of with respect to other companies and
other technologies, products and services, including, without limitation,
<PAGE> 22
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technologies, products and services that may be competitive with the Company's,
and (c) developments with respect to the technologies, products and services,
and plans and strategies relating thereto, of other companies, including,
without limitation, companies that may be competitive with the Company. The
Company recognizes that a portion of such Information may be of interest to the
Company. Such Information may or may not be known by the Observer. The Company,
as a material part of the consideration for this Agreement, agrees that Investor
and its Observer shall have no duty to disclose any Information to the Company
or permit the Company to participate in any projects or investments based on any
Information, or to otherwise take advantage of any opportunity that may be of
interest to the Company if it were aware of such Information, and hereby waives,
to the extent permitted by law, any claim based on the corporate opportunity
doctrine or otherwise that could limit Investor's ability to pursue
opportunities based on such Information or that would require Investor or
Observer to disclose any such Information to the Company or offer any
opportunity relating thereto to the Company.
11.10 Termination of Purchase Agreement. The Company and the
Investor hereby expressly agree that the terms of the Purchase Agreement shall
terminate as of the date hereof and have no further force and effect.
11.11 VESTING OF RESERVED EMPLOYEE SHARES. Except as disclosed in
the Plans, the Disclosure Letter delivered pursuant to the Purchase Agreement or
as otherwise approved by the Board of Directors, the Company shall not grant to
any of its employees options to purchase Reserved Employee Shares which will
become exercisable at a rate in excess of 25% per annum from the date of such
grant, nor will the Company accelerate the vesting of any outstanding options
without prior consultation with the Investor.
12. MISCELLANEOUS.
12.1 Successors and Assigns. The terms and conditions of this
Agreement will inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. Neither party may assign this
Agreement or any rights hereunder without the consent of the other party, except
that Investor may assign its rights hereunder to a wholly-owned subsidiary.
12.2 Governing Law. This Agreement will be governed by and construed
under the internal laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware,
without reference to principles of conflict of laws or choice of laws.
12.3 Counterparts. This Agreement may be executed in counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.
<PAGE> 23
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12.4 Headings. The headings and captions used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules will, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
12.5 Notices. Any notice required or permitted under this Agreement
will be given in writing, shall be effective when received, and shall in any
event be deemed received and effectively given upon personal delivery to the
party to be notified one (1) business day after deposit with a nationally
recognized courier service such as Federal Express for next business day
delivery, or one (1) business day after being sent by facsimile with copy
delivered by a nationally recognized courier service such as Federal Express for
next business day delivery, addressed to the party to be notified at the address
indicated for such party on the signature page hereof or at such other address
as the Investor or the Company may designate by giving at least ten (10) days
advance written notice pursuant to this Section 12.5.
12.6 Financial Advisor; No Finder's Fees. The Company has retained
Advest, Inc. ("ADVEST") as its exclusive financial advisor in connection with
the transactions contemplated by this Agreement. Other than any fee or
commission payable to Advest (which payment shall be the obligation of the
Company), each party represents that it neither is nor will be obligated for any
finder's or broker's fee or commission in connection with this transaction. The
Investor will indemnify and hold harmless the Company from any liability for any
commission or compensation in the nature of a finders' or broker's fee for which
the Investor or any of its officers, partners, employees or consultants, or
representatives is responsible. The Company will indemnify and hold harmless the
Investor from any liability for any commission or compensation in the nature of
a finder's or broker's fee for which the Company or any of its officers,
employees or consultants or representatives is responsible, including any fee or
compensation payable to Advest.
12.7 Amendments and Waivers. This Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Investor. Any amendment or waiver
effected in accordance with this Section 12.7 will be binding upon the Investor,
the Company and their respective successors and assigns.
12.8 Severability. If any provision of this Agreement is held to be
unenforceable under applicable law, such provision will be excluded from this
Agreement and the balance of the Agreement will be interpreted as if such
provision were so excluded and will be enforceable in accordance with its terms.
12.9 Entire Agreement. This Agreement, together with all Exhibits
and schedules hereto, constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings duties or
obligations between the parties with respect to the subject matter hereof.
<PAGE> 24
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12.10 Further Assurances. From and after the date of this Agreement
upon the request of the Investor or the Company, the Company and the Investor
will execute and deliver such instruments, documents or other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
12.11 Meaning of Include and Including. Whenever in this Agreement
the word "include" or "including" is used, it shall be deemed to mean "include,
without limitation" or "including, without limitation," as the case may be, and
the language following "include" or "including" shall not be deemed to set forth
an exhaustive list.
12.12 Fees, Costs and Expenses. All fees, costs and expenses
(including attorneys' fees and expenses) incurred by either party hereto in
connection with the preparation, negotiation and execution of the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby, shall be the sole and exclusive responsibility of such party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 25
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
<TABLE>
<S> <C>
NUMBER NINE VISUAL TECHNOLOGY CORPORATION SILICON GRAPHICS, INC.
By: /s/ Andrew Najda
By: /s/ David Orton
Name: Andrew Najda
Name: David Orton
Title: Chairman of the Board and
Chief Executive officer Title: Senior Vice President
Address: 18 Hartwell Avenue Address: 2011 N. Shoreline Blvd.
Lexington, Massachusetts 02173 Mountain View, California 94043-1389
Attention: Chief Executive Officer Attention: Director of Corporate Legal
Services
Telephone No.: (781) 674-0009 Telephone No.: (650) 933-3009
Facsimile No.: (781) 869-7220 Facsimile No.: (650) 933-0652
</TABLE>
WITH COPIES TO:
William B. Asher, Jr., Esq.
Testa, Hurwitz & Thibeault, LLP
125 High Street; High Street Tower
Boston, Massachusetts 02110
Facsimile No.: (617) 248-7100
Neil H. Aronson, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Facsimile No.: (617) 542-2241
<PAGE> 26
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CONVERTIBLE NOTE PURCHASE AGREEMENT
LIST OF EXHIBITS
Exhibit A - Form of Secured Subordinated Convertible Promissory Note
Exhibit B - Form of Series A Convertible Preferred Stock Purchase Warrant
Exhibit C - Form of Security Agreement
Exhibit D - Form of Series A Convertible Preferred Stock Terms
Exhibit E - Form of Investor Rights Agreement
Exhibit F - Form of Technology Agreements
<PAGE> 1
EXHIBIT B
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO NUMBER NINE VISUAL TECHNOLOGY
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTE
$[PRINCIPAL AMOUNT] [DATE]
FOR VALUE RECEIVED, Number Nine Visual Technology Corporation, a
Delaware corporation (the "Company"), hereby promises to pay to the order of
Silicon Graphics, Inc., a Delaware corporation, (the "Investor"), no later than
180 days following demand made by the Investor at any time on or after September
30, 1998 (the "Maturity Date"), the principal amount of [PRINCIPAL AMOUNT
($_________)], plus interest in arrears from and including the date hereof on
the principal balance from time to time outstanding, computed daily, at a rate
per annum equal to two percent (2%) above the rate of interest publicly
announced from time to time by Bank of America as its prime rate (the "Prime
Rate"), which rate shall change as and when the Prime Rate changes. Any
principal or interest remaining unpaid following the date on which payment is
due hereunder shall bear interest at the rate equal to the lesser of: (a) four
percent (4%) above the Prime Rate and (b) the maximum rate permitted by law.
This Note may not be prepaid in whole or in part at any time prior to the
Maturity Date. The Company shall provide the Investor at least ten (10) days
prior written notice of its intent to pay the Note in whole or in part on the
Maturity Date or at any time thereafter following Investor's demand. Interest
shall be calculated on the basis of actual number of days elapsed over a year of
360 days. Notwithstanding any other provision of this Note, the holder hereof
does not intend to charge and the Company shall not be required to pay any
interest or other fees or charges in excess of the maximum permitted by
applicable law; any payments in excess of such maximum shall be refunded to the
Company or credited to reduce principal hereunder. All payments received by the
holder hereunder will be applied first to costs of collection, if any, then to
interest and the balance to principal.
Payments of principal and interest will be made by check or by wire
transfer of funds, in immediately available United States funds, sent to the
holder at the address furnished to the Company for that purpose. Principal and
interest hereunder shall be payable in a single payment on demand made pursuant
to the preceding paragraph.
<PAGE> 2
- 2 -
This Note is one of a series of Secured Subordinated Convertible
Promissory Notes of like tenor, issued or issuable by the Company pursuant to
and entitled to the benefits of a certain Securities Purchase Agreement, of even
date herewith by and between the Company and the Investor ("Purchase
Agreement"), and each holder of this Note, by his, her or its acceptance hereof,
agrees to be bound by the provisions of the Purchase Agreement. This Note will
be registered on the books of the Company or its agent as to principal and
interest. Any transfer of this Note will be effected only by surrender of this
Note to the Company and reissuance of a new note to the transferee.
1. Subordination. The Investor's rights to payment of principal
and interest hereunder shall be subject to the rights of the holders of Senior
Debt pursuant to the Intercreditor Agreement with Marine Midland Bank dated May
7, 1998.
2. Events of Default. The outstanding principal and accrued
interest on this Note shall, at the option of the holder hereof, become
immediately due and payable without notice or demand, upon the happening of any
one of the following specified events:
(a) failure to pay any amount as herein set forth;
(b) default in the performance by the Company of any other
obligation to the holder under this Note, which default is not cured
within thirty (30) days after written notice of such default from the
holder;
(c) default in the performance by the Company of any
obligation to the Investor pursuant to the Securities Purchase Agreement
or the Security Agreement which default is not cured within the applicable
cure period, if any, specified therein;
(d) the making of a general assignment for the benefit of
creditors;
(e) the filing of any petition or the commencement of any
proceeding by the Company or any endorser or guarantor of this Note for
any relief under any bankruptcy or insolvency laws, or any laws relating
to the relief of debtors, readjustment of indebtedness, reorganizations,
compositions, or extensions;
(f) the filing of any petition or the commencement of any
proceeding against the Company or any endorser or guarantor of this Note
for any relief under any bankruptcy or insolvency laws, or any laws
relating to the relief of debtors, readjustment of indebtedness,
reorganizations, compositions, or extensions, which proceeding is not
dismissed within sixty (60) days;
(g) permanent suspension of the transaction of the usual
business of the Company; or
(h) the past or future making of a false representation or
warranty by the Company in connection with the Securities Purchase
Agreement or the Security Agreement.
3. Security. This Note is secured by certain assets of the
Company pursuant to the terms of a Security Agreement dated as of May 7, 1998 by
and among the Company and the Investor.
<PAGE> 3
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4. Conversion.
(a) The principal outstanding under this Note and accrued
interest thereon shall be convertible, in whole or in part, whether or not the
holder of this Note has demanded payment therefore, at the option of the holder
upon written notice to the Company delivered at any time (such date of
conversion referred to herein as the Conversion Date), into shares of Series A
Convertible Preferred Stock, $.01 par value, of the Company ("Series A Preferred
Stock"), at a conversion price per share as determined in accordance with
Section 4(c) herein.
(b) The Company covenants and agrees that so long as (i) this
Note is outstanding and (ii) the holder of this Note is entitled to convert this
Note into Series A Preferred Stock, the Company will reserve a number of shares
of Series A Preferred Stock and Common Stock, $.01 par value, of the Company
("Common Stock") issuable upon conversion of the Series A Preferred Stock
sufficient to enable the holder hereof to exercise the conversion rights
contained herein with respect to an amount equal to the amount of principal and
interest from time to time due hereupon.
(c) The conversion price per share of Series A Preferred Stock
shall be $2.75 (as such price may be adjusted for stock splits, stock dividends
and the like).
(d) If the holder of this Note elects to convert this Note in
part, as provided herein, the holder shall be entitled to a new note, which note
shall be dated as of the date of this Note and shall cover the remaining
principal balance outstanding hereunder which had not been converted into shares
of Series A Preferred Stock.
5. Expenses of Collection. The Company agrees to pay the holder's
reasonable costs in collecting and enforcing this Note, including reasonable
attorney's fees.
6. Waiver by Holder. No waiver of any obligation of the Company
under this Note shall be effective unless it is in a writing signed by the
holder. A waiver by the holder of any right or remedy under this Note on any
occasion shall not be a bar to exercise of the same right or remedy on any
subsequent occasion or of any other right or remedy at any time.
7. Notice. Any notice required or permitted under this Note shall
be in writing and shall be deemed to have been given on the date of delivery, if
personally delivered to the party to whom notice is to be given, or on the fifth
business day after mailing, if mailed to the party to whom notice is to be
given, by certified mail, return receipt requested, postage prepaid, and
addressed as follows:
if to the Company, at
Number Nine Visual Technology Corporation
18 Hartwell Avenue
Lexington, Massachusetts 02173; and
<PAGE> 4
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if to the holder, at the most recent address provided to the
Company by the holder for such purpose; or, in each case, to the most recent
address, specified by written notice, given to the sender pursuant to this
paragraph.
8. Waiver by Company. The Company hereby expressly waives
presentment, demand, and protest, notice of demand, dishonor and nonpayment of
this Note, and all other notices or demands of any kind in connection with the
delivery, acceptance, performance, default or enforcement hereof, and hereby
consents to any delays, extensions of time, renewals, waivers or modifications
that may be granted or consented to by the holder hereof with respect to the
time of payment or any other provision hereof or of the Security Agreement.
9. Severability. In the event any one or more of the provisions
of this Note shall for any reason be held to be invalid, illegal or
unenforceable, in whole or in part or in any respect, or in the event that any
one or more of the provisions of this Note operate or would prospectively
operate to invalidate this Note, then and in any such event, such provision(s)
only shall be deemed null and void and shall not affect any other provision of
this Note and the remaining provisions of this Note shall remain operative and
in full force and effect and in no way shall be affected, prejudiced, or
disturbed thereby.
10. Governing Law. This Note shall be governed by and construed
and enforced in accordance with the laws of the Commonwealth of Massachusetts.
NUMBER NINE VISUAL TECHNOLOGY
CORPORATION
[Corporate Seal] By:___________________________
Name:_________________________
Title:________________________
Attested:
By:___________________________
Name:_________________________
Title:________________________
<PAGE> 1
EXHIBIT C
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR SOME OTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS AVAILABLE WITH
RESPECT THERETO.
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE WARRANT
Warrant No. 1
NUMBER NINE VISUAL TECHNOLOGY CORPORATION
Void after Expiration Date (defined herein)
1. Issuance. This Warrant is issued to Silicon Graphics, Inc. ("SGI"),
a Delaware corporation, by Number Nine Visual Technology Corporation, a Delaware
corporation (hereinafter with its successors called the "Company").
2. Purchase Price; Number of Shares.
(a) Subject to the terms and conditions hereinafter set forth, the
registered holder of this Warrant (the "Holder"), commencing on the Exercise
Date (as defined herein), is entitled upon surrender of this Warrant with the
subscription form annexed hereto duly executed, at the office of the Company, 18
Hartwell Avenue, Lexington, Massachusetts 02173, or such other office as the
Company shall notify the Holder of in writing, to purchase from the Company at a
price per share (the "Purchase Price") of $2.75, the Warrant Shares (as defined
herein). Until such time as this Warrant is exercised in full or expires, the
Purchase Price and the Warrant Shares issuable upon exercise of this Warrant are
subject to adjustment as hereinafter provided.
(b) For purposes hereof, "Warrant Shares" shall be that number of
fully paid and nonassessable shares of Series A Convertible Preferred Stock,
$.01 par value, of the Company (the "Series A Preferred Stock") as are
convertible into shares of the Company's Common Stock, $.01 par value per share
(the "Common Stock") equal to three percent (3%) of the Company's issued and
outstanding Common Stock, calculated on a fully diluted basis (excluding the
Series A Preferred Stock and any warrants or options that are not
"in-the-money") as of the Exercise Date.
<PAGE> 2
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(c) For purposes hereof, "Exercise Date" shall mean the date upon
which the Company pays any outstanding principal and interest due under any of
the secured subordinated convertible promissory notes (the "Notes") issued
pursuant to a Securities Purchase Agreement dated May 7, 1998 by and between the
Company and the Investor; provided, however, that if the Holder converts any
portion of the Notes into equity, the Warrant shall not be exercisable.
3. Payment of Purchase Price. The Purchase Price may be paid (i) in
cash or by check, (ii) by the surrender by the Holder to the Company of any
promissory notes or other obligations issued by the Company, with all such notes
and obligations so surrendered being credited against the Purchase Price in an
amount equal to the principal amount thereof plus accrued interest to the date
of surrender, (iii) by any combination of the foregoing.
4. Partial Exercise. This Warrant may be exercised in part, and the
Holder shall be entitled to receive a new warrant, which shall be dated as of
the date of this Warrant, covering the number of shares in respect of which this
Warrant shall not have been exercised.
5. Issuance Date. The person or persons in whose name or names any
certificate representing shares of Series A Preferred Stock is issued hereunder
shall be deemed to have become the holder of record of the shares represented
thereby as at the close of business on the date this Warrant is exercised with
respect to such shares, whether or not the transfer books of the Company shall
be closed.
6. Exercise; Expiration Date. This Warrant shall expire at the close of
business on the third (3rd) anniversary of the Exercise Date, and shall be void
thereafter.
7. Reserved Shares; Valid Issuance. The Company covenants that it will
at all times from and after the date hereof reserve and keep available such
number of its authorized shares of Series A Preferred Stock and Common Stock
free from all preemptive or similar rights therein, as will be sufficient to
permit the exercise of this Warrant in full and the conversion into shares of
Common Stock of all shares of Series A Preferred Stock received upon such
exercise. The Company further covenants that such shares as may be issued
pursuant to the exercise of this Warrant and conversion of the shares of Series
A Preferred Stock acquired thereby, will, upon issuance, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof.
8. Dividends. If after May 7, 1998 (the "Authorization Date") the
Company shall subdivide the Series A Preferred Stock, by split-up or otherwise,
or combine the Series A Preferred Stock, or issue additional shares of Series A
Preferred Stock in payment of a stock dividend on the Series A Preferred Stock,
the number of shares issuable on the exercise of this Warrant shall forthwith be
proportionately increased in the case of a subdivision or stock dividend, or
proportionately decreased in the case of a combination, and the Purchase Price
shall forthwith be proportionately decreased in the case of a subdivision or
stock dividend, or proportionately increased in the case of a combination.
<PAGE> 3
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9. Mergers and Reclassifications. If after the Authorization Date there
shall be any reclassification, capital reorganization or change of the Series A
Preferred Stock (other than as a result of a subdivision, combination or stock
dividend provided for in Section 9 hereof), or any consolidation of the Company
with, or merger of the Company into, another corporation or other business
organization (other than a consolidation or merger in which the Company is the
continuing corporation and which does not result in any reclassification or
change of the outstanding Series A Preferred Stock), or any sale or conveyance
to another corporation or other business organization of all or substantially
all of the assets of the Company, then, as a condition of such reclassification,
reorganization, change, consolidation, merger, sale or conveyance, lawful
provisions shall be made, and duly executed documents evidencing the same from
the Company or its successor shall be delivered to the Holder, so that the
Holder shall thereafter have the right to purchase, at a total price not to
exceed that payable upon the exercise of this Warrant in full, the kind and
amount of shares of stock and other securities and property receivable upon such
reclassification, reorganization, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Series A Preferred Stock which
might have been purchased by the Holder immediately prior to such
reclassification, reorganization, change, consolidation, merger, sale or
conveyance (or, if there are no holders of Series A Preferred Stock at such
time, by a holder of the number of shares of Common Stock which might have been
acquired by the Holder immediately prior to such reclassification,
reorganization, change, consolidation, merger, sale or conveyance upon the
exercise of this Warrant in full and the conversion into shares of Common Stock
of all shares of Series A Preferred Stock receivable upon such exercise), and in
any such case appropriate provisions shall be made with respect to the rights
and interest of the Holder to the end that the provisions hereof (including
without limitation, provisions for the adjustment of the Purchase Price and the
number of shares issuable hereunder) shall thereafter be applicable in relation
to any shares of stock or other securities and property thereafter deliverable
upon exercise hereof.
10. Fractional Shares. In no event shall any fractional share of Series
A Preferred Stock be issued upon any exercise of this Warrant. If, upon exercise
of this Warrant as an entirety, the Holder would, except as provided in this
Section 12, be entitled to receive a fractional share of Series A Preferred
Stock, then the Company shall issue the next higher number of full shares of
Series A Preferred Stock, issuing a full share with respect to such fractional
share.
11. Certificate of Adjustment. Whenever the Purchase Price is adjusted,
as herein provided, the Company shall promptly deliver to the Holder a
certificate of a firm of independent public accountants setting forth the
Purchase Price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment.
12. Notices of Record Date, Etc. In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right
to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
<PAGE> 4
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(b) any reclassification of the capital stock of the Company,
capital reorganization of the Company, consolidation or merger involving
the Company, or sale or conveyance of all or substantially all of its
assets, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right, or (ii) the date on which
any such reclassification, reorganization, consolidation, merger, sale or
conveyance, dissolution, liquidation or winding-up is to take place, and the
time, if any is to be fixed, as of which the holders of record in respect of
such event are to be determined. Such notice shall be mailed at least 20 days
prior to the date specified in such notice on which any such action is to be
taken.
13. Amendment. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Company and the holder of this
Warrant; provided, however, if the holder of this Warrant transfers this Warrant
with respect to any of the shares purchasable hereunder, this Warrant may be
amended, modified or waived only with the written consent of the Company and the
holders of the Warrants representing at least two-thirds of the number of shares
of Series A Preferred Stock then issuable upon the exercise of such Warrants. No
such amendment, modification or waiver shall be effective as to this Warrant
unless the terms of such amendment, modification or waiver shall apply with the
same force and effect to all of the other Warrants then outstanding.
14. Warrant Register; Transfers, Etc.
A. The Company will maintain a register containing the name and
address of the registered holder of the Warrant, and if the holder of the
Warrant transfers this Warrant with respect to any of the shares
purchasable hereunder, the names and addresses of the holders of such
Warrants. The Holder may change its address as shown on the warrant
register by written notice to the Company requesting such change. Any
notice or written communication required or permitted to be given to the
Holder may be given by certified mail or delivered to the Holder at its
address as shown on the warrant register.
B. Subject to compliance with applicable federal and state
securities laws, as well as Section 17 hereof, this Warrant may be
transferred by the Holder with respect to any or all of the shares
purchasable hereunder. Upon surrender of this Warrant to the Company,
together with the assignment hereof properly endorsed, for transfer of
this Warrant as an entirety by the Holder, the Company shall issue a new
warrant of the same denomination to the assignee. Upon surrender of this
Warrant to the Company, together with the assignment hereof properly
endorsed, by the Holder for transfer with respect to a portion of the
shares of Series A Preferred Stock purchasable hereunder, the Company
shall issue a new warrant to the assignee, in such denomination as shall
be requested by the Holder hereof, and shall
<PAGE> 5
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issue to such Holder a new warrant covering the number of shares in
respect of which this Warrant shall not have been transferred.
C. In case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new warrant of like tenor and
denomination and deliver the same (i) in exchange and substitution for and
upon surrender and cancellation of any mutilated Warrant, or (ii) in lieu
of any Warrant lost, stolen or destroyed, upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft or destruction
of such Warrant (including a reasonably detailed affidavit with respect to
the circumstances of any loss, theft or destruction) and of indemnity
reasonably satisfactory to the Company; provided, however, that so long as
Silicon Graphics Computer Systems is the registered holder of this
Warrant, no indemnity shall be required other than its written agreement
to indemnify the Company against any loss arising from the issuance of
such new warrant.
15. No Impairment. The Company will not, by amendment of its Certificate
of Incorporation or through any reclassification, capital reorganization,
consolidation, merger, sale or conveyance of assets, dissolution, liquidation,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder.
16. Governing Law. The provisions and terms of this Warrant shall be
governed by and construed in accordance with the internal laws of the State of
Delaware.
17. Successors and Assigns. This Warrant shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors, legal representatives and permitted assigns. Notwithstanding the
foregoing, the holder of this Warrant may not transfer the Warrant without the
prior written consent of the Company which consent shall not be unreasonably
withheld, provided, however, no consent of the Company shall be required for
transfer of the Warrant to a wholly-owned subsidiary or a financial institution.
18. Business Days. If the last or appointed day for the taking of any
action required or the expiration of any right granted herein shall be a
Saturday or Sunday or a legal holiday in California, then such action may be
taken or right may be exercised on the next succeeding day which is not a
Saturday or Sunday or such a legal holiday.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE TO FOLLOW]
<PAGE> 6
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NUMBER NINE VISUAL TECHNOLOGY
CORPORATION
Dated: May 7, 1998 By: /s/ Andrew Najda
----------------
Title: Chairman of the Board and Chief Executive
Officer
(Corporate Seal)
Attest:
- ---------------------------
<PAGE> 7
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SUBSCRIPTION
To: NUMBER NINE VISUAL Date: _________________________
TECHNOLOGY CORPORATION
18 Hartwell Avenue
Lexington, Massachusetts 02173
The undersigned hereby subscribes for __________ shares of Series A
Preferred Stock covered by this Warrant. The certificate(s) for such shares
shall be issued in the name of the undersigned or as otherwise indicated below:
SILICON GRAPHICS, INC.
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
Name for
Registration:_____________________________
Mailing Address:__________________________
__________________________________________
<PAGE> 8
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ASSIGNMENT
For value received ____________________________ hereby sells, assigns and
transfers unto _________________________________ (please print or typewrite
name and address of Assignee) the within Warrant, and does hereby irrevocably
constitute and appoint _______________________ its attorney to transfer the
within Warrant on the books of the within named Company with full power of
substitution on the premises.
Dated:_______________________
SILICON GRAPHICS, INC.
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
In the Presence of:
_____________________________
Witness Signature
<PAGE> 1
EXHIBIT D
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of May 7, 1998 made by Number Nine Visual
Technology Corporation, a Delaware corporation (the "Borrower") in favor of
Silicon Graphics, Inc. (the "Investor").
RECITALS
Pursuant to the Securities Purchase Agreement of even date herewith (as
amended, supplemented or otherwise modified from time to time, the "Purchase
Agreement"), between the Borrower and the Investor, the Investor has agreed to
make loans to the Borrower, upon the terms and subject to the conditions set
forth therein, to be evidenced by a series of secured subordinated convertible
promissory notes (each a "Note" and, collectively, the "Notes") issued by the
Borrower thereunder. It is a condition precedent to the obligation of the
Investor to make its loans to the Borrower under the Purchase Agreement that the
Borrower shall have executed and delivered this Security Agreement to the
Investor.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and to induce the Investor to make its loans to the Borrower under
the Purchase Agreement, the Borrower hereby agrees with the Investor as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are
defined in the Purchase Agreement and used herein are so used as so defined; the
following terms which are defined in the Uniform Commercial Code in effect in
the Commonwealth of Massachusetts on the date hereof are used herein as therein
defined: Accounts, Chattel Paper, Documents, Equipment, Fixtures, General
Intangibles, Goods, Instruments, Inventory and Proceeds; and the following terms
shall have the following meanings:
"Code" means the Uniform Commercial Code as from time to time in
effect in the Commonwealth of Massachusetts.
"Collateral" shall have the meaning assigned to it in Section 2 of
this Security Agreement.
"Event of Default" shall have the meaning assigned to it in the
Notes.
"Obligations" means the unpaid principal amount of, and interest on,
the Notes and all other obligations and liabilities of the Borrower to the
Investor, whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or in
connection with, the Purchase Agreement, the Notes or this Security Agreement
and each other obligation and liability, whether direct or indirect, absolute or
contingent, due or to become due, or now or hereafter existing, of the Borrower
to the Investor, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs,
<PAGE> 2
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expenses (including, without limitation, all reasonable fees and disbursements
of counsel to the Investor) or otherwise.
"Security Agreement" means this Security Agreement, as amended,
supplemented or otherwise modified from time to time.
2. Grant of Security Interest. As collateral security for the prompt
and complete payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Obligations, the Borrower hereby grants to
the Investor a security interest in the property set forth on Schedule A hereto
(collectively, the "Collateral").
3. Rights of Investor; Limitations on Investor's Obligations.
(a) Borrower Remains Liable under Accounts. Anything herein to the
contrary notwithstanding, the Borrower shall remain liable under each of the
Accounts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account. The Investor shall not have any
obligation or liability under any Account (or any agreement giving rise thereto)
by reason of or arising out of this Security Agreement or the receipt by the
Investor of any payment relating to such Account pursuant hereto, nor shall the
Investor be obligated in any manner to perform any of the obligations of the
Borrower under or pursuant to any Account (or any agreement giving rise
thereto), to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party under any Account (or any agreement giving rise
thereto), to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
(b) Notice to Account Debtors. Upon the request of the Investor at
any time after the occurrence and during the continuance of an Event of Default,
the Borrower shall notify account debtors on the Accounts that the Accounts have
been assigned to the Investor and that payments in respect thereof shall be made
directly to the Investor. The Investor may in its own name or in the name of
others communicate with account debtors on the Accounts to verify with them to
its satisfaction the existence, amount and terms of any Accounts.
(c) Collections on Accounts. The Investor hereby authorizes the
Borrower to collect the Accounts, and the Investor may curtail or terminate said
authority at any time after the occurrence and during the continuance of an
Event of Default. If required by the Investor at any time after the occurrence
and during the continuance of an Event of Default, any payments of Accounts,
when collected by the Borrower, shall be forthwith (and, in any event, within
two Business Days) deposited by the Borrower in the exact form received, duly
endorsed by the Borrower to the Investor if required, in a special collateral
account maintained by the Investor, subject to withdrawal by the Investor only,
as hereinafter provided, and, until so turned over, shall be held by the
Borrower in trust for the Investor, segregated from other funds of the Borrower.
All Proceeds constituting collections of Accounts while held by the Investor (or
by the Borrower in trust for the Investor) shall continue to be collateral
security for all of the
<PAGE> 3
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Obligations and shall not constitute payment thereof until applied thereto by
the Investor, or by the Borrower with the Investor's consent. If an Event of
Default shall have occurred and be continuing, at any time at the Investor's
election, the Investor shall apply all or any part of the funds on deposit in
said special collateral account on account of the Obligations in such order as
the Investor may elect, and any part of such funds which the Investor elects not
so to apply and deems not required as collateral security for the Obligations
shall be paid over from time to time by the Investor to the Borrower or to
whomsoever may be lawfully entitled to receive the same. At the Investor's
request, the Borrower shall deliver to the Investor all original and other
documents evidencing, and relating to, the agreements and transactions which
gave rise to the accounts, including, without limitation, all original orders,
invoices and shipping receipts.
(d) Trust Account. Upon the occurrence and during the continuance of
an Event of Default, the Investor may, in its sole discretion, elect to require
the Borrower to establish with the Investor a trust account and to deal with all
of its Receivables subject to the provisions of this Section. Following such
election, the Borrower will collect its Receivables as the Investor's collection
agent, hold such collections in trust for the Investor without commingling the
same with other funds of the Borrower and will promptly, on the day of receipt
thereof, transmit such collections to the Investor in the identical form in
which they were received by the Borrower, with such endorsements as may be
appropriate, accompanied by a report, in form approved by the Investor, showing
the amount of such collections and the cash discounts applicable thereto.
(e) Title to Collateral. The Borrower represents and warrants to the
Investor that it has good title to all of the Collateral, free and clear of all
liens, security interests and adverse interests, other than the Permitted Liens,
in favor of any person or entity other than the Investor.
4. Covenants. The Borrower covenants and agrees with the Investor that,
from and after the date of this Security Agreement until the Obligations are
paid in full:
(a) Further Documentation; Pledge of Instruments and Chattel Paper.
At any time and from time to time, upon the written request of the Investor, and
at the sole expense of the Borrower, the Borrower will promptly and duly execute
and deliver such further instruments and documents and take such further action
as the Investor may reasonably request for the purpose of obtaining or
preserving the full benefits of this Security Agreement and of the rights and
powers herein granted, including, without limitation, the filing of any
financing or continuation statements under the Uniform Commercial Code in effect
in any jurisdiction with respect to the security interests and liens created
hereby. The Borrower also hereby authorizes the Investor to file any such
financing or continuation statement without the signature of the Borrower to the
extent permitted by applicable law. A carbon, photographic or other reproduction
of this Security Agreement shall be sufficient as a financing statement for
filing in any jurisdiction. If any amount payable under or in connection with
any of the Collateral shall be or become evidenced by any Instrument or Chattel
Paper, such Instrument or Chattel Paper shall be immediately delivered to the
Investor, duly endorsed in a manner satisfactory to the Investor, to be held as
Collateral pursuant to this Security Agreement.
<PAGE> 4
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(b) Indemnification. The Borrower agrees to pay, and to save the
Investor harmless from, any and all liabilities, reasonable costs and expenses
(including, without limitation, legal fees and expenses) (i) with respect to, or
resulting from, any delay in paying, any and all excise, sales or other taxes
which may be payable or determined to be payable with respect to any of the
Collateral, (ii) with respect to, or resulting from, any delay in complying with
any law, rule, regulation or order of any court, arbitrator or governmental
entity, jurisdiction or authority applicable to any of the Collateral or (iii)
in connection with any of the transactions contemplated by this Security
Agreement. In any suit, proceeding or action brought by the Investor under any
Account for any sum owing thereunder, or to enforce any provisions of any
Account, the Borrower will save, indemnify and keep the Investor harmless from
and against all expense, loss or damage suffered by reason of any defense,
setoff, counterclaim, recoupment or reduction or liability whatsoever of the
account debtor or obligor thereunder, arising out of a breach by the Borrower of
any obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor of such account debtor or obligor or
its successors from the Borrower. The foregoing indemnification shall not apply
to any liabilities, costs or expenses resulting directly from the gross
negligence, actual willful misconduct or bad faith of the Investor.
(c) Maintenance of Records. The Borrower will keep and maintain at
its own cost and expense satisfactory and complete records of the Collateral,
including without limitation, a record of all payments received and all credits
granted with respect to the Accounts. For the Investor's further security, the
Borrower hereby grants to the Investor a security interest in all of the
Borrower's books and records pertaining to the Collateral, and upon the
occurrence and during the continuance of an Event of Default, the Borrower shall
turn over any such books and records to the Investor or to its representatives
during normal business hours at the request of the Investor.
(d) Right of Inspection. The Investor shall at all times have full
and free access during normal business hours, and upon reasonable prior notice,
to all the books of record and account of the Borrower, and the Investor or its
representatives may examine the same, take extracts therefrom and make
photocopies thereof, and the Borrower agrees to render to the Investor, at the
Borrower's cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto. The Investor and its representatives
shall at all times also have the right during normal business hours, and upon
reasonable prior notice, to enter into and upon any premises where any of the
Inventory or Equipment is located for the purpose of inspecting the same or
otherwise protecting its interests therein.
(e) Compliance with Laws, etc. The Borrower will comply in all
material respects with all laws, rules, regulations and orders of any court,
arbitrator or governmental entity, jurisdiction or authority applicable to the
Collateral or any part thereof or to the operation of the Borrower's business;
provided, however, that the Borrower may contest any such law, rule, regulation
or order in any reasonable manner which shall not, in the reasonable opinion of
the Investor, adversely affect the Investor's rights or the priority of its
liens on the Collateral.
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(f) Payment of Obligations. The Borrower will pay promptly when
due all taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if (i) the validity thereof is being contested in good faith
by appropriate proceedings, (ii) such proceedings do not involve any material
danger of the sale, forfeiture or loss of any of the Collateral or any interest
therein and (iii) such charge is adequately reserved against on the Borrower's
books in accordance with GAAP.
(g) Limitation on Liens on Collateral. The Borrower will not create,
incur or permit to exist, will defend the Collateral against, and will take such
other action as is necessary to remove, any lien, security interest, pledge,
mortgage, deed of trust, levy, attachment, claim or other charge or encumbrance
on or to the Collateral, other than Permitted Liens, and will defend the right,
title and interest of the Investor in and to any of the Collateral against the
claims and demands of all persons or entities whatsoever.
(h) Limitations on Dispositions of Collateral. The Borrower will not
sell, transfer, lease or otherwise dispose of any of the Collateral, or attempt,
offer or contract to do so, except for sales of Collateral permitted by the
Purchase Agreement.
(i) Limitations on Discounts, Compromises, Extensions of Accounts.
Other than in the ordinary course of business as generally conducted by the
Borrower, the Borrower will not grant any extension of the time of payment of
any of the Accounts, compromise, compound or settle the same for less than the
full amount thereof, release, wholly or partially, any person or entity liable
for the payment thereof, or allow any credit or discount whatsoever thereon.
(j) Maintenance of Equipment. The Borrower will maintain each item
of Equipment in good operating condition, ordinary wear and tear and immaterial
impairments of value and damage by the elements excepted, and will provide all
maintenance, service and repairs necessary for such purpose.
(k) Maintenance of Insurance. The Borrower will maintain, with
financially sound and reputable companies, insurance policies (i) insuring the
Inventory, Equipment and Vehicles against loss by fire, explosion, theft and
such other casualties as may be reasonably satisfactory to the Investor and (ii)
insuring the Borrower and the Investor against liability for personal injury and
property damage relating to such Inventory, Equipment and Vehicles, such
policies to be in such form and amounts and having such coverage as may be
reasonably satisfactory to the Investor, with losses payable to the Borrower and
the Investor as their respective interests may appear. All such insurance shall
(i) provide that no termination, cancellation, material reduction in amount or
material change in coverage thereof shall be effective until at least 30 days
after receipt by the Investor of written notice thereof, (ii) name the Investor
as an insured and (iii) be reasonably satisfactory in all other respect to the
Investor. From time to time upon the request of the Investor, the Borrower shall
deliver to the Investor insurance policies, certificates or binders as the
Investor may from time to time reasonably request.
<PAGE> 6
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(l) Further Identification of Collateral. The Borrower will furnish
to the Investor from time to time statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Investor may reasonably request, all in reasonable detail.
5. Investor's Appointment as Attorney-in-Fact.
(a) Powers. The Borrower hereby irrevocably constitutes and appoints
the Investor and any officer or agent thereof, with full power of substitution,
as its true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of the Borrower and in the name of the Borrower
or in its own name, from time to time in the Investor's reasonable discretion,
for the purpose of carrying out the terms of this Security Agreement, to take
any and all appropriate action and to execute any and all instruments which may
be necessary or desirable to accomplish the purposes of this Security Agreement,
and, without limiting the generality of the foregoing, the Borrower hereby gives
the Investor the power and right, on behalf of the Borrower, without notice to
or assent by the Borrower, to do the following:
(i) in the case of any Account, at any time when the
authority of the Borrower to collect the Accounts has
been curtailed or terminated pursuant to the first
sentence of Section 3(c) hereof, or in the case of any
other Collateral, at any time when any Event of Default
shall have occurred and is continuing, in the name of
the Borrower or its own name, or otherwise, to take
possession of and endorse and collect any checks,
drafts, notes, acceptances or other instruments for the
payment of moneys due under any Account, Instrument or
with respect to any other action or proceeding in any
court of law or equity or otherwise deemed appropriate
by the Investor for the purpose of collecting any and
all such moneys due under any Account, Instrument or
with respect to any other collateral whenever payable;
(ii) to pay or discharge taxes and liens levied or placed on
or threatened against the Collateral, to effect any
repairs or any insurance called for the terms of this
Security Agreement and to pay all or any part of the
premiums therefor and the costs thereof; and
(iii) Upon the occurrence and during the continuance of any
Event of Default, (A) to direct any party liable for any
payment under any of the Collateral to make payment of
any and all moneys due or to become due thereunder
directly to the Investor or as the Investor shall
direct; (B) to ask or demand for, collect, receive
payment of and receipt for, any and all moneys, claims
and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (C) to sign
and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications, notices and
other documents in connection with any of the
collateral; (D) to commence and prosecute any suits,
actions or proceedings at law or in equity in any court
of competent jurisdiction to
<PAGE> 7
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collect the Collateral or any thereof and to enforce any
other right in respect of any Collateral; (E) to defend
any suit, action or proceeding brought against the
Borrower with respect to any Collateral; (F) to settle,
compromise or adjust any suit, action or proceeding
described in clause (E) above and, in connection
therewith, to give such discharges or releases as the
Investor may deem appropriate; and (G) generally, to
sell, transfer, pledge and make any agreement with
respect to or otherwise deal with any of the Collateral
as fully and completely as though the Investor were the
absolute owner thereof for all purposes, and to do, at
the Investor's option and the Borrower's expense, at any
time, or from time to time, all acts and things which
the Investor deems necessary to protect, preserve or
realize upon the Collateral and the Investor's liens
thereon and to effect the intent of this Security
Agreement, all as fully and effectively as the Borrower
might do.
At the reasonable request of the Investor, the Borrower shall deliver to the
Investor, one or more further documents ratifying any and all actions that said
attorneys shall lawfully take or do or cause to be taken or done by virtue
hereof. This power of attorney is a power coupled with an interest and shall be
irrevocable.
(b) Other Powers. The Borrower also authorizes the Investor, at any
time and from time to time, to execute, in connection with the sales provided
for in Section 7 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(c) No Duty on Investor's Part. The powers conferred on the Investor
hereunder are solely to protect the Investor's interests in the Collateral and
shall not impose any duty upon it to exercise any such powers. The Investor
shall be accountable only for amounts that it actually receives as a result of
the exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Borrower for any act or failure
to act hereunder, except for its own gross negligence or willful misconduct.
6. Performance by Investor of Borrower's Obligations. If the Borrower
fails to perform or comply with any of its agreements contained herein and the
Investor, as provided for by the terms of this Security Agreement, shall itself
perform or comply, or otherwise cause performance or compliance, with such
agreement, the expenses of the Investor incurred in connection with such
performance or compliance, together with interest thereon at a rate per annum
equal to the Prime Rate plus 2%, shall be payable by the Borrower to the
Investor on demand and shall constitute Obligations secured hereby.
7. Remedies. If an Event of Default shall occur and be continuing, the
Investor may exercise, in addition to all other rights and remedies granted to
it in this Security Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the Code. Without limiting the generality of the foregoing, the
Investor, without demand of performance or other demand, presentment, protest,
or notice of any kind (except any notice required by law referred to below) to
or upon the
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Borrower or any other person or entity (all and each of which are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Investor or elsewhere upon such terms
and conditions as it may deem advisable and at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. The Investor shall have the right upon any such public sale or sales, and,
to the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, free of any right or equity or
redemption in the Borrower, which right or equity is hereby waived or released.
The Borrower further agrees, at the Investor's request, to assemble the
Collateral and make it available to the Investor at places which the Investor
shall reasonably select, whether at the Borrower's premises or elsewhere. The
Investor shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred therein or incidental to the care or safekeeping
of any of the Collateral or in any way relating to the Collateral or the rights
of the Investor hereunder, including, without limitation, reasonable attorneys'
fees and disbursements, to the payment in whole or in part of the Obligations,
in such order as the Investor may elect, and only after such application and
after the payment by the Investor of any other amount required by any provision
of law, including, without limitation, Section 9-504(1)(c) of the Code, need the
Investor account for the surplus, if any, to the Borrower. To the extent
permitted by applicable law, the Borrower waives all claims, damages and demands
it may acquire against the Investor arising out of the exercise by the Investor
of any of its rights hereunder, provided that such release shall not apply to
any claim, damage or demand resulting directly from the gross negligence, actual
willful misconduct or bad faith of the Investor. If any notice of a proposed
sale or other disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least seven days before such
sale or other disposition. The Borrower shall remain liable for any deficiency
if the proceeds of any sale or other disposition of the Collateral are
insufficient to pay the Obligations and the fees and disbursements of any
attorneys employed by the Investor to collect such deficiency.
8. Limitation on Duties Regarding Preservation of Collateral. The
Investor's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
Code or otherwise, shall be to deal with it in the same manner as the Investor
deals with similar property for its own account. Neither the Investor nor any of
its directors, officers, employees or agents shall be liable for failure to
demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Borrower or otherwise.
9. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
10. Severability. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such
<PAGE> 9
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prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
11. Paragraph Headings. The paragraph headings used in this Security
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
12. No Waiver; Cumulative Remedies. The Investor shall not by any act
(except by a written instrument pursuant to Section 13 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Investor, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Investor of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Investor would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any rights or remedies provided by law.
13. Waivers and Amendments; Successors and Assigns. None of the terms or
provisions of this Security Agreement may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by the Borrower and
the Investor, provided that any provision of this Security Agreement may be
waived by the Investor in a written letter or agreement executed by the Investor
or by telex or facsimile transmission from the Investor. This Security Agreement
shall be binding upon the successors and assigns of the Borrower and shall inure
to the benefit of the Investor and its successors and assigns.
14. Governing Law. This Security Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the Commonwealth of
Massachusetts,
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Borrower has caused this Security Agreement to be
duly executed and delivered in favor of the Investor as of the date first above
written.
BORROWER:
NUMBER NINE VISUAL TECHNOLOGY
CORPORATION
By: /s/ Andrew Najda
--------------------
Name: Andrew Najda
--------------
Title: Chairman of the Board and Chief Executive Officer
----------------------------------------------------
AGREED AND ACCEPTED TO BY:
INVESTOR:
SILICON GRAPHICS, INC.
By: /s/ David Orton
--------------------
Name: David Orton
---------------
Title: Senior Vice President
------------------------
<PAGE> 11
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SCHEDULE A
Collateral
All of the assets of the Borrower, wherever located and whether now owned
or hereafter acquired or arising, and all proceeds therefrom, including:
(i) all of the Borrower's inventory, goods, wares, merchandise, raw
materials, supplies, work in process, finished goods, and other personal
property of every kind and description held for sale or lease or furnished or to
be furnished under any contract of service, and all goods which are in transit,
and all returned, repossessed and rejected goods of the foregoing description,
and any other tangible personal property held by the Borrower for licensing,
processing, sale or other business purpose or to be used, licensed or consumed
in the Borrower's business;
(ii) all machinery, equipment, motor vehicles, furniture, office
equipment and supplies, plant equipment, tools, dies, molds, fixtures and
leasehold improvements of Borrower, of every kind and description, wherever
located and including all additions, improvements, accessions and substitutions
thereto;
(iii) all accounts, accounts receivable and notes receivable of the
Borrower, whether now existing or hereafter arising, as well as all right, title
and interest of the Borrower in the goods, license rights or services which have
given rise thereto, including the rights of reclamation and of stoppage in
transit and all other rights to the payment of money (including without
limitation, tax refunds);
(iv) all contracts and contract rights of the Borrower, now existing
or hereafter arising, under contracts to sell or lease goods or render services;
(v) all insurance proceeds, whether arising out of any of the
foregoing or otherwise;
(vi) all notes, bills, drafts, acceptances, choses in action,
chattel paper, instruments, and any other forms of obligations and receivables
and rights to payment for credit extended and for goods sold, licensed or leased
or services rendered, whether or not earned by performance, all deposit accounts
maintained by the Borrower with any Investor, trust company, investment firm or
fund, or similar institutions, documents, books and records, rights in and to
all goodwill and all other general intangibles of the Borrower, including all
customer lists, causes of action, judgments, rights to performance, licenses,
permits, copyrights, trademarks, servicemarks, trade secrets, trade names,
patents, patent applications, patent rights, proprietary processes and related
documentation, intellectual property rights, rights as a licensee to
intellectual property rights, blueprints, drawings, designs, diagrams,
engineering details and specifications, plans, reports, charts, catalogs,
manuals, inventions, know-how, notes and memoranda, technical data and any and
all concepts or ideas in any manner related to the design, development,
manufacture, sale,
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marketing, license, lease or use of any or all goods produced or sold, licensed
or leased or services rendered by the Borrower in its business; and
(vii) all securities and all guaranties for, and all products,
proceeds, additions, substitutions, and accessions of, any of the foregoing
property.
<PAGE> 1
EXHIBIT E
FORM OF SERIES A CONVERTIBLE PREFERRED STOCK TERMS
1. Number of Shares. The series of Preferred Stock designated and known
as "Series A Convertible Preferred Stock" shall consist of 3,400,000 shares,
which shares shall have the rights, preferences and privileges as set forth
below.
2. Voting.
2A. General. Except as may be otherwise provided in these terms of
the Series A Convertible Preferred Stock or by law, the Series A Convertible
Preferred Stock shall vote together with all other classes and series of stock
of the Corporation as a single class on all actions to be taken by the
stockholders of the Corporation, including, but not limited to actions amending
the Certificate of Incorporation of the Corporation to increase the number of
authorized shares of Common Stock. Each share of Series A Convertible Preferred
Stock shall entitle the holder thereof to such number of votes per share on each
such action as shall equal the number of shares of Common Stock (including
fractions of a share) into which each share of Series A Convertible Preferred
Stock is then convertible.
2B. Board Size. Provided that the shares of Series A Convertible
Preferred Stock held by Silicon Graphics, Inc. (or by a wholly-owned
subsidiary), based upon the then applicable conversion price as determined in
accordance with Section 6 herein, equals or exceeds at least five percent (5%)
of the then issued and outstanding shares of the Company's Common Stock, the
Corporation shall not, without the written consent or affirmative vote of the
holders of at least two-thirds of the then outstanding shares of Series A
Convertible Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class, increase the
maximum number of directors constituting the Board of Directors to a number in
excess of seven.
2C. Board Seats. Provided that the shares of Series A Convertible
Preferred Stock held by Silicon Graphics, Inc. (or by a wholly-owned
subsidiary), based upon the then applicable conversion price as determined in
accordance with Section 6 herein, equals or exceeds at least five percent (5%)
of the then issued and outstanding shares of the Company's Common Stock, the
holders of the shares of Series A Convertible Preferred Stock, voting as a
separate class, shall be entitled to elect one director of the Corporation. The
holders of the Common Stock, voting as a separate class, shall be entitled to
elect the remaining directors of the Corporation. At any meeting (or in a
written consent in lieu thereof) held for the purpose of electing directors, the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Series A Convertible Preferred Stock then outstanding
shall constitute a quorum of the Series A Convertible Preferred Stock for the
election of directors to be elected solely by the holders of the Series A
Convertible Preferred Stock or jointly by the holders of the Series A
Convertible Preferred Stock and the Common Stock. A vacancy in any directorship
elected by the holders of the Series A Convertible Preferred Stock shall be
filled only by vote or written consent of the holders of the Series A
Convertible Preferred Stock, a vacancy in any directorship
<PAGE> 2
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elected by the holders of the Common Stock shall be filled only by vote or
written consent of the holders of the Common Stock and a vacancy in the
directorship elected jointly by the holders of the Series A Convertible
Preferred Stock and the Common Stock shall be filled only by vote or written
consent of the Series A Convertible Preferred Stock and the Common Stock as
provided above.
3. Dividends. The holders of the Series A Convertible Preferred Stock
shall be entitled to receive, out of funds legally available therefor, dividends
at the same rate as dividends (other than dividends paid in additional shares of
Common Stock) are paid with respect to the Common Stock (treating each share of
Series A Convertible Preferred Stock as being equal to the number of shares of
Common Stock (including fractions of a share) into which each share of Series A
Convertible Preferred Stock is then convertible).
4. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation (a "Liquidation Event"), whether voluntary or involuntary, the
holders of the shares of Series A Convertible Preferred Stock shall be entitled,
before any distribution or payment is made upon any stock ranking on liquidation
junior to the class of Series A Convertible Preferred Stock, to be paid an
amount equal to the greater of (i) $2.75 per share plus, in the case of each
share, and any other dividends declared but unpaid thereon, computed to the date
payment thereof is made available, or (ii) such amount per share as would have
been payable had each such share been converted to Common Stock pursuant to
paragraph 6 immediately prior to such liquidation, dissolution or winding up,
and the holders of Series A Convertible Preferred Stock shall not be entitled to
any further payment, such amount payable with respect to one share of Series A
Convertible Preferred Stock being sometimes referred to as the "Liquidation
Preference Payment" and with respect to all shares of Series A Convertible
Preferred Stock being sometimes referred to as the "Liquidation Preference
Payments". If upon such Liquidation Event, whether voluntary or involuntary, the
assets to be distributed among the holders of the class of Series A Convertible
Preferred Stock shall be insufficient to permit payment to the holders of the
class of Series A Convertible Preferred Stock of the amount distributable as
aforesaid, then the entire assets of the Corporation to be so distributed shall
be distributed ratably among the holders of Series A Convertible Preferred
Stock. Upon any such Liquidation Event, after the holders of Series A
Convertible Preferred Stock shall have been paid in full the amounts to which
they shall be entitled, the remaining net assets of the Corporation may be
distributed to the holders of stock ranking on liquidation junior to the class
of Series A Convertible Preferred Stock. Written notice of such Liquidation
Event, stating a payment date, the amount of the Liquidation Preference Payments
and the place where said Liquidation Preference Payments shall be payable, shall
be delivered in person, mailed by certified or registered mail, return receipt
requested, or sent by telecopier or telex, not less than 20 days prior to the
payment date stated therein, to the holders of record of Series A Convertible
Preferred Stock, such notice to be addressed to each such holder at its address
as shown by the records of the Corporation. The consolidation or merger of the
Corporation into or with any other entity or entities which results in the
exchange of outstanding shares of the Corporation for securities or other
consideration issued or paid or caused to be issued or paid by any such entity
or affiliate thereof (other than a merger to reincorporate the Corporation in a
different jurisdiction), and the sale, lease, abandonment, transfer or other
disposition by the Corporation of all or substantially all its assets, shall be
deemed to be a
<PAGE> 3
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Liquidation Event within the meaning of the provisions of this paragraph 4. For
purposes hereof, the Common Stock shall rank on liquidation junior to the Series
A Convertible Preferred Stock.
5. Restrictions. At any time when shares of Series A Convertible
Preferred Stock are outstanding, except where the vote or written consent of the
holders of a greater number of shares of the Corporation is required by law or
by the Certificate of Incorporation, and in addition to any other vote required
by law or the Certificate of Incorporation, without the approval of the holders
of at least two-thirds of the then outstanding shares of Series A Convertible
Preferred Stock, given in writing or by vote at a meeting, consenting or voting
(as the case may be) separately as a series, the Corporation will not:
5A. Create or authorize the creation of any additional class or
series of shares of stock unless the same ranks junior to the Series A
Convertible Preferred Stock as to the distribution of assets on the liquidation,
dissolution or winding up of the Corporation, or increase the authorized amount
of the Series A Convertible Preferred Stock or increase the authorized amount of
any additional class or series of shares of stock unless the same ranks junior
to the Series A Convertible Preferred Stock as to the distribution of assets on
the liquidation, dissolution or winding up of the Corporation, or create or
authorize any obligation or security convertible into shares of Series A
Convertible Preferred Stock or into shares of any other class or series of stock
unless the same ranks junior to the Series A Convertible Preferred Stock as to
the distribution of assets on the liquidation, dissolution or winding up of the
Corporation, whether any such creation, authorization or increase shall be by
means of amendment to the Certificate of Incorporation or by merger,
consolidation or otherwise;
5B. Consent to any Liquidation Event (as defined in paragraph 4.A.)
where the amount payable with respect to the shares of Series A Convertible
Preferred Stock pursuant to Section 4 would be less than the Liquidation
Preference Payment or, except to the extent the Board of Directors of the
Corporation, after having consulted with and considered the advice of outside
counsel, determines in good faith that the failure to take such action would
constitute a breach of fiduciary duties of the members of such Board of
Directors to its stockholders under applicable law, recommend to the
stockholders of the Corporation to tender their shares in a tender offer or
exchange offer for 25% or more of the outstanding shares of Common Stock of the
Corporation where the amount payable with respect to a share of Common Stock
would be less than the amount of the Liquidation Preference Payment;
5C. Amend, alter or repeal its Certificate of Incorporation if the
effect would be detrimental or adverse in any manner with respect to the rights
of the holders of the Series A Convertible Preferred Stock;
5D. Purchase or set aside any sums for the purchase of, or pay any
dividend or make any distribution on, any shares of stock other than the Series
A Convertible Preferred Stock, except for dividends or other distributions
payable on the Common Stock solely in the form of additional shares of Common
Stock and except for the purchase of shares of Common Stock from former
employees of the Corporation who acquired such shares directly from the
Corporation, if each such purchase is made pursuant to contractual rights held
by the Corporation
<PAGE> 4
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relating to the termination of employment of such former employee and the
purchase price does not exceed the original issue price paid by such former
employee to the Corporation for such shares; or
5E. Redeem or otherwise acquire any shares of Series A Convertible
Preferred Stock except as expressly authorized pursuant to a purchase offer made
pro rata to all holders of the shares of Series A Convertible Preferred Stock on
the basis of the aggregate number of outstanding shares of Series A Convertible
Preferred Stock then held by each such holder.
6. Conversions. The holders of shares of Series A Convertible Preferred
Stock shall have the following conversion rights:
6A. Right to Convert. Subject to the terms and conditions of this
paragraph 6, the holder of any share or shares of Series A Convertible Preferred
Stock shall have the right, at its option at any time, to convert any such
shares of Series A Convertible Preferred Stock (except that upon any liquidation
of the Corporation the right of conversion shall terminate at the close of
business on the business day fixed for payment of the amount distributable on
the Series A Convertible Preferred Stock) into such number of fully paid and
nonassessable shares of Common Stock as is obtained by (i) multiplying the
number of shares of Series A Convertible Preferred Stock so to be converted by
$2.75 and (ii) dividing the result by the conversion price of $2.75 per share
or, in case an adjustment of such price has taken place at any time after May 6,
1998 (the "Authorization Date") pursuant to the further provisions of this
paragraph 6, then by the conversion price as last adjusted and in effect at the
date any share or shares of Series A Convertible Preferred Stock are surrendered
for conversion (such price, or such price as last adjusted, being referred to as
the "Conversion Price"). Such rights of conversion shall be exercised by the
holder thereof by giving written notice that the holder elects to convert a
stated number of shares of Series A Convertible Preferred Stock into Common
Stock and by surrender of a certificate or certificates for the shares so to be
converted to the Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by notice in writing
to the holders of the Series A Convertible Preferred Stock) at any time during
its usual business hours on the date set forth in such notice, together with a
statement of the name or names (with address) in which the certificate or
certificates for shares of Common Stock shall be issued.
6B. Issuance of Certificates; Time Conversion Effected. Promptly
after the receipt of the written notice referred to in subparagraph 6A and
surrender of the certificate or certificates for the share or shares of Series A
Convertible Preferred Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, a certificate or certificates for the
number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Series A Convertible Preferred Stock. To the extent permitted
by law, such conversion shall be deemed to have been effected and the Conversion
Price shall be determined as of the close of business on the date on which such
written notice shall have been received by the Corporation and the certificate
or certificates for such share or shares shall have been surrendered as
aforesaid, and at such time the rights of the holder of such share or shares of
Series A Convertible Preferred Stock shall cease,
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and the person or persons in whose name or names any certificate or certificates
for shares of Common Stock shall be issuable upon such conversion shall be
deemed to have become the holder or holders of record of the shares represented
thereby.
6C. Fractional Shares; Dividends; Partial Conversion. No fractional
shares shall be issued upon conversion of Series A Convertible Preferred Stock
into Common Stock and no payment or adjustment shall be made upon any conversion
on account of any cash dividends on the Common Stock issued upon such
conversion. At the time of each conversion, the Corporation shall pay in cash an
amount equal to all dividends accrued and unpaid on the shares of Series A
Convertible Preferred Stock surrendered for conversion to the date upon which
such conversion is deemed to take place as provided in subparagraph 6B. In case
the number of shares of Series A Convertible Preferred Stock represented by the
certificate or certificates surrendered pursuant to subparagraph 6A exceeds the
number of shares converted, the Corporation shall, upon such conversion, execute
and deliver to the holder, at the expense of the Corporation, a new certificate
or certificates for the number of shares of Series A Convertible Preferred Stock
represented by the certificate or certificates surrendered which are not to be
converted. If any fractional share of Common Stock would, except for the
provisions of the first sentence of this subparagraph 6C, be delivered upon such
conversion, the Corporation, in lieu of delivering such fractional share, shall
pay to the holder surrendering the Series A Convertible Preferred Stock for
conversion an amount in cash equal to the current market price of such
fractional share as determined in good faith by the Board of Directors of the
Corporation.
6D. Adjustment of Price Upon Issuance of Common Stock. Except as
provided in subparagraph 6E, if and whenever the Corporation shall issue or
sell, or is, in accordance with subparagraphs 6D(1) through 6D(7), deemed to
have issued or sold, any shares of Common Stock for a consideration per share
less than the Conversion Price in effect immediately prior to the time of such
issue or sale, then, forthwith upon such issue or sale, the Conversion Price
shall be reduced to the price determined by dividing (i) an amount equal to the
sum of (a) the number of shares of Common Stock outstanding immediately prior to
such issue or sale multiplied by the then existing Conversion Price and (b) the
consideration, if any, received by the Corporation upon such issue or sale, by
(ii) the total number of shares of Common Stock outstanding immediately after
such issue or sale.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1) to
6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time after
the Authorization Date the Corporation shall in any manner grant
(whether directly or by assumption in a merger or otherwise) any
warrants or other rights to subscribe for or to purchase, or any
options for the purchase of, Common Stock or any stock or security
convertible into or exchangeable for Common Stock (such warrants,
rights or options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible
Securities") whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon the conversion
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or exchange of such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable by the
Corporation as consideration for the granting of such Options, plus
the minimum aggregate amount of additional consideration payable to
the Corporation upon the exercise of all such Options, plus, in the
case of such Options which 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 (ii) the total maximum
number of shares of Common Stock issuable upon the exercise of such
Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less
than the Conversion Price in effect immediately prior to the time of
the granting of such Options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or
upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options
shall be deemed to have been issued for such price per share as of
the date of granting of such Options or the issuance of such
Convertible Securities and thereafter shall be deemed to be
outstanding. Except as otherwise provided in subparagraph 6D(3), no
adjustment of the Conversion Price shall be made upon the actual
issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common
Stock upon conversion or exchange of such Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the
Corporation shall at any time after the Authorization Date in any
manner issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are
immediately exercisable, and the price per share for which Common
Stock is issuable upon such conversion or exchange (determined by
dividing (i) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon
the conversion or exchange thereof, by (ii) the total maximum number
of shares of Common Stock issuable upon the conversion or exchange
of all such Convertible Securities) shall be less than the
Conversion Price in effect immediately prior to the time of such
issue or sale, then the total maximum number of shares of Common
Stock issuable upon conversion or exchange of all such Convertible
Securities shall be deemed to have been issued for such price per
share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding,
provided that (a) except as otherwise provided in subparagraph
6D(3), no adjustment of the Conversion Price shall be made upon the
actual issue of such Common Stock upon conversion or exchange of
such Convertible Securities and (b) if any such issue or sale of
such Convertible Securities is made upon exercise of any Options to
purchase any such Convertible Securities for which adjustments of
the Conversion Price have been or are to be made pursuant to other
provisions of this subparagraph 6D, no further adjustment of the
Conversion Price shall be made by reason of such issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events at any time after the
Authorization Date, namely, if the purchase
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price provided for in any Option referred to in subparagraph 6D(1),
the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in subparagraph
6D(1) or 6D(2), or the rate at which Convertible Securities referred
to in subparagraph 6D(1) or 6D(2) are convertible into or
exchangeable for Common Stock shall change at any time (including,
but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Conversion Price in
effect at the time of such event shall forthwith be readjusted to
the Conversion Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration
or conversion rate, as the case may be, at the time initially
granted, issued or sold, but only if as a result of such adjustment
the Conversion Price then in effect hereunder is thereby reduced;
and on the termination of any such Option or any such right to
convert or exchange such Convertible Securities, the Conversion
Price then in effect hereunder shall forthwith be increased to the
Conversion Price which would have been in effect at the time of such
termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such termination, never been
issued.
6D(4) Stock Dividends. In case the Corporation shall at any
time after the Authorization Date declare a dividend or make any
other distribution upon any stock of the Corporation (other than the
Common Stock) payable in Common Stock, Options or Convertible
Securities, then any Common Stock, Options 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.
6D(5) Consideration for Stock. In case at any time after the
Authorization Date any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount
received by the Corporation therefor, without deduction therefrom of
any expenses incurred or any underwriting commissions or concessions
paid or allowed by the Corporation in connection therewith. In case
any shares of Common Stock, Options 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 Corporation shall
be deemed to be the fair value of such consideration as determined
in good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions
or concessions paid or allowed by the Corporation in connection
therewith. In case any Options shall be issued in connection with
the issue and sale of other securities of the Corporation, together
comprising one integral transaction in which no specific
consideration is allocated to such Options by the parties thereto,
such Options shall be deemed to have been issued for such
consideration as determined in good faith by the Board of Directors
of the Corporation.
6D(6) Record Date. In case at any time after the Authorization
Date the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock, Options or
Convertible Securities or (ii) to subscribe for or purchase Common
Stock, Options or Convertible Securities, then such record date
shall be deemed to be the date of
<PAGE> 8
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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.
6D(7) Treasury Shares. 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 Corporation, and the disposition of any
such shares shall be considered an issue or sale of Common Stock for
the purpose of this subparagraph 6D.
6E. Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Conversion Price in the case of the issuance from and after
the date of filing of these terms of the Series A Convertible Preferred Stock of
any shares (appropriately adjusted to reflect the occurrence of any event
described in subparagraph 6F) of Common Stock to directors, officers, employees
or consultants of the Corporation in connection with their service as directors
of the Corporation, their employment by the Corporation or their retention as
consultants by the Corporation issued under the Company's stock option, stock
purchase and equity compensation plans as such plans are in effect as of the
Authorization Date or subsequently approved by the stockholders of the Company,
plus such number of shares of Common Stock which are repurchased by the
Corporation from such persons after such date pursuant to contractual rights
held by the Corporation and at repurchase prices not exceeding the respective
original purchase prices paid by such persons to the Corporation therefor.
6F. Subdivision or Combination of Common Stock. In case the
Corporation shall at any time after the Authorization Date subdivide (by any
stock split, stock dividend or otherwise) its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Conversion Price in effect immediately prior to such
combination shall be proportionately increased. In the case of any such
subdivision, no further adjustment shall be made pursuant to subparagraph 6D(4)
by reason thereof.
6G. Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification, lawful
and adequate provisions shall be made whereby each holder of a share or shares
of Series A Convertible Preferred Stock shall thereupon have the right to
receive, upon the basis and upon the terms and conditions specified herein and
in lieu of the shares of Common Stock immediately theretofore receivable upon
the conversion of such share or shares of Series A Convertible Preferred Stock,
such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such Common Stock immediately theretofore
receivable upon such conversion had such reorganization or reclassification not
taken place, and in any such case appropriate provisions shall be made with
respect to the rights and interests of such holder
<PAGE> 9
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to the end that the provisions hereof (including without limitation provisions
for adjustments of the Conversion Price) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of such conversion rights.
6H. Notice of Adjustment. Upon any adjustment of the Conversion
Price, then and in each such case the Corporation shall give written notice
thereof, by delivery in person, certified or registered mail, return receipt
requested, telecopier or telex, addressed to each holder of shares of Series A
Convertible Preferred Stock at the address of such holder as shown on the books
of the Corporation, which notice shall state the Conversion Price resulting from
such adjustment, setting forth in reasonable detail the method upon which such
calculation is based.
6I. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its Common
Stock payable in cash or stock or make any other distribution to the
holders of its Common Stock;
(2) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of
any class or other rights; or
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a
Liquidation Event (as defined in paragraph 4.A.), whether
voluntarily or involuntarily; or
then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to each holder of any shares of the class of Series A
Convertible Preferred Stock at the address of such holder as shown on the books
of the Corporation, (a) at least 20 days' prior written notice of the date on
which the books of the Corporation shall close or a record shall be taken for
such dividend, distribution or subscription rights or for determining rights to
vote in respect of any such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up and (b) in the case
of any such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up, at least 20 days' prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause (a) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto and such notice in accordance
with the foregoing clause (b) shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up, as
the case may be.
6J. Stock to be Reserved. The Corporation will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose of
issuance upon the conversion of Series A Convertible Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Series A Convertible Preferred
Stock. The Corporation covenants that all shares of Common
<PAGE> 10
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Stock which shall be so issued shall be duly and validly issued and fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and, without limiting the generality of the foregoing, the
Corporation covenants that it will from time to time take all such action as may
be requisite to assure that the par value per share of the Common Stock is at
all times equal to or less than the Conversion Price in effect at the time. The
Corporation will take all such action as may be necessary to assure that all
such shares of Common Stock may be so issued without violation of any applicable
law or regulation, or of any requirement of any national securities exchange
upon which the Common Stock may be listed. The Corporation will not take any
action which results in any adjustment of the Conversion Price if the total
number of shares of Common Stock issued and issuable after such action upon
conversion of the Series A Convertible Preferred Stock would exceed the total
number of shares of Common Stock then authorized by the Certificate of
Incorporation.
6K. No Reissuance of Series A Convertible Preferred Stock. Shares of
Series A Convertible Preferred Stock which are converted into shares of Common
Stock as provided herein shall not be reissued.
6L. Issue Tax. The issuance of certificates for shares of Common
Stock upon conversion of Series A Convertible Preferred Stock shall be made
without charge to the holders thereof for any issuance tax in respect thereof,
provided that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Series A Convertible
Preferred Stock which is being converted.
6M. Closing of Books. The Corporation will at no time close its
transfer books against the transfer of any Series A Convertible Preferred Stock
or of any shares of Common Stock issued or issuable upon the conversion of any
shares of Series A Convertible Preferred Stock in any manner which interferes
with the timely conversion of such Series A Convertible Preferred Stock, except
as may otherwise be required to comply with applicable securities laws.
6N. Definition of Common Stock. As used in this paragraph 6, the
term "Common Stock" shall mean and include the Corporation's authorized Common
Stock, par value $.01 per share, as constituted on the date of filing of these
terms of the Series A Convertible Preferred Stock, and shall also include any
capital stock of any class of the Corporation thereafter authorized which shall
not be limited to a fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends or in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; provided that the shares of Common Stock receivable upon conversion
of shares of Series A Convertible Preferred Stock shall include only shares
designated as Common Stock of the Corporation on the date of filing of this
instrument, or in case of any reorganization or reclassification of the
outstanding shares thereof, the stock, securities or assets provided for in
subparagraph 6G.
7. Amendments. No provision of these terms of the Series A Convertible
Preferred Stock may be amended, modified or waived without the written consent
or affirmative vote of
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the holders of at least two-thirds of the then outstanding shares of Series A
Convertible Preferred Stock.
<PAGE> 1
EXHIBIT F
FORM OF INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "AGREEMENT") is made and entered into
as of ______ __, 199_ by and among Number Nine Visual Technology Corporation, a
Delaware corporation (the "COMPANY"), and Silicon Graphics, Inc., a Delaware
corporation ("INVESTOR").
RECITALS
WHEREAS, the Company and Investor entered into a Securities Purchase
Agreement dated as of May 7, 1998 (the "PURCHASE AGREEMENT") pursuant to which
the Investor agreed to loan the Company an aggregate of Nine Million Dollars
($9,000,000) and the Company agreed to issue secured subordinated convertible
promissory notes (collectively the "NOTES") which Notes are convertible into
shares of Series A Convertible Preferred Stock, $.01 par value per share (the
"PREFERRED STOCK") and the Company issued to Investor a warrant exercisable for
such number of shares of Preferred Stock and pursuant to such terms and
conditions as set forth in the warrant (the "WARRANT") (such shares issuable
upon conversion of the Notes and exercise of the Warrant are collectively
referred to herein as the "PREFERRED SHARES"); and
WHEREAS, as a condition precedent to the conversion of the Notes and
exercise of the Warrant on such conditions and terms as set forth in the Notes,
the Warrant and the Purchase Agreement, the parties are obligated to execute and
deliver this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the parties hereto agree as follows:
AGREEMENT
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
indicated below:
1933 ACT. The Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, as in effect from time to time.
1934 ACT. The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder, as in effect from time to time.
BUSINESS DAY. Each weekday that is not a day on which banking
institutions in the Commonwealth of Massachusetts are authorized or obligated by
law or executive order to close.
COMMISSION. The United States Securities and Exchange Commission.
COMMON STOCK. The Common Stock, $.01 par value per share, of the
Company as constituted as of the date of this Agreement.
<PAGE> 2
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CONVERSION SHARES. The shares of Common Stock issued or issuable
upon conversion of the Preferred Shares, and any securities that may be issued
by the Company or any successor to the Company from time to time with respect
to, in exchange for, or in replacement of such shares of Common Stock Shares,
including, without limitation, the securities issued as a stock dividend on or
pursuant to a stock split of such shares of Common Stock.
HOLDER. Any person owning Registrable Securities who is a party to
this Agreement, and any transferee thereof in accordance with this Agreement.
PROSPECTUS. The prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement (including, without
limitation, any prospectus supplement with respect to the terms of the offering
of any portion of the Registrable Securities covered by such Registration
Statement), and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
REGISTER, REGISTRATION AND REGISTERED. A registration effected by
preparing and filing a registration statement or similar document with the
Commission in compliance with the 1933 Act, and the declaration or ordering of
effectiveness of such registration statement or document.
REGISTRABLE SECURITIES. The Conversion Shares and any other shares
of Common Stock held by the Holder; provided, however, that those shares as to
which the following apply shall cease to be Registrable Securities when: (a) a
Registration Statement with respect to the sale of such Registrable Securities
shall have become effective under the 1933 Act and such Registrable Securities
shall have been disposed of under such Registration Statement; (b) such
Registrable Securities shall have become transferable, or have become eligible
and remain eligible for transfer (whether or not so transferred), in accordance
with Rule 144(k), or any successor rule or provision, under the 1933 Act; (c)
such Registrable Securities shall have been transferred in a transaction in
which the Holder's rights and obligations under this Agreement were not assigned
in accordance with this Agreement; (d) such Registrable Securities shall have
ceased to be outstanding; or (e) such Registrable Securities shall have been
sold pursuant to Rule 144.
REGISTRATION EXPENSES. All expenses incident to the Company's
performance of or compliance with Sections 2 and 3 hereof; including, without
limitation, all registration and filing fees (including filing fees with respect
to the Commission and to the National Association of Securities Dealers, Inc.
and listing fees of The Nasdaq National Market), all fees and expenses of
complying with state securities or "blue sky" laws (including reasonable fees
and disbursements of underwriters' counsel in connection with any "blue sky"
memorandum or survey, but excluding any fees and expenses for foreign
qualification in such jurisdictions), all printing expenses, all registrars' and
transfer agents' fees and all fees and disbursements of the Company's counsel
and independent public accountants; provided, however that Registration Expenses
shall not include the fees and expenses of more than one counsel to the holders
of
<PAGE> 3
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Registrable Securities, or underwriters' discounts and commissions, or brokerage
fees, associated with the sale of the Registrable Securities.
REGISTRATION STATEMENT. A registration statement prepared and filed
with the Commission in compliance with the 1933 Act.
SELLER. Any person, including any Holder, selling any Registrable
Securities in an offering of any Registrable Securities of the Company pursuant
to this Agreement.
SELLING EXPENSES. All applicable discounts and commissions,
brokerage fees, transfer taxes and any fees and disbursements of more than one
counsel or any accountants or other advisors for the Sellers of the Registrable
Securities being registered.
Any other terms used herein and not otherwise defined shall have the
meaning assigned to such term in the Purchase Agreement.
2. "PIGGY-BACK" REGISTRATION RIGHTS
If at any time the Company shall determine to register pursuant to an
underwritten public offering under the 1933 Act any of its shares of Common
Stock for its own account, or the account of other stockholders of the Company
desiring to sell "restricted securities" of the Company (as defined in Rule 144
of the 1933 Act) pursuant to an underwritten public offering, it shall send to
the Holder written notice of such determination and, if within 15 calendar days
after receipt of such notice, Holder shall so request in writing, the Company
shall include in such Registration Statement all or any part of the Registrable
Securities the Holder requests to be registered. This right shall not apply to a
registration of shares of Common Stock on Form S-8 or Form S-4 (or their then
equivalents) relating to shares of Common Stock to be issued by the Company in
connection with any acquisition of any entity or business, or shares of Common
Stock issuable in connection with any stock option, stock purchase plan or other
employee benefit plan of the Company as such plans are in effect as of the date
hereof.
If, in connection with any offering involving an underwriting of shares of
Common Stock to be issued for the account of selling securityholders, the
managing underwriter shall impose a limitation on the number of shares of Common
Stock which may be included in any such registration statement because, in its
judgment, such limitation is necessary to effect an orderly public distribution
of the shares of Common Stock and to maintain a stable market for the securities
of the Company, then the Company shall be obligated to include in such
registration statement only such limited portion of the Registrable Securities
with respect to which the Holder has requested inclusion hereunder, on a pro
rata basis based on the number of shares of Registrable Securities owned by the
Holder and the shares of Common Stock owned by all other selling
securityholders; provided, however, that the Holder of Registrable Securities
shall have priority over other securityholders of the Company (other than
securityholders that do not hold Registrable Securities who have initiated a
registration to which this Section 2 applies and any securities held by the
Company) to include any Registrable Securities held by such Holder in any
registration statement referred to in this Section 2.
<PAGE> 4
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3. SHELF REGISTRATION
3.1 UNDERTAKING TO REGISTER
Within ninety (90) days following the Closing (as that term is
defined in the Purchase Agreement), upon written request of Investor, the
Company will use its commercially reasonable best efforts to prepare, file and
have declared effective a Registration Statement to register all of the
Registrable Securities for resale in the public market in brokerage transactions
or transactions with market makers, in block trades, and in privately negotiated
transactions.
3.2 SELLING PROCEDURES; SUSPENSION
(a) Except in the event that paragraph (b) below applies, the
Company shall (i) if deemed necessary by the Company, prepare and file from time
to time with the Commission a post-effective amendment to the Registration
Statement or a supplement to the related Prospectus or a supplement or amendment
to any document incorporated therein by reference or file any other required
document so that such Registration Statement will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
so that, as thereafter delivered to purchasers of the Registrable Securities
being sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; (ii) provide the Holders of the
Registrable Securities copies of any documents filed pursuant to Section
3.2(a)(i); and (iii) inform each Holder that the Company has complied with its
obligations in Section 3.2(a)(i) (or that, if the Company has filed a
post-effective amendment to the Registration Statement which has not yet been
declared effective, the Company will notify each such Holder to that effect, it
will use its best efforts to secure the effectiveness of such post-effective
amendment and will immediately notify each such Holder pursuant to Section
3.2(a)(i) hereof when the amendment has become effective).
(b) In the event (i) of any request by the Commission or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement for amendments or supplements to a Registration
Statement or related Prospectus or for additional information; (ii) of the
issuance by the Commission or any other federal or state governmental authority
of any stop order suspending the effectiveness of a Registration Statement or
the initiation of any proceedings for that purpose; (iii) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) of any event or circumstance which necessitates the making of any
changes in the Registration Statement or Prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements
<PAGE> 5
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therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; or (v) that, in the reasonable, good faith judgment of the Company's
management or Board of Directors, (A) the offering of securities pursuant
thereto would materially and adversely affect (i) a pending or scheduled public
offering or private placement of the Company's securities, (ii) a pending or
proposed acquisition, merger, consolidation, reorganization, restructuring or
similar transaction of or by the Company or other material corporate activity or
transaction, (iii) bona fide negotiations, discussions or proposals with respect
to any of the foregoing, or (iv) the position or strategy of the Company in
connection with any pending or threatened litigation, claim, assessment or
government investigation, and (B) in the event sales of Registrable Securities
were made under the Registration Statement and disclosure of all material
information with respect to the applicable circumstance(s) described in
subsection (A) had not been made, such circumstance(s) could reasonably be
expected to cause a violation of the 1933 Act or the 1934 Act (each a
"SUSPENSION EVENT"); then, subject to paragraph (d) below, the Company shall
deliver a notice in writing to the Holders (the "SUSPENSION NOTICE") to the
effect of the foregoing and, upon receipt of such Suspension Notice, each such
Holder will refrain from selling any Registrable Securities pursuant to the
Registration Statement (a "SUSPENSION") until such Holder's receipt of copies of
the supplemented or amended Prospectus provided for in Section 3.2(a)(i) hereof,
or until it is advised in writing by the Company that the Prospectus may be
used, and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such Prospectus.
(c) In the event of any Suspension Event, or any delay in effecting
the Registration under Section 3.2 above, the Company will use its commercially
reasonable efforts to ensure that the use of the Prospectus so suspended or
delayed may be commenced or resumed, as the case may be, and that the Suspension
will terminate and the Holder's ability to sell pursuant to the Prospectus so
suspended will commence or resume, as the case may be, as soon as practicable
and, in the case of a pending development, filing or event referred to in
Section 3.2(b)(iv) or (v) hereof, as soon, in the judgment of the Company's
management or Board of Directors (in accordance with the provisions of Section
3.2), as disclosure of such pending development, filing or event or the
resumption of sales pursuant to the Registration Statement would not have a
material adverse effect on the Company's ability to consummate or materially
prejudice the Company's interest with respect to the transaction, if any,
contemplated by such development, filing or event. Notwithstanding any other
provision of this Agreement, the Company shall have the right to cause a maximum
of two (2) Suspensions pursuant to Section 3.2(b)(iv) and (v), neither of which
may be within 60 days of the other, as provided above (including for this
purpose a delay in effecting the Registration pursuant to Section 3.2 above)
during any 12-month period after the initial effective date of the Registration
Statement, and the total number of days for which all Suspensions (including for
this purpose a delay in effecting the Registration Statement pursuant to Section
3.2 above) during any 12-month period shall not exceed 90 days in the aggregate.
(d) The Company will use its commercially reasonable efforts to
maintain the effectiveness of any registration statement pursuant to which any
of the Registrable Securities are being offered for (i) up to 180 days (or such
shorter period of time as the underwriters need to complete the distribution of
the registered offering in any Company-primary or secondary
<PAGE> 6
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offering), in the case of a registration pursuant to Section 2, or (ii) in the
case of a "shelf" Registration Statement pursuant to Section 3 until the date on
which each Holder may sell all Registrable Securities then held by such Holder
without restriction by the volume limitations of Rule 144(e). The Company from
time to time will amend or supplement such Registration Statement and the
Prospectus contained therein to the extent necessary to comply with the 1933 Act
and any applicable state securities statue or regulation. The 180-day time
period referenced in clause (i) above during which the Company is obligated to
keep the registration statement effective shall be extended for a number of days
equal to the number of days during which the Company has effected a Suspension.
The Company shall use commercially reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of the Registration
Statement, or the lifting of any suspension of the qualification (or exemption
from qualification) of any of the securities for sale in any jurisdiction, at
the earliest practicable moment.
3.3 UNDERWRITING AGREEMENT
If in connection with any proposed distribution by the Holder under
the "piggy back" registration referred to in Section 2, the Company in its
discretion shall determine that it is in the best interests of the Company to
effect distribution by means of an underwriting, the Company shall promptly
notify the Holder of such determination. In such event, in addition to the
limitations set forth in Section 2, the right of Holder to participate in such
distribution shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 3.3, including without
limitation, the requirement that the Holder enter into an underwriting agreement
and a lock-up agreement (for a period determined by the managing underwriter not
to exceed the period agreed to by all directors and officers of the Company),
each in customary form with the managing underwriter selected for the
underwriting by the Company.
4. EXPENSES
The Company will pay all Registration Expenses in connection with the
registration of Registrable Securities effected by the Company pursuant to
Section 2 or 3. Holders of Registrable Securities registered pursuant to this
Agreement shall pay all Selling Expenses with each such Holder bearing a pro
rata portion of the Selling Expenses based upon the number of Registrable
Securities registered by each such Holder.
5. EXPIRATION OF REGISTRATION RIGHTS
The obligations of the Company under Section 2 of this Agreement to
register the Registrable Securities shall expire and terminate at the earlier of
(a) two (2) years following the Closing or (b) such time as the Holder shall be
entitled or eligible to sell, within any ninety (90) day period, all such
securities without restriction and without a need for the filing of a
registration statement under the 1933 Act, including without limitation, for any
resales of restricted securities made pursuant to Rule 144(k) as promulgated by
the Commission. The determination as to whether the Holder is entitled or
eligible to sell all Registrable Securities without the need for registration
under the 1933 Act shall be based on a written opinion of counsel that
registration of the Registrable Securities is not required under the 1933 Act,
sufficient to permit the transfer agent to transfer such securities upon a sale
by the Holder. The
<PAGE> 7
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obligations of the Company under Section 3 of this Agreement shall expire at the
time specified in Section 3.2(d)(ii).
6. REGISTRATION PROCEDURES
In connection with the registration of Registrable Securities under this
Agreement, and subject to the other provisions of this Agreement, the Company
shall:
(a) use its commercially reasonable efforts to cause the
Registration Statement filed in accordance with Section 2 or Section 3 to become
effective as soon as practicable after the date of filing thereof;
(b) 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 continuously
effective for the shorter of (i) the duration of its registration obligations,
or (ii) until there are no Registrable Securities outstanding, and to comply
with the provisions of the 1933 Act with respect to the disposition of the
Registrable Securities;
(c) furnish to each Seller of such Registrable Securities such
number of copies of the Prospectus included in such Registration Statement as
such Seller may reasonably request in order to facilitate the sale or
disposition of such Registrable Securities;
(d) use its commercially reasonable efforts to register or qualify
all securities covered by such Registration Statement under such other
securities or "blue sky" laws of such jurisdictions as each Seller shall
reasonably request, and do any and all other acts and things that may be
necessary to enable such Seller to consummate the disposition in such
jurisdictions of its Registrable Securities covered by such Registration
Statement, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, or to subject itself to taxation in respect of
doing business in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;
(e) notify each Seller of Registrable Securities covered by such
Registration Statement, at any time when a Prospectus relating thereto is
required to be delivered under the 1933 Act, of the happening of any event as a
result of which the Prospectus included in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing or if it is
necessary to amend or supplement such Prospectus to comply with the law, and at
the request of any such Seller, prepare and furnish to such Seller a reasonable
number of copies of a supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities or securities, such Prospectus, as amended or supplemented, will
comply with the law;
<PAGE> 8
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(f) use its best efforts to qualify such securities for inclusion in
the Nasdaq National Market, and provide a transfer agent and registrar for such
Registrable Securities not later than the effective date of such Registration
Statement; and
(g) issue to any person (who is not an affiliate of the Company) to
which any Holder of Registrable Securities may sell such Registrable Securities
in connection with such registration certificates evidencing such Registrable
Securities without any legend restricting the transferability of the Registrable
Securities (unless otherwise required by law).
7. 1934 ACT REGISTRATION
The Company shall timely file with the Commission such information as the
Commission may prescribe under Section 13 or 15(d) of the 1934 Act and shall use
its best efforts to take all action and make all filings of information
referenced in Rule 144(c) as may be required as a condition to the availability
of Rule 144 under the 1933 Act (or any successor exemptive rule hereinafter in
effect) with respect to the shares of Common Stock. The Company shall furnish to
any holder of Registrable Securities forthwith upon five (5) days written
request (i) a written statement by the Company as to its compliance with the
reporting requirements of Rule 144(c), (ii) a copy of the most recent annual or
quarterly report of the Company as filed with the Commission, and (iii) such
other publicly-filed reports and documents as a holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a holder to
sell any such Registrable Securities without registration.
8. INVESTOR INFORMATION
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement that all Holders of Registrable
Securities shall furnish to the Company such information regarding themselves,
the Registrable Securities held by them and the intended method of disposition
of such Registrable Securities as shall be reasonably required to effect the
registration of their Registrable Securities and to execute such documents in
connection with such registration as the Company may reasonably request.
9. INDEMNIFICATION AND CONTRIBUTION
In the event any Registrable Securities are included in a Registration
Statement under Sections 2 and 3:
(a) The Company will indemnify and hold harmless each Seller, the
officers, directors, partners, agents and employees of each Seller, any
underwriter (as defined in the 1933 Act) for such Seller and each person, if
any, who controls such Seller or underwriter within the meaning of the 1933 Act
or the 1934 Act, against any losses, claims, damages or liabilities (joint or
several) to which they may become subject under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively, a
"VIOLATION"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such Registration Statement, including any preliminary
Prospectus or final
<PAGE> 9
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Prospectus contained therein or any amendments or supplements thereto; (ii) the
omission or alleged omission to state in such Registration Statement a material
fact required to be stated therein, or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any state securities law or any rule or regulation promulgated under
the 1933 Act, the 1934 Act or any state securities law applicable to the Company
in connection with such Registration Statement; and the Company will reimburse
each such Seller, officer, director, partner, agent, employee, underwriter or
controlling person for any reasonable legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 9(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld or delayed), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon a Violation (i) which occurs in reliance
upon and in conformity with written information furnished expressly for use in
connection with such registration by any such Seller, underwriter or controlling
person or (ii) which is based upon any information in a Prospectus that has been
amended or supplemented if such Seller had been notified of such amendment or
supplement and the use of such amendment or supplement by the Seller would have
avoided the Violation.
(b) Each Seller will indemnify and hold harmless the Company, each
of its officers, directors, partners, agents or employees, each person, if any,
who controls the Company within the meaning of the 1933 Act, any underwriter and
any other Seller or any of its directors, officers, partners, agents or
employees or any person who controls such Seller, against any losses, claims,
damages or liabilities joint or several) to which the Company or any such
director, officer, partner, agent, employee, controlling person or underwriter,
or other such Seller or director, officer, partner, agent, employee or
controlling person may become subject, under the 1933 Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Seller expressly for use in connection with such registration; and each such
Seller will reimburse any reasonable legal or other expenses reasonably incurred
by the Company or any such director, officer, partner, agent, employee,
controlling person or underwriter, other Seller, officer, director, partner,
agent, employee or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. Notwithstanding
anything contained in this Agreement to the contrary, the indemnity agreement
contained in this Section 9(b) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Seller, which consent shall not be unreasonably
withheld or delayed; provided, further, that the aggregate liability of each
Seller in connection with any sale of Registrable Securities pursuant to a
Registration Statement in which a Violation occurred shall be limited to the net
proceeds from such sale.
<PAGE> 10
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(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel selected by the
indemnifying party and reasonably acceptable to the indemnified party; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the reasonable fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
conflicting interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if and to the extent prejudicial to its ability to defend such
action, shall relieve such indemnifying party of liability to the indemnified
party under this Section 9 to the extent of such prejudice, but the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 9.
(d) If recovery is not available under the foregoing indemnification
provisions of this Section 9, for any reason other than as specified therein,
the parties entitled to indemnification by the terms thereof shall be entitled
to contribution to liabilities and expenses in such proportion as is appropriate
to reflect the relative fault of the indemnifying parties and the indemnified
parties, except to the extent that contribution is not permitted under Section
11(f) of the 1933 Act. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things, the
parties' relative knowledge and access to information concerning the matter with
respect to which the claim was asserted, the opportunity to correct and prevent
any statement or omission and any other equitable considerations appropriate
under the circumstances, including, without limitation, whether any untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Company, on the one hand, or by the Holder of Registrable Securities, on the
other hand. The Company and Investors of the Registrable Securities covered by
such Registration Statement agree that it would not be equitable if the amount
of such contribution were determined by pro rata or per capita allocation. No
seller of Registrable Securities covered by such Registration Statement or
person controlling such Seller shall be obligated to make any contribution
hereunder which in the aggregate exceeds the net proceeds of the securities sold
by such seller, less the aggregate amount of any damages which such seller and
its controlling persons have otherwise been required to pay in respect of the
same claim or any substantially similar claim. The obligations of such Investors
to contribute are several in proportion to their respective ownership of the
Registrable Securities covered by such Registration Statement and not joint.
Notwithstanding the foregoing, in no event shall any contribution by a Holder
under this Section 9(d) exceed the net proceeds from the offering received by
such Holder.
<PAGE> 11
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10. TRANSFERABILITY
Each Holder agrees that it will not make any disposition of all or any
portion of the Registrable Securities (a) except in a registered public offering
pursuant to the rights granted in this Agreement; or (b) until (i) such Holder
shall have furnished the Company with a statement of the circumstances
surrounding the proposed disposition and (ii) if reasonably requested by the
Company, such Holder shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to counsel for the Company, that such
disposition will not require registration of such Registrable Securities or such
transaction under the 1933 Act or applicable state securities laws.
11. COVENANTS
The Company covenants and agrees with the Investor that, provided that the
Investor continues to hold Preferred Shares, based upon the then applicable
conversion price, equal to at least five percent (5%) of the then issued and
outstanding shares of the Company's Common Stock:
11.1 DIRECTORS.
(a) Election of Investor Representative. In accordance with the
terms of the Preferred Stock set forth in a Certificate of Designation filed
with the Secretary of State of the State of Delaware (the "CERTIFICATE OF
DESIGNATION"), at each annual meeting of the stockholders of the Company, or at
each special meeting of the stockholders of the Company involving the election
of directors of the Company, and at any other time at which stockholders of the
Company will have the right to or will vote for or consent in writing regarding
the election of directors of the Company, then and in each event, the Board of
Directors of the Company shall use it best efforts, subject to the exercise of
its fiduciary duties, to nominate an individual designated by the Investor for
election as a director of the Company (the "INVESTOR REPRESENTATIVE").
(b) Vacancies and Removal of Investor Representative. The vacancy or
resignation of any Investor Representative elected to the Board of Directors of
the Company shall be governed by the terms of the Certificate of Designation.
(c) Meetings; Indemnification. The Company shall at all times cause
its By-laws to provide that, (a) unless otherwise required by the laws of the
State of Delaware, any two directors shall have the right to call a meeting of
the Board of Directors and (b) the number of directors fixed in accordance
therewith shall in no event conflict with any of the terms or provisions of the
Preferred Stock as set forth in the Certificate of Incorporation, as amended.
The Company shall at all times maintain provisions in its By-laws and/or
Certificate of Incorporation indemnifying all directors against liability and
absolving all directors from liability to the Company and its stockholders to
the maximum extent permitted under the laws of the State of Delaware.
<PAGE> 12
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11.2 DISCLOSURE
(a) Prior to the execution of this Agreement, the parties will agree
on the content of a joint press release announcing the existence of this
Agreement, which press release will be issued as mutually agreed by the parties.
(b) Neither party will be required to disclose to the other any
confidential information of any third party without having first obtained such
third party's prior written consent.
11.3 RESERVE FOR PREFERRED SHARES AND CONVERSION SHARES. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Preferred Stock and Common Stock for the purpose of effecting
the conversion of the Notes and exercise of the Warrant and the conversion of
the Preferred Shares and Conversion Shares, respectively, and otherwise
complying with the terms of this Agreement, such number of its duly authorized
shares of Preferred Stock and Common Stock as shall be sufficient to effect the
conversion of the Notes and the exercise of the Warrant and the conversion of
the Preferred Shares and Conversion Shares, respectively, from time to time
outstanding or otherwise to comply with the terms of this Agreement. If at any
time the number of authorized but unissued shares of Preferred Stock and Common
Stock shall not be sufficient to effect the conversion of the Notes and the
exercise of the Warrant and the conversion of the Preferred Shares and
Conversion Shares, as the case might be, or otherwise to comply with the terms
of this Agreement, the Company will forthwith take such corporate action as may
be necessary to increase its authorized but unissued shares of Preferred Stock
and Common Stock to such number of shares as shall be sufficient for such
purposes. The Company will obtain any authorization, consent, approval or other
action by or make any filing with any court or administrative body that may be
required under applicable United States federal and state securities laws in
connection with the issuance of shares of Preferred Stock and Common Stock upon
conversion of the Notes and exercise of the Warrant and upon conversion of the
Preferred Shares and Conversion Shares, respectively.
11.4 RESTRICTIVE AGREEMENTS PROHIBITED. Neither the Company nor any
of its subsidiaries shall become a party to any agreement which by its terms
restricts the Company's performance of this Agreement.
11.5 TRANSACTIONS WITH AFFILIATES. Except for transactions set
forth in the SEC Documents, contemplated by this Agreement or as otherwise
approved by the Board of Directors, neither the Company nor any of its
subsidiaries shall enter into any transaction with any director, officer,
employee or holder of more than 5% of the outstanding capital stock of any class
or series of capital stock of the Company or any of its subsidiaries, member of
the family of any such person, or any corporation, partnership, trust or other
entity in which any such person, or member of the family of any such person, is
a director, officer, trustee, partner or holder of more than 5% of the
outstanding capital stock thereof, except for transactions on customary terms
related to such person's employment.
<PAGE> 13
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11.6 EMPLOYEE NONDISCLOSURE AND DEVELOPMENTS AGREEMENTS. The
Company shall use its best efforts to obtain, and shall cause its subsidiaries
to use their best efforts to obtain, an Employee Nondisclosure and Developments
Agreement in a form approved by the Board of Directors from all officers, key
employees and other employees hired subsequent to the Closing Date who will have
access to confidential information of the Company or any of its subsidiaries,
upon their employment by the Company or any of its subsidiaries.
11.7 INTELLECTUAL PROPERTY COVENANT. For the term of 18 months from
the date of this Agreement, the Company covenants that it will, where the
Company, in the exercise of reasonable judgment deems it appropriate, use
reasonable business efforts to seek copyright and patent registration, and other
appropriate intellectual property protection, for Intellectual Property of the
Company.
11.8 PURCHASE AGREEMENT COVENANTS. The Company shall comply with
all obligations set forth in Sections 11.1, 11.4, 11.5, 11.6, 11.7 and 11.11 of
the Purchase Agreement.
12. MISCELLANEOUS
12.1 AMENDMENTS AND WAIVERS
Any provision of this Agreement may be amended and the observance
thereof may only be waived (either generally or in a particular instance and
either retroactively or prospectively), with the written consent of the Company
and the Holders of a majority of the Registrable Securities then outstanding.
Any amendment or waiver effected in accordance with this Section 12.1 shall be
binding upon each Holder of Registrable Securities at the time outstanding, each
future Holder of Registrable Securities, and the Company.
12.2 NOTICES
Any notice required or permitted under this Agreement will be given
in writing, shall be effective when received, and shall in any event be deemed
received and effectively given upon personal delivery to the party to be
notified or one (1) business day after deposit with a nationally recognized
courier service such as Federal Express for next business day delivery, or one
(1) business day after sent by facsimile with copy deposited with a nationally
recognized courier service such as Federal Express for next business day
delivery, addressed to the party to be notified at the address indicated for
such party on the signature page hereof or at such other address as the
Shareholder or the Company may designate by giving at least ten (10) days
advance written notice pursuant to this Section 12.2.
12.3 GOVERNING LAW
This Agreement shall for all purposes be governed by and construed
in accordance with the internal laws of the State of Delaware without regard to
conflicts-of-laws
<PAGE> 14
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principles. The parties hereto agree to submit to the non-exclusive jurisdiction
of the federal and state courts of the Commonwealth of Massachusetts with
respect to the breach or interpretation of this Agreement or the enforcement of
any and all rights, duties, liabilities, obligations, powers and other relations
between parties arising under this Agreement.
12.4 SEVERABILITY
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excised from this
Agreement, and the remainder of this Agreement shall be interpreted as if such
provision were so excised and shall be enforceable in accordance with its
remaining terms.
12.5 COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall
be deemed to be an original and all of which together shall constitute one and
the same instrument.
12.6 ASSIGNMENT
The rights set forth in this Agreement are not transferable except
to a person controlling, controlled by, or under common control with Holder who
receives at least 20% of the Registrable Securities. All transferees shall agree
in writing to be bound by all of the provisions of this Agreement. A Holder
shall promptly advise the Company in writing of the identity and address of any
person to whom it transferred its registration rights hereunder.
12.7 ACCESS TO INVESTOR INFORMATION.
The Company acknowledges that the Investor Representative (as
defined in Section 11.1) will likely have, from time to time, information that
may be of interest to the Company ("INFORMATION") regarding a wide variety of
matters including, by way of example only, (a) Investor's technologies, plans
and services, and plans and strategies relating thereto, (b) current and future
investments Investor has made, may make, may consider or may become aware of
with respect to other companies and other technologies, products and services,
including, without limitation, technologies, products and services that may be
competitive with the Company's, and (c) developments with respect to the
technologies, products and services, and plans and strategies relating thereto,
of other companies, including, without limitation, companies that may be
competitive with the Company. The Company recognizes that a portion of such
Information may be of interest to the Company. Such Information may or may not
be known by the Investor Representative. The Company, as a material part of the
consideration for this Agreement, agrees that the Investor and its Investor
Representative shall have no duty to disclose any Information to the Company or
permit the Company to participate in any projects or investments based on any
Information, or to otherwise take advantage of any opportunity that may be of
interest to the Company if it were aware of such Information, and hereby waives,
to the extent permitted by law, any claim based on the corporate opportunity
doctrine or otherwise that could limit the Investor's ability to pursue
opportunities based on such Information or that
<PAGE> 15
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would require the Investor or the Investor Representative to disclose any such
Information to the Company or offer any opportunity relating thereto to the
Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 16
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
<TABLE>
<S> <C>
NUMBER NINE VISUAL TECHNOLOGY SILICON GRAPHICS, INC.
CORPORATION
By:
By:
Name:
Name:
Title:
Title:
Address: 18 Hartwell Avenue
Lexington, Massachusetts 02173 Address: 2011 N. Shoreline Blvd.
Attention: Chief Executive Officer Mountain View, California 94043-1389
Attention: Director of Corporate Legal
Services
Telephone No.: (781) 674-0009
Facsimile No.: (781) 869-7220 Telephone No.: (650) 933-9003
Facsimile No.: (650) 932-0652
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WITH COPIES TO:
William B. Asher, Jr., Esq.
Testa, Hurwitz & Thibeault, LLP
125 High Street; High Street Tower
Boston, Massachusetts 02110
Facsimile No. (617) 248-7100
Neil H. Aronson, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center, 41st Floor
Boston, Massachusetts 02111
Facsimile No. (617) 542-2241
