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EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of June 1,
2000, by and among Komag, Incorporated, a Delaware corporation, with
headquarters located at 1710 Automation Parkway, San Jose, California 95131(the
"COMPANY"), and the investors listed on the Schedule of Buyers attached hereto
(individually, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and each Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT");
B. The Company has authorized convertible notes of the Company, in the
form attached as Exhibit A (together with any convertible notes issued in
replacement thereof in accordance with the terms thereof, the "CONVERTIBLE
NOTES"), which shall be convertible into shares of the Company's common stock,
par value $0.01 per share (the "COMMON STOCK") (as converted, the "CONVERSION
SHARES"), in accordance with the terms of the Convertible Notes;
C. Each Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, Convertible Notes (which amount in the aggregate shall be
$9,281,730.84) in the respective amounts set forth opposite each Buyer's name on
the Schedule of Buyers (the "INITIAL NOTES");
D. Subject to the terms and conditions set forth in this Agreement, each
Buyer has the right to purchase and the Company may be required to sell
Convertible Notes in an aggregate principal amount of up to $35,700,000 pro rata
based on the principal amount of Initial Notes purchased by each buyer at the
Initial Closing (as defined below) compared to the principal amount of all
Initial Notes purchased by all Buyers (the "ADDITIONAL NOTES" and collectively
with the Initial Notes, the "NOTES").
E. Contemporaneously with the execution and delivery of this Agreement,
the Company and each Buyer are executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as Exhibit B (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
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NOW THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF NOTES.
a. Purchase of Notes. Subject to the satisfaction (or waiver) of
the conditions set forth in Sections 6(a) and 7(a) below, the Company shall
issue and sell to each Buyer and each Buyer severally agrees to purchase from
the Company the respective principal amount of Initial Notes set forth opposite
such Buyer's name on the Schedule of Buyers (the "INITIAL CLOSING"). Subject to
the satisfaction (or waiver) of the conditions set forth in Sections 1(c), 6(b)
and 7(b), at the option of each Buyer, the Company shall issue at multiple
closings, if applicable, and sell to each such Buyer and each such Buyer may
purchase from the Company their pro rata portion of up to $35,700,000 in
aggregate principal amount (pro rata based on the principal amount of Initial
Notes purchased by each buyer at the Initial Closing (as defined below) compared
to the principal amount of all Initial Notes purchased by all Buyers) (each an
"ADDITIONAL CLOSING"). The Initial Closing and the Additional Closings
collectively are referred to in this Agreement as the "CLOSINGS." The purchase
price (the "PURCHASE PRICE") of each $1,000 of principle amount of the Notes
shall be an exchange of existing bank debt of the Company equal to
$1,428.57142857 in principal and accrued and unpaid interest issued pursuant to
that certain Loan Restructuring Agreement by and among the Company, Bank Boston,
N.A. and the banks party thereto (the "BANK DEBT"). "BUSINESS DAYS " means any
day other than Saturday, Sunday or other day on which commercial banks in the
City of New York are authorized or required by law to remain closed.
b. The Initial Closing Date. The date and time of the Initial
Closing (the "INITIAL CLOSING DATE") shall be 10:00 a.m. Central Time, within
five (5) Business Days of the date on which the Company files the Bank Debt Form
8-K (as defined in Section 4(h)) with the SEC pursuant to Section 4(h), subject
to the satisfaction (or waiver) of the conditions to the Initial Closing set
forth in Sections 6(a) and 7(a) (or such later date as is mutually agreed to by
the Company and the Buyers). The Initial Closing shall occur on the Initial
Closing Date at the offices of Katten Muchin Zavis, 525 West Monroe Street,
Suite 1600, Chicago, Illinois 60661-3693.
c. The Additional Closing Date. The date and time of each
Additional Closing (an "ADDITIONAL CLOSING Date") shall be 10:00 a.m. Central
time, on the date specified in the Additional Share Notice (as defined below),
subject to satisfaction (or waiver) of the conditions to each Additional Closing
set forth in Sections 6(b) and 7(b) and the conditions contained in this Section
1(c) (or such later date as is mutually agreed to by the Company and each Buyer
purchasing Notes at such Closing). At any time during the period beginning on
the Initial Closing Date and ending on and including the date which is five (5)
years after the Initial Closing Date, but subject to the requirements of
Sections 6(b) and 7(b) and the conditions contained in this Section 1(c); each
Buyer may purchase, at such Buyer's option, Additional Notes by delivering
written notice to the Company (a "ADDITIONAL NOTE NOTICE") at least five
Business Days (the "ADDITIONAL NOTE NOTICE DATE") prior to the Additional
Closing Date set forth in the Additional Note Notice. The Additional Note Notice
shall set forth (i) the principal amount of the Additional
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Notes such Buyer will purchase at such Additional Closing, which amount shall
not exceed when aggregated with the principal amount of all Additional Notes
purchased by such Buyer such Buyer's pro rata portion of $35,700,000 (pro rata
based on the principal amount of Initial Notes purchased by each Buyer at the
Initial Closing (as defined below) compared to the principal amount of all
Initial Notes purchased by all Buyers), (ii) the aggregate Purchase Price for
the Additional Notes and (iii) the Additional Closing Date for such Additional
Closing. The Additional Closing shall occur on an Additional Closing Date at the
offices of Katten Muchin Zavis, 525 West Monroe Street, Suite 1600, Chicago,
Illinois 60661-3693. The Initial Closing Date and the Additional Closing Dates
collectively are referred to in this Agreement as the "CLOSING DATES".
d. Form of Payment. On each of the Closing Dates, (i) each Buyer
shall pay the Purchase Price to the Company for the Notes to be issued and sold
to such Buyer at such Closing, by delivering evidence of indebtedness of the
applicable amount of the Bank Debt owned by the Buyer to the Company, and (ii)
the Company shall deliver to each Buyer purchasing Notes at such Closing, Notes
(in the denominations as such Buyer shall request) representing the principal
amount of Notes which such Buyer is then purchasing hereunder, duly executed on
behalf of the Company and registered in the name of such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer is acquiring the Notes and,
upon conversion of the Notes, will acquire the Conversion Shares then issuable
(the Notes and the Conversion Shares collectively are referred to herein as the
"SECURITIES"), for its own account and not with a present view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided, however,
that by making the representations herein, such Buyer does not agree to hold any
of the Securities for any minimum or other specific term and reserves the right
to dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of the United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
such Buyer to acquire the Securities.
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d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Sections 3 and 9(m) below. Such Buyer understands that its investment in the
Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, reasonably acceptable to the Company, to the
effect that such Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration, or (C)
such Buyer provides the Company with reasonable assurance that such Securities
can be sold, assigned or transferred pursuant to Rule 144 promulgated under the
1933 Act, as amended, (or a successor rule thereto) ("RULE 144"); (ii) any sale
of the Securities made in reliance on Rule 144 may be made only in accordance
with the terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of the Securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 1933 Act) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register the
Securities under the 1933 Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder. Notwithstanding the foregoing,
the Securities may be pledged in connection with a bona fide margin account or
other loan secured by the Securities.
g. Legends. Such Buyer understands that the certificates or
other instruments representing the Notes and, until such time as the sale of the
Conversion Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the stock certificates representing the
Conversion Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL,
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR
(II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED
BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale, assignment or transfer , such holder provides the Company with an
opinion of counsel, reasonably acceptable to the Company, to the effect that a
sale, assignment or transfer of the Securities may be made without registration
under the 1933 Act, or (iii) such holder provides the Company with reasonable
assurances that the Securities can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a particular date that
can then be immediately sold.
h. Authorization; Enforcement; Validity. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of such Buyer and are valid and binding agreements of
such Buyer enforceable against such Buyer in accordance with their terms,
subject as to enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that jurisdiction
specified in its address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that
as of the date hereof and as of each of the Closing Dates (as such
representations and warranties are modified by the Company's schedules updated
pursuant to Section 4(m), as necessary, on each of the Additional Closing
Dates):
a. Organization and Qualification. The Company and its
"SUBSIDIARIES" (which for purposes of this Agreement means any entity (A) in
which the Company, directly or
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indirectly, owns 50% or more of the capital stock or holds 50% or more of the
equity or a similar interest of the Company and (B) whose business, properties,
assets, operations, results of operations or financial condition are material to
the Company) are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power and authorization to own their properties and
to carry on their business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not reasonably be expected to have a Material Adverse Effect. As used in
this Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse effect on
(i) the business, properties, assets, operations, results of operations or
financial condition of the Company and its Subsidiaries, if any, taken as a
whole, (ii) the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith, other than solely by a
decline in the market price of the Common Stock, or (iii) the authority or
ability of the Company to perform its obligations under the Transaction
Documents (as defined below). A complete list of entities in which the Company,
directly or indirectly, owns capital stock or holds an equity or similar
interest is set forth on Schedule 3(a).
b. Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 5), the Notes and
each of the other agreements entered into by the parties hereto in connection
with the transactions contemplated by this Agreement (collectively, the
"TRANSACTION DOCUMENTS"), and to issue the Securities in accordance with the
terms hereof and thereof. The execution and delivery of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation the issuance of
the Notes and the reservation for issuance and the issuance of the Conversion
Shares issuable upon conversion or exercise thereof, have been duly authorized
by the Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders. The
Transaction Documents have been duly executed and delivered by the Company. The
Transaction Documents constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
c. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 150,000,000 shares of Common Stock, of
which as of May 30, 2000, 66,054,041 shares were issued and outstanding,
17,138,042 shares were reserved for issuance pursuant to the Company's stock
option and purchase plans and 80,000 shares were issuable and reserved for
issuance pursuant to securities (other than the Notes) exercisable or
exchangeable for, or convertible into, shares of Common Stock and (ii) 1,000,000
shares of Preferred Stock, of which as of the date hereof, no shares are issued
and outstanding. During the period between
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May 30, 2000 and the date hereof, no additional issuances of Common Stock have
been made which in the aggregate exceed 50,000 shares of Common Stock. All of
such outstanding shares have been validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(c), (A) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company; (B)
there are no outstanding debt securities issued by the Company; (C) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries; (D) there are
no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement); (E) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (F) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; and (G) the Company does not have
any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to each Buyer true and
correct copies of the Company's Certificate of Incorporation, as amended and as
in effect on the date hereof (the "CERTIFICATE OF INCORPORATION"), and the
Company's Bylaws, as amended and as in effect on the date hereof (the "BYLAWS"),
and the terms of all securities convertible into or exercisable for Common Stock
and the material rights of the holders thereof in respect thereto.
d. Issuance of Securities. The Notes are duly authorized and at
least 16,000,000 shares of Common Stock (subject to adjustment pursuant to the
Company's covenant set forth in Section 4(f) below) have been duly authorized
and reserved for issuance upon conversion of the Notes. Upon conversion in
accordance with the Notes the Conversion Shares will be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof, with the holders being entitled to all rights accorded to
a holder of Common Stock. Assuming the accuracy of the Buyer's representations
and warranties as to factual matters contained in Sections 2(a), 2(b) and 2(d),
the issuance by the Company of the Securities is exempt from registration under
the 1933 Act.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the Company,
the performance by the Company of its obligations under the Notes and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the reservation for issuance and issuance of the
Conversion Shares) will not (i) result in a violation of the Certificate of
Incorporation or the Bylaws; (ii) conflict with, or constitute a default (or an
event which with
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notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party; (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the Principal Market (as
defined below)) applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries is bound or
affected. Except as disclosed in Schedule 3(e), neither the Company nor its
Subsidiaries is in violation of any term of its Certificate of Incorporation or
the Bylaws or their organizational charter or bylaws, respectively. Except as
disclosed in Schedule 3(e), neither the Company or any of its Subsidiaries is in
violation or any term of or in default under any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Subsidiaries, except where
such violations and defaults would not reasonably be expected to result, either
individually or in the aggregate, in a Material Adverse Effect. The business of
the Company and its Subsidiaries is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except where such violations
would not reasonably be expected to result, either individually or in the
aggregate, in a Material Adverse Effect. Except as specifically contemplated by
this Agreement and as required under the 1933 Act and state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under or contemplated by the Transaction
Documents, in each case in accordance with the terms hereof or thereof. Except
as disclosed in Schedule 3(e), all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company is not in violation of the listing requirements of the Principal Market,
including, without limitation, the requirements set forth in Rule
4310(c)(25)(G)(iv)(d) of the Principal Market and has no actual knowledge of any
facts which would reasonably lead to delisting or suspension of the Common Stock
by the Principal Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since January 3, 1999,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents.
None of the SEC Documents, at the time they were filed with the SEC or as
revised in a subsequent amendment filed prior to the date hereof, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. As of
their respective dates, the
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financial statements of the Company included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d), contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading. Neither the Company nor any of its
Subsidiaries or any of their officers, directors, employees or agents have
directly provided the Buyers with any material, nonpublic information, except
for the information that the Company is required to disclose pursuant to Section
4(h).
g. Absence of Certain Changes. Except as disclosed in Schedule
3(g), since January 2, 2000 there has been no material adverse change and no
material adverse development in the business, properties, assets, operations,
results of operations or financial conditions of the Company or its Subsidiaries
taken as a whole. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company or any of its Subsidiaries have any knowledge that its
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do so. Except as
disclosed in Schedule 3(g), since April 2, 2000 the Company has not declared or
paid any dividends, sold any assets in the aggregate in excess of $5,000,000
outside of the ordinary course of business or had capital expenditures in the
aggregate in excess of $5,000,000.
h. Absence of Litigation. Except for such as would not have
either individually or in the aggregate a Material Adverse Effect, there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the Company threatened against or affecting the Company,
the Common Stock or, to the knowledge of the Company, any of the Subsidiaries or
any of the Company's or the Subsidiaries' officers or directors in their
capacities as such. To the knowledge of the Company none of the directors or
officers of the Company in their capacities as such have been involved in
securities related litigation during the past five years.
i. Acknowledgment Regarding Buyer's Purchase of Notes. The
Company acknowledges and agrees that each of the Buyers is acting solely in the
capacity of an arm's length purchaser with respect to the Transaction Documents
and the transactions contemplated hereby and thereby. The Company further
acknowledges that each Buyer is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the Transaction
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Documents and the Certificate of Designation and the transactions contemplated
hereby and thereby and any advice given by any of the Buyers or any of their
respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to such Buyer's purchase of the Securities. The Company further
represents to each Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
j. Intentionally left blank.
k. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. Neither the Company, nor any of its
officers, directors or Subsidiaries, nor any person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would require
registration of any of the Securities under the 1933 Act or cause this offering
of the Securities to be integrated with prior offerings by the Company for
purposes of the 1933 Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Company are
listed or designated, nor will the Company or any of its Subsidiaries take any
action or steps that would require registration of any of the Securities under
the 1933 Act or cause the offering of the Securities to be integrated with other
offerings.
m. Intellectual Property Rights. To the Company's knowledge, the
Company and its Subsidiaries own or possess or can obtain on commercially
reasonable terms adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights necessary
to conduct their respective businesses as now conducted. Except to the extent
that such infringement would not have, either individually or in the aggregate,
a Material Adverse Effect, the Company does not have any knowledge of any
infringement by the Company or its Subsidiaries of trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, trade secrets or other intellectual
property rights of others, or of any development of similar or identical trade
secrets or technical information by others and there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its Subsidiaries regarding its trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, trade secrets, or infringement
of other intellectual property rights, except to the extent that such claim,
action or proceeding, either individually or in the aggregate, would not have a
Material Adverse Effect; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company has
taken reasonable security measures to protect the secrecy, confidentiality and
value of all of their intellectual properties.
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n. Title. The Company and its U.S. Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company and any of its Subsidiaries. To the best of the
Company's knowledge, any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and facilities by the
Company and its Subsidiaries.
o. Regulatory Permits. To the Company's knowledge and except the
absence of which would not reasonably be expected to result, either individually
or in the aggregate, in a Materially Adverse Effect, the Company and its
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
p. Internal Accounting Controls. The Company and to the
Company's knowledge each of its Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
q. Tax Status. The Company and each of its Subsidiaries (i) has
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes), (ii) has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and for which the Company has made appropriate reserves for on its books, and
(iii) has set aside on its books provisions reasonably adequate for the payment
of all taxes for periods subsequent to the periods to which such returns,
reports or declarations (referred to in clause (i) above) apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
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r. Transactions With Affiliates. Except as set forth on Schedule
3(r) and in the SEC Documents filed at least ten days prior to the date hereof,
and other than the grant of stock options disclosed on Schedule 3(c), none of
the officers, directors, or employees of the Company is presently a party to any
material transaction with the Company or any of its Subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.
s. Application of Takeover Protections. The Company does not
have any control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or other similar anti-takeover
provision under the Certificate of Incorporation.
t. Rights Agreement. The Company has not adopted a shareholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
u. Foreign Corrupt Practices. To the best of the Company's
knowledge, neither the Company, nor any of its Subsidiaries, nor any director,
officer, agent, employee or other person acting on behalf of the Company or any
of its Subsidiaries has, in the course of its actions for, or on behalf of, the
Company, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made
any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
b. Form D and Blue Sky. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before each of the Closing Dates, take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for or to
qualify the Securities for sale to the Buyers at each of the Closings pursuant
to this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the Buyers on or prior to the Closing Dates. The Company shall make all filings
and reports relating to the offer and sale of the Securities required under
applicable securities or "Blue Sky" laws of the states of the United States
following each of the Closing Dates.
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c. Reporting Status. Until the later of (i) the date which is
one year after the date as of which the Investors (as that term is defined in
the Registration Rights Agreement) may sell all of the Conversion Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto) and (ii) the date on which the Investors have sold all Conversion
Shares which they may acquire pursuant to this Agreement or the Notes, which
date shall not be later than five (5) years from the last Closing Date to occur
(the "REPORTING PERIOD"), the Company shall file all reports required to be
filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate
its status as an issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would otherwise permit such
termination.
d. Financial Information. The Company agrees to send the
following to each Investor during the Reporting Period: (i) within two (2) days
after the filing thereof with the SEC (unless available on the EDGAR System), a
copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any
Current Reports on Form 8-K and any registration statements (other than on Form
S-8) or amendments filed pursuant to the 1933 Act, provided that if any such
report is not filed with the SEC through EDGAR then the Company shall deliver a
copy of such report to each Investor by facsimile on the same day it is filed
with the SEC and (ii) to use its best efforts to provide copies of any notices
and other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders. The Company will add the Investors to its email distribution list
which it maintains to disseminate its press releases.
e. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance of Conversion Shares, at least the greater of (i) the number of shares
of Common Stock to provide for the issuance of the shares of Common Stock upon
conversion of all outstanding Notes (without regard to any limitations on
conversions) and (ii) 16,000,000 shares of Common Stock.
f. Listing. The Company shall promptly secure the listing of all
of the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents. The Company shall
maintain the Common Stock's authorization for quotation on the Nasdaq National
Market ("NASDAQ") or listed on The New York Stock Exchange ("NYSE") or The
American Stock Exchange ("AMEX"). Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock from any such market. The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(f).
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g. Expenses. Subject to Section 9(l) below, at the Initial
Closing, the Company shall reimburse the Buyers for the Buyers' expenses
(including reasonable attorneys' fees and expenses) in due diligence and
negotiating and preparing the Transaction Documents and consummating the
transactions contemplated thereby of up to $50,000. Such amount will be paid by
the Company by wire transfer of immediately available funds within 5 days of the
Company's receipt of invoices for expenses to be reimbursed pursuant to this
Section 4(g).
h. Filing of Form 8-K. On the first (1st) Business Day following
the date on which the transaction which restructures the Bank Debt closes, the
Company shall publicly disclose the material terms of the Bank Debt by filing
with the SEC a Form 8-K (the "BANK DEBT FORM 8-K") describing the terms of the
Bank Debt and including as exhibits to the Bank Debt Form 8-K such agreements
which set forth the Bank Debt. On the date the Company files the Bank Debt Form
8-K, the Company shall file a Form 8-K with the SEC describing the terms of the
transactions contemplated by the Transaction Documents and including as exhibits
to such Form 8-K this Agreement, the Note and the Registration Rights Agreement
in the form required by the 1934 Act. On or before the first (1st) Business Day
following each Additional Closing Date and Additional Note Notice Date the
Company shall file a Form 8-K with the SEC describing the transaction
consummated or proposed on such date.
i. Corporate Existence. So long as a Buyer beneficially owns any
Notes the Company shall maintain its corporate existence and shall not sell all
or substantially all of the Company's assets, except in the event of a merger or
consolidation or sale of all or substantially all of the Company's assets, where
the surviving or successor entity in such transaction (i) assumes the Company's
obligations hereunder and under the agreements and instruments entered into in
connection herewith and (ii) is a publicly traded corporation whose common stock
is quoted on or listed for trading on Nasdaq, AMEX or NYSE.
j. Right of First Offer. Subject to the exceptions described
below, the Company agrees that during the period beginning on the date hereof
and ending on and including the date which is 183 days after the Initial Closing
Date, neither the Company nor its Subsidiaries will negotiate or contract with
any party for any equity financing (including any debt financing with an equity
component) or issue any equity securities of the Company or any Subsidiary or
securities convertible or exchangeable into or for equity securities of the
Company or any Subsidiary (including debt securities with an equity component)
in any form (a "PROPOSED OFFERING") unless it shall have first delivered to each
Buyer or a designee appointed by such Buyer written notice (the "OFFERING
NOTICE") describing the proposed Participation Offering, including the size,
terms and conditions thereof, and providing each Buyer an option to offer terms
to the Company for the Proposed Offering (the limitations referred to in this
sentence are collectively referred to as the "CAPITAL RAISING LIMITATIONS").
Notwithstanding the foregoing, the Company shall retain the right to accept such
Buyer's terms for the Proposed Offering, to attempt to secure better terms from
other investors, or postpone or discontinue such Proposed Offering. A Buyer
shall exercise its option to offer terms to the Company for the Proposed
Offering by delivering written notice of such terms to the Company within 10
Business Days after receipt of a Proposed Offering Notice. Within five (5)
Business Days of the Company's receipt of proposed terms from
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<PAGE> 15
a Buyer pursuant to this Section 4(j), the Company shall notify such Buyer in
writing of the Company's election to accept such terms, to attempt to secure
better terms from other investors, or postpone or discontinue such Proposed
Offering. In the event the Company has not sold such securities of the Proposed
Offering within such 135 days of the Company's delivery of the Offering Notice,
the Company shall not thereafter issue or sell such securities without first
notifying each Buyer of the proposed offering in the manner provided in this
Section 4(j). The Capital Raising Limitations shall not apply to (i) a loan from
a commercial bank, insurance company or other institutional investor which does
not have any equity feature, (ii) any transaction involving the Company's
issuances of securities (A) as consideration in a merger or consolidation, (B)
in connection with any strategic partnership or joint venture (the primary
purpose of which is not to raise equity capital), or (C) as consideration for
the acquisition of a business, product, license or other assets by the Company,
(iii) the issuance of Common Stock or debt in a firm commitment, underwritten
public offering, (iv) the issuance of securities upon exercise or conversion of
the Company's options, warrants or other convertible securities outstanding as
of the date hereof, (v) the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option plan,
restricted stock plan or stock purchase plan for the benefit of the Company's
employees, directors or consultants, (vi) the issuance of securities pursuant to
an offering by the Company in reliance upon Rule 144A under the 1933 Act with
proceeds to the Company of at least $50,000,000 and (vii) the issuance of
convertible debt in exchange for Bank Debt not held by the Holders of the Notes.
The Buyers shall not be required to offer terms for a particular Proposed
Offering in order to have the right to receive notice with respect to later
Proposed Offerings.
k. Organizational Chart. The Company shall provide the Buyers
with an organizational chart describing the relationship between the Company and
each of the entities listed on Schedule 3(a) on or prior to the Initial Closing
Date, which organizational chart shall not disclose any material nonpublic
information.
l. Limitation on the Sales of Common Stock. During any period
beginning on and including a date which is eight (8) Business Days prior to an
Additional Note Notice Date and ending on and excluding such Additional Note
Notice Date, each Buyer agrees that neither such Buyer nor its affiliates will
sell any shares of the Company's Common Stock.
m. Schedules. The Company shall update the disclosure schedules
made pursuant to Section 3 hereof on each Additional Closing Date so as to make
the Company's representations and warranties on such date true and correct as of
such date.
n. Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit D attached hereto, shall be delivered to
and acknowledged in writing by the Company's transfer agent on or prior to June
6, 2000.
o. Restructured Loan Agreement. So long as the any principal
amount of the Notes is outstanding, the Company shall comply in all respects
with the Senior Credit Facility (as
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defined in Section 23 of the Notes) and shall immediately pay all amounts due
and owing under the Senior Credit Facility.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of each Buyer or its respective nominee(s), for the Conversion Shares
in such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Notes (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior
to registration of the Conversion Shares under the 1933 Act, all such
certificates shall bear the restrictive legend specified in Section 2(g). The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5 and stop transfer instructions to
give effect to Section 2(f) (in the case of the Conversion Shares, prior to
registration of the Conversion Shares under the 1933 Act) will be given by the
Company to its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. If a Buyer
provides the Company with an opinion of counsel, in a generally acceptable form,
to the effect that a sale, assignment or transfer of the Securities may be made
without registration under the 1933 Act or the Buyer provides the Company with
reasonable assurances that the Securities can be sold pursuant to Rule 144
without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold, the Company shall permit the
transfer, and, in the case of the Conversion Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Buyer and without any restrictive legend. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to each Buyer by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the each Buyer shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
a. Initial Closing Date. The obligation of the Company to issue
and sell the Initial Notes to each Buyer at the Initial Closing is subject to
the satisfaction, at or before the Initial Closing Date, of each of the
following conditions, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion by
providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of this Agreement and
the Registration Rights Agreement and delivered the same to the Company.
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(ii) Such Buyer shall have delivered evidence of indebtedness to
the Company in an amount equal to the Purchase Price in exchange for the
Initial Notes being purchased by such Buyer at the Initial Closing by
delivering transfer documentation transferring the Bank Debt from the
Buyer to the Company.
(iii) The representations and warranties of such Buyer shall be
true and correct as of the date when made and as of the Initial Closing
Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied with the covenants, agreements and
conditions required by the Transaction Documents to be performed,
satisfied or complied with by such Buyer at or prior to the Initial
Closing Date.
(iv) Each Buyer shall have purchased the principal amount of
Initial Notes set forth on the Schedule of Buyers.
b. Additional Closing Date. The obligation of the Company
hereunder to issue and sell the Additional Notes to each Buyer at each
Additional Closing is subject to the satisfaction, at or before such Additional
Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:
(i) Such Buyer shall have delivered evidence of indebtedness to
the Company in an amount equal to the Purchase Price in exchange for the
Additional Notes being purchased by such Buyer at the applicable
Additional Closing by delivering transfer documentation transferring the
Bank Debt from the Buyer to the Company.
(ii) The representations and warranties of such Buyer shall be
true and correct as of the date when made and as of the applicable
Additional Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and
such Buyer shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Buyer at
or prior to the applicable Additional Closing Date.
(iii) The principal amount of Additional Notes being purchased
at such Additional Closing shall equal or exceed $3,500,000.
(iv) Each Buyer purchasing Additional Notes in the applicable
Additional Closing shall have satisfied conditions (i) through (iii) of
this Section 6(b).
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7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
a. Initial Closing Date. The obligation of each Buyer hereunder
to purchase the Initial Notes from the Company at the Initial Closing is subject
to the satisfaction, at or before the Initial Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion by
providing the Company with prior written notice thereof:
(i) The Company shall have executed each of the Transaction
Documents and delivered the same to such Buyer.
(ii) The Common Stock (x) shall be designated for quotation or
listed on Nasdaq and (y) shall not have been suspended by the SEC or
Nasdaq from trading on Nasdaq nor shall suspension by the SEC or Nasdaq
have been threatened either (A) in writing by the SEC or Nasdaq or (B)
by falling below the minimum listing maintenance requirements of Nasdaq;
and the Conversion Shares issuable upon conversion of the Initial Notes
shall be listed upon Nasdaq.
(iii) The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Initial Closing
Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all respects with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the
Initial Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the
Initial Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by such Buyer including, without
limitation, an update as of the Initial Closing Date regarding the
representation contained in Section 3(c) above.
(iv) Such Buyer shall have received the opinion of Wilson
Sonsini Goodrich & Rosati, P.C. dated as of the Initial Closing Date, in
substantially the form of Exhibit C attached hereto.
(v) The Company shall have executed and delivered to such Buyer
the Notes (in such denominations as such Buyer shall request, as
specified in the Schedule of Buyers) for the Initial Notes being
purchased by such Buyer at the Initial Closing.
(vi) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b) above and in a form reasonably
acceptable to such Buyer (the "RESOLUTIONS").
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(vii) As of the Initial Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Initial Notes at least
16,000,000 shares of Common Stock.
(viii) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the
Company and each U.S. Subsidiary in such entity's state of incorporation
or organization issued by the Secretary of State of such state of
incorporation or organization as of a date within ten days of the
Initial Closing Date.
(ix) The Company shall have delivered to such Buyer a certified
copy of the Certificate of Incorporation as certified by the Secretary
of State of the State of Delaware as of a date within ten days of the
Initial Closing Date.
(x) The Company shall have delivered to such Buyer a secretary's
certificate, dated as the Initial Closing Date, certifying as to (A) the
Resolutions, (B) the Certificate of Incorporation and (C) the Bylaws,
each as in effect at the Initial Closing.
(xi) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of
Common Stock outstanding as within three (3) days of the Initial Closing
Date.
(xii) The debt restructuring transaction contemplated by the
Bank Debt shall be finalized and shall have closed.
b. Additional Closing Dates. The obligation of each Buyer
hereunder to purchase the Additional Notes from the Company at each of the
applicable Additional Closings is subject to the satisfaction, at or before each
of the Additional Closing Dates, of each of the following conditions, provided
that these conditions are for each Buyer's sole benefit and may be waived by
such Buyer at any time in its sole discretion:
(i) The Company shall have complied with and satisfied all of
the requirements of Section 1(c).
(ii) The Common Stock (x) shall be designated for quotation or
listed on Nasdaq and (y) shall not have been suspended by the SEC or
Nasdaq from trading on or delisted from Nasdaq nor shall delisting or
suspension by Nasdaq have been threatened either (A) in writing by the
SEC or Nasdaq or (B) by falling below the minimum listing maintenance
requirements of Nasdaq and all of the Conversion Shares issuable upon
conversion of the Additional Notes shall be listed upon Nasdaq.
(iii) The representations and warranties of the Company shall be
true and correct as of the date of this Agreement and as of the
applicable Additional Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date) and
the Company shall have performed, satisfied and complied in all respects
with the
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covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at
or prior to the applicable Additional Closing Date. Such Buyer shall
have received a certificate, executed by the Chief Executive Officer of
the Company, dated as of the Additional Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by
such Buyer including, without limitation, an update as of the applicable
Additional Closing Date regarding the representation contained in
Section 3(c) above.
(iv) Such Buyer shall have received the opinion of Wilson
Sonsini Goodrich & Rosati, P.C. dated as of the applicable Additional
Closing Date, in substantially the form of Exhibit C attached hereto.
(v) The Company shall have executed and delivered to such Buyer
the Notes (in such denominations as such Buyer shall request) for the
Additional Notes being purchased by such Buyer at the applicable
Additional Closing.
(vi) The Board of Directors of the Company shall have adopted,
and shall not have amended, the Resolutions.
(vii) As of the applicable Additional Closing Date, the Company
shall have reserved out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Notes, a
number of shares of Common Stock equal to at least 100% of the number of
shares of Common Stock which would be issuable upon conversion in full
of the then outstanding Notes (without regard to any limitations on
conversions), including for such purposes the Additional Notes to be
issued at such Additional Closing.
(viii) The Irrevocable Transfer Agent Instructions shall remain
in effect as of the Additional Closing Date and the Company shall cause
its Transfer Agent to deliver a letter to such Buyer to that effect.
(ix) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the
Company and each Subsidiary in the state of such entity's state of
incorporation or organization issued by the Secretary of State of such
state of incorporation or organization as of a date within ten days of
the applicable Additional Closing Date.
(x) The Company shall have delivered to such Buyer a certified
copy of its Certificate of Incorporation as certified by the Secretary
of State of the State of Delaware within ten days of the applicable
Additional Closing Date.
(xi) The Company shall have delivered to such Buyer a
secretary's certificate, dated as of the applicable Additional Closing
Date, certifying as to (A) the Resolutions, (B) the Certificate of
Incorporation and (C) the Bylaws, each as in effect at the applicable
Additional Closing.
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(xii) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of
Common Stock outstanding as of a date within twenty days of the
applicable Additional Closing Date.
(xiii) The Company shall not have updated the schedules or added
additional schedules to the representations and warranties contained in
Section 3.
8. INTENTIONALLY LEFT BLANK.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of Illinois,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Illinois or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Illinois. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago,
Cook County, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
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e. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between each Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended or waived other than by an instrument in writing signed
by the Company and the holders of at least two-thirds (b) of the principle
amount of the Initial Notes purchased on the Initial Closing Date or, if prior
to the Initial Closing Date, the Buyers listed on the Schedule of Buyers as
being obligated to purchase at least two-thirds (b) of the principal amount of
the Initial Notes issued on the Initial Closing Date. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Notes then outstanding. No consideration shall be offered or paid to any person
to amend or consent to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration also is offered to all of
the parties to the Transaction Documents or holders of Notes, as the case may
be.
f. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Komag, Incorporated
1710 Automation Parkway
San Jose, California 95131
Telephone: 408-576-2000
Facsimile: 408-944-9234
Attention: Chief Financial Officer
With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Telephone: 650-493-9300
Facsimile: 650-493-6811
Attention: Kathleen Bloch, Esq.
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<PAGE> 23
If to the Transfer Agent:
Chase Mellon Shareholder Services
235 Montgomery Street, 23rd Floor
San Francisco, CA 94104
Telephone: (415) 743-1426
Facsimile: (415) 989-5241
Attention: Duane Knutsen
If to a Buyer, to it at the address and facsimile number set forth on the
Schedule of Buyers, with copies to such Buyer's representatives as set forth on
the Schedule of Buyers, or at such other address and/or facsimile number and/or
to the attention of such other person as the recipient party has specified by
written notice given to each other party five days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
g. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Notes. The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the holders of a majority of the Notes then outstanding, including by
merger or consolidation, except pursuant to a Change of Control (as defined in
Section 4(b) of the Notes) with respect to which the Company is in compliance
with Section 4(i) of this Agreement and Section 4 of the Notes. A Buyer may
assign some or all of its rights hereunder without the consent of the Company,
provided, however, that any such assignment shall not release such Buyer from
its obligations hereunder unless such obligations are assumed by such assignee
and the Company has consented to such assignment and assumption, which consent
shall not be unreasonably withheld. Notwithstanding anything to the contrary
contained in the Transaction Documents, the Buyers shall be entitled to pledge
the Securities in connection with a bona fide margin account or other loan
secured by the Securities.
h. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and the Buyers contained
in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
9, and the indemnification provisions set forth in Section 8, shall survive the
Closings. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder. Notwithstanding the above,
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<PAGE> 24
nothing in this Section 9(i) shall serve to change the representations and
warranties contained in Sections 2 and 3 and as given on the date hereof and
each of the Closing Dates into covenants.
j. Publicity. The Company and each Buyer shall have the right to
approve before issuance any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of any Buyer, to make any
press release or other public disclosure with respect to such transactions as is
required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Initial Closing shall not
have occurred with respect to a Buyer on or before fifteen (15) days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6(a) and 7(a) above (and the nonbreaching
party's failure to waive such unsatisfied condition(s)), the nonbreaching party
shall have the option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of any party to
any other party; provided, however, that if this Agreement is terminated
pursuant to this Section 9(l), the Company shall remain obligated to reimburse
any nonbreaching Buyers for the expenses described in Section 4(g) above. In the
event that the Initial Closing shall not have occurred with respect to a Buyer
on or before the date which is fifteen (15) days after the date hereof due to
the failure to satisfy the condition set forth in Section 7(a)(xii) (and such
Buyer's failure to waive such unsatisfied conditions), each of the Company and
such Buyer shall have the option to terminate this Agreement with respect to
such Buyer and the Company at any time after such date without liability of any
party to any other party.
m. Placement Agent. The Company acknowledges that it has not
engaged a placement agent in connection with the sale of the Notes. Each Buyer
acknowledges that they have not engaged a placement agent in connection with the
purchase of the Notes.
n. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
o. Remedies. Each Buyer and each holder of the Securities shall
have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted and all of the rights
which such holders have under any law. Any person having any rights under any
provision of this Agreement shall be entitled to enforce such
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<PAGE> 25
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
p. Payment Set Aside. To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to the Registration
Rights Agreement or the Notes or the Buyers enforce or exercise their rights
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
* * * * * *
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<PAGE> 26
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
KOMAG, INCORPORATED OLYMPUS SECURITIES LTD.
By: By:
---------------------------------
Name: Name: Bradford B. Couri
------------------------------ Its: Authorized Signatory
Title:
-----------------------------
NELSON PARTNERS LTD.
By:
---------------------------------
Name: Bradford B. Couri
Its: Authorized Signatory
<PAGE> 27
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
PRINCIPAL INVESTOR'S LEGAL
INVESTOR ADDRESS AMOUNT OF REPRESENTATIVES' ADDRESS
INVESTOR'S NAME AND FACSIMILE NUMBER INITIAL NOTES AND FACSIMILE NUMBER
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Olympus Securities Ltd. c/o Citadel Investment Group, L.L.C. $5,606,730.81 Katten Muchin Zavis
225 West Washington Street 525 W. Monroe Street
Chicago, Illinois 60606 Chicago, Illinois 60661-3693
Attention: Bradford B. Couri Attention: Robert J. Brantman, Esq.
Telephone: (312) 696-2063 Telephone: (312) 902-5200
Facsimile: (312) 368-4650 Facsimile: (312) 902-1061
Residence: Cayman Islands
Nelson Partners Ltd. c/o Citadel Investment Group, L.L.C. $3,675,000.03 Katten Muchin Zavis
225 West Washington Street 525 W. Monroe Street
Chicago, Illinois 60606 Chicago, Illinois 60661-3693
Attention: Bradford B. Couri Attention: Robert J. Brantman, Esq.
Telephone: (312) 696-2063 Telephone: (312) 902-5200
Facsimile: (312) 368-4650 Facsimile: (312) 902-1061
Residence: Bahamas
</TABLE>
<PAGE> 28
SCHEDULES
<TABLE>
<S> <C>
Schedule 3(a) Subsidiaries
Schedule 3(c) Capitalization
Schedule 3(e) Conflicts
Schedule 3(g) Material Changes
Schedule 3(r) Certain Transactions
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Note
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Company Counsel Opinion
Exhibit D Form of Irrevocable Transfer Agent Instructions
</TABLE>
