SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
SOUTHWALL TECHNOLOGIES, INC.
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(Name of Issuer)
COMMON STOCK
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(Title of Class of Securities)
844 909 101
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(CUSIP Number)
Joe C. Sorenson, Esq., Graham & James LLP
600 Hansen Way, Palo Alto, CA 94304-1043; (415) 856-6500
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
April 9, 1997
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(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
[ ].
Check the following box if a fee is being paid with this statement [ ].
(A fee is not required only if the filing person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7).
* 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 the disclosures provided in a prior cover page.
The information required in 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).
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CUSIP No. 844 909 101 13D
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1 NAMES OF REPORTING PERSONS/
S.S. or I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
(See Instructions)
Teijin Limited
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(See Instructions) (b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
WC
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) pr 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Japan
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7 SOLE VOTING POWER
825,000
NUMBER OF --------- -------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 0
OWNED BY EACH --------- ------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 825,000
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10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
825,000
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12 CHECK 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
11.2%
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14 TYPE OF REPORTING PERSON (See Instructions)
CO
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Item 1. Security and Issuer.
The class of equity securities to which this Statement relates is the
Common Stock, $0.001 par value, of Southwall Technologies, Inc., a
Delaware corporation ("Southwall"). The principal executive offices
of Southwall are located at 1029 Corporation Way, Palo Alto, CA
94303.
Item 2. Identity and Background.
This Statement is being filed by Teijin Limited, a Japanese
corporation ("Teijin"). The registered office of Teijin is at 6-7,
Minami-honmachi 1-Chome, Chuo-ku, Osaka 541, JAPAN.
Teijin is a US$6 billion diversified chemicals and plastics, fibers,
pharmaceutical and medical products, information systems and media
company based in Osaka, Japan. Its operations include the manufacture
and sale of polyester (PET) films which are used in a variety of
applications. The name, business address, present principal
occupation and citizenship of each executive officer and director of
Teijin are set forth in Appendix A hereto, which is incorporated
herein by reference.
During the last five years, neither Teijin nor, to the best knowledge
of Teijin, any of its executive officers or directors has been
convicted in any 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 is or was 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 violations with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The funds for the purchase of the shares of Southwall Common Stock
will be provided from Teijin's working capital. The aggregate
purchase price of the shares of Southwall Common Stock reported as
beneficially owned in Item 5 is US$5,002,500. In addition, Southwall
has agreed to issue to Teijin a warrant to purchase an additional
158,000 shares of Southwall Common Stock as described in Item 5. If
the warrant is exercised, Teijin currently anticipates that the funds
for the purchase of the shares subject to the warrant will be
provided from Teijin's working capital.
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Item 4. Purpose of Transaction.
Teijin and Southwall have had a business relationship for almost 10
years and Teijin is a principal supplier of PET films used by
Southwall as the substrate for Southwall's sputtered coatings.
Southwall's thin film coating products selectively absorb, reflect or
conduct certain types of electromagnetic radiation. Teijin has agreed
to acquire the shares from Southwall for investment purposes in order
to further its cooperative relationship with Southwall and to provide
funds for the construction of Southwall's new manufacturing plant in
Arizona. Teijin does not currently intend to acquire control of
Southwall, although it may purchase (from time to time in open market
transactions) additional shares of Southwall Common Stock. In
determining whether to purchase additional shares of Southwall Common
Stock, Teijin intends to consider various factors, including
Southwall's financial condition, business and prospects, price levels
of the Southwall Common Stock, the business relationship between
Teijin and Southwall, other opportunities available to Teijin, and
general economic, money and stock market conditions. Depending upon,
among other things, the matters referred to above, Teijin may
determine to dispose of all or a portion of its shares of Southwall
Common Stock. Teijin has also had discussions with Southwall
concerning representation on Southwall's board of directors.
Southwall has agreed to allow a representative from Teijin to attend
meetings of the board of directors as a non-voting observer and to
consider the election to Southwall's board of directors of a
representative who is mutually acceptable to both companies.
Except as discussed above, the undersigned has no plans or proposals
which relate to or would result in any of the following:
(a) The acquisition by any person of additional securities of
Southwall or the disposition of securities of Southwall;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving Southwall or any of its
subsidiaries, if any;
(c) A sale or transfer of a material amount of assets of Southwall or
any of its subsidiaries;
(d) Any change in the present board of directors or management of
Southwall, including any plans or proposals to change the number or
term of directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend
policy of Southwall;
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(f) Any other material change in Southwall's business or corporate
structure;
(g) Changes in Southwall's charter, bylaws or instruments
corresponding thereto or other actions which may impede the
acquisition or control of Southwall by any person;
(h) Causing a class of securities of Southwall to be delisted from a
national securities exchange or to cease to be authorized to be
quoted in an inter-dealer quotation system of a registered national
securities association;
(i) A class of equity securities of Southwall becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Act;
or
(j) Any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
(a) Teijin has agreed to purchase 667,000 shares of Common Stock of
Southwall (the "Shares") at a price of $7.50 per share, for an
aggregate purchase price of $5,002,500, pursuant to a Basic Agreement
Regarding Stock Purchase Between Southwall/Teijin dated April 9,
1997, which is described in Item 6 below. In addition, Southwall has
agreed to issue to Teijin a warrant to purchase an additional 158,000
shares of Common Stock (the "Warrant") at a purchase price of $9.00
per share. The Warrant must be exercised prior to the third
anniversary of the date of issuance. As of the date of the filing of
this Statement, none of the shares subject to the Warrant have been
exercised.
As of February 28, 1997, 6,538,589 shares of Southwall Common Stock
were outstanding. After giving effect to the issuance of the Shares,
but assuming the issuance of no additional shares of Southwall Common
Stock subsequent to February 28, 1997, Teijin will own approximately
9.26% of Southwall's outstanding Common Stock. If all of the shares
subject to the Warrant were purchased, but assuming the issuance of
no additional shares of Southwall Common Stock, Teijin would own
approximately 11.2% of Southwall's outstanding Common Stock.
(b) Number of shares as to which such person has:
(i) Sole power to vote or direct the vote: 825,000 (including
158,000 shares subject to the Warrant, which is currently
exercisable in full).
(ii) Shared power to vote or to direct the vote: -0-
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(iii) Sole power to dispose or to direct the disposition of:
825,000 (including 158,000 shares subject to the Warrant,
which is currently exercisable in full).
(iv) Shared power to dispose or to direct the disposition of:
-0-
(c) Except for the purchase of the 667,000 shares of Southwall Common
Stock and the Warrant described above, the undersigned has not
engaged in any transactions in Southwall Common Stock during the past
60 days.
(d) No other person has the right to receive or the power to direct
the receipt of dividends from, or the proceeds from the sale of, the
667,000 shares of Southwall Common Stock and the Warrant which are
beneficially owned by the undersigned.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Teijin and Southwall entered into a Basic Agreement Regarding Stock
Purchase Between Southwall/Teijin dated April 9, 1997 (the "Basic
Agreement") which provides for the purchase of 667,000 shares of
Southwall Common Stock and the issuance of the Warrant to purchase an
additional 158,000 shares of Southwall Common Stock. The Warrant is
exercisable during a three (3) year period ending on the third
anniversary of the date of issuance. The discussion of the terms of
the Basic Agreement contained in this Statement is qualified in its
entirety by reference to the Basic Agreement, a copy of which is
attached to this Statement as Exhibit A.
Teijin also agreed to facilitate a loan to Southwall in the principal
amount of US$10,000,000 (the "Loan") and to guarantee Southwall's
performance under the Loan. It is presently contemplated that
US$5,000,000 of the Loan will be drawn down on or about May 6, 1997
(the "First Draw Down Date") and that the remaining US$5,000,000 of
the Loan will be drawn down within 6 months after the First Draw Down
Date. Under the terms of the Loan, Southwall will be required to make
semi-annual interest-only payments, including a guarantee fee, for a
period of four (4) years after the First Draw Down Date, followed by
eight (8) semi-annual principal repayments, plus accrued interest and
guarantee fee, commencing forty-eight (48) months after the
anniversary of the First Draw Down Date, as more fully described in
the Basic Agreement. The interest rate, including the guarantee fee,
shall be one percent (1%) per annum above the six (6) months LIBOR
rate established by BBA. Teijin's guarantee
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of Southwall's obligations under the Loan is to be secured in a
manner satisfactory to Teijin. Southwall will have the right to
prepay the Loan in full or in part without penalty, provided that
Southwall gives at least 6 months notice prior to its intended
prepayment and otherwise complies with the prepayment terms of the
Loan and guarantee.
The Basic Agreement also sets forth a general framework for areas in
which Teijin and Southwall may collaborate in the future, including:
a) collaboration on the development of new substrate films, thin film
coated products and processes; b) Teijin's acting as a distributor
for Southwall's products in certain territories, including Japan; and
c) Teijin being accorded "most favored supplier" status for new
substrate films purchased by Southwall, so long as price, quality and
other supply conditions are competitive with those of other
suppliers.
Item 7. Material To Be Filed as Exhibits.
The following agreement is attached hereto as an exhibit:
Exhibit A - Basic Agreement Regarding Stock Purchase Between
Southwall/Teijin Dated April 9, 1997
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SIGNATURE
After reasonable inquiry and to the best of its knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
April 14, 1997
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(Date)
TEIJIN LIMITED
By: /s/ Shosaku Yasui
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(Signature)
Shosaku Yasui
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(Name)
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APPENDIX A
INFORMATION CONCERNING
THE EXECUTIVE OFFICERS AND DIRECTORS OF TEIJIN LIMITED
(a) Hiroshi Itagaki
(b) 2-1-1 Uchisaiwaicho, Chiyodaku, Tokyo, JAPAN
(c) President and Chief Executive Officer
(d) N/A
(e) N/A
(f) Japan
(a) Toshihiko Doi
(b) 2-1-1 Uchisaiwaicho, Chiyodaku, Tokyo, JAPAN
(c) Executive Vice President
(d) N/A
(e) N/A
(f) Japan
(a) Masao Nishida
(b) 6-7, Minami-honmachi 1 Chome, Chuo-ku, Osaka 541, JAPAN
(c) Senior Managing Director; General Manager, Fibers Group
(d) N/A
(e) N/A
(f) Japan
(a) Masao Matsuzaki
(b) 2-1-1 Uchisaiwaicho, Chiyodaku, Tokyo, JAPAN
(c) Senior Managing Director; General Manager, Medical and Pharmaceutical
Group
(d) N/A
(e) N/A
(f) Japan
(a) Shosaku Yasui
(b) 2-1-1 Uchisaiwaicho, Chiyodaku, Tokyo, JAPAN
(c) Senior Managing Director; General Manager, Films Group; General
Manager, Information; Systems and Recording Media Business Group
(d) N/A
(e) N/A
(f) Japan
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(a) Taku Morota
(b) 6-7, Minami-honmachi 1 Chome, Chuo-ku, Osaka 541, JAPAN
(c) Senior Manager Director; General Manager, Administration Division
(d) N/A
(e) N/A
(f) Japan
(a) Masateru Terano
(b) 6-7, Minami-honmachi 1 Chome, Chuo-ku, Osaka 541, JAPAN
(c) Senior Managing Director; Deputy General Manager, Fibers Group;
General Manager, Fibers Technology and Development Division;
Chairman, Teijin Chemicals Ltd.
(d) N/A
(e) N/A
(f) Japan
(a) Ken Fukuoka
(b) 6-7, Minami-honmachi 1 Chome, Chuo-ku, Osaka 541, JAPAN
(c) Managing Director; Deputy General Manager, Fibers Group;
General Manager, Tetoron Filament Division
(d) N/A
(e) N/A
(f) Japan
(a) Toshimitsu Ishikawa
(b) 2-1-1 Uchisaiwaicho, Chiyodaku, Tokyo, JAPAN
(c) Managing Director; Deputy General Manager, Medical and Pharmaceutical
Group; General Manager, Administration and Marketing Division of
Medical and Pharmaceutical Group
(d) N/A
(e) N/A
(f) Japan
(a) Nobuharu Izawa
(b) 2-1-1 Uchisaiwaicho, Chiyodaku, Tokyo, JAPAN
(c) Managing Director; General Manager New Business Development Group
(d) N/A
(e) N/A
(f) Japan
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(a) Hideo Nakamori
(b) 2-1-1 Uchisaiwaicho, Chiyodaku, Tokyo, JAPAN
(c) Managing Director; General Manager, Films Marketing Division
(d) N/A
(e) N/A
(f) Japan
(a) Tatsuyuki Naruchi
(b) 2-1-1 Uchisaiwaicho, Chiyodaku, Tokyo, JAPAN
(c) Managing Director; General Manager, Planning and Research Division of
Medical and Pharmaceutical Group
(d) N/A
(e) N/A
(f) Japan
(a) Kunio Okumura
(b) 2-1-1 Uchisaiwaicho, Chiyodaku, Tokyo, JAPAN
(c) Managing Director; General Manager, General Affairs and Personnel
Division; General Manager, Health Counseling Office
(d) N/A
(e) N/A
(f) Japan
(a) Masatsugu Kajiwara
(b) 2-1-1 Uchisaiwaicho, Chiyodaku, Tokyo, JAPAN
(c) Managing Director; General Manager, Plastics Group; President and
Chief Executive Officer, Teijin Chemicals Ltd.
(d) N/A
(e) N/A
(f) Japan
(a) Yoichi Hoshi
(b) 6-7, Minami-honmachi 1 Chome, Chuo-ku, Osaka 541, JAPAN
(c) Director, Member of the Board; Deputy General Manager, Tetoron
Filament Division
(d) N/A
(e) N/A
(f) Japan
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(a) Takeshi Hara
(b) 2-1-1 Uchisaiwaicho, Chiyodaku, Tokyo, JAPAN
(c) Director, Member of the Board; General Manager, Development and
Technology Division of Medical and Pharmaceutical Group
(d) N/A
(e) N/A
(f) Japan
(a) Toshio Naito
(b) 2-1-1 Uchisaiwaicho, Chiyodaku, Tokyo, JAPAN
(c) Director, Member of the Board; Deputy General Manager,
Administration and Marketing Division of Medical and Pharmaceutical
Group
(d) N/A
(e) N/A
(f) Japan
(a) Masayuki Maruyama
(b) 19th Floor, Ploenchit Tower, 898 Ploenchit Road, Lumpinee, Patumwan,
Bangkok, 10330 THAILAND
(c) Director, Member of the Board; President and Chief Executive Officer,
Teijin Polyester (Thailand) Ltd., Teijin (Thailand) Ltd.
(d) N/A
(e) N/A
(f) Japan
(a) Shohei Nishida
(b) 6-7, Minami-honmachi 1 Chome, Chuo-ku, Osaka 541, JAPAN
(c) Director, Member of the Board; General Manager, Textile Division
(d) N/A
(e) N/A
(f) Japan
(a) Noriaki Nagashima
(b) 2-1-1 Uchisaiwaicho, Chiyodaku, Tokyo, JAPAN
(c) Director, Member of the Board; General Manager, Films Technology and
Production Division; General Manager, Films Technology Department
(d) N/A
(e) N/A
(f) Japan
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(a) Kazuhiko Soma
(b) 2-1-1 Uchisaiwaicho, Chiyodaku, Tokyo, JAPAN
(c) Director, Member of the Board; General Manager, Research and
Development Division
(d) N/A
(e) N/A
(f) Japan
(a) Takashi Kishida
(b) 6-7, Minami-honmachi 1 Chome, Chuo-ku, Osaka 541, JAPAN
(c) Director, Member of the Board; General Manager, Engineering Division;
President and Chief Executive Officer, Teijin Engineering Ltd.
(d) N/A
(e) N/A
(f) Japan
(a) Isamu Matsuda
(b) 2-1-1 Uchisaiwaicho, Chiyodaku, Tokyo, JAPAN
(c) Director, Member of the Board; General Manager, Home Health Care
Division
(d) N/A
(e) N/A
(f) Japan
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EXHIBIT A
BASIC AGREEMENT
REGARDING STOCK PURCHASE
BETWEEN SOUTHWALL/TEIJIN
This Basic Agreement (the "Agreement") is made as of April 9,
1997 by and between Southwall Technologies Inc., a Delaware corporation whose
principal business offices are at 1029 Corporation Way, Palo Alto, California
94303 (hereinafter called "Southwall" or the "Company")
and
Teijin Limited, a Japanese corporation whose registered office is at 6-7,
Minami-honmachi 1-chome, Chuo-ku, Osaka 541, Japan (hereinafter called "Teijin"
or the "Purchaser").
WITNESSETH:
WHEREAS, Teijin is the principal supplier of PET film for
substrates of Southwall's products, and Southwall and Teijin have had a
productive working relationship for almost ten (10) years;
WHEREAS, Southwall is in the process of building a new
manufacturing plant with two vacuum coaters and one solvent coater in Tempe,
Arizona and desires to secure the necessary funds to complete the new plant;
WHEREAS, Teijin has been seeking ways to expand its
relationship with Southwall and is willing to make an equity investment in
Southwall and arrange for a loan to Southwall for the completion of the new
plant; and
WHEREAS, Southwall and Teijin now wish to set forth the terms
and conditions of the above-mentioned financing and other areas of cooperation
between the parties hereto;
NOW, THEREFORE, the parties hereto have agreed as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Article 1:
1.1.1 The term "Closing" shall mean the closing of the
purchase and sale of new shares of Southwall to Teijin as set forth in Article
3.
1.1.2 The term "Closing Date" shall mean April 28, 1997,
or any other date before May 30, 1997, which may be agreed by the parties hereto
for the Closing.
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1.1.3 The term "New Plant" shall mean Southwall's new
electronics products manufacturing plant with two vacuum coaters and one solvent
coater in Tempe, Arizona, which is under construction as of the date of this
Agreement.
1.1.4 The term "GAAP" shall mean generally accepted
United States accounting principles, applied on a consistent basis.
1.1.5 The term "Securities Act" shall mean the Securities
Act of 1933 or any successor law, and regulations and rules issued pursuant to
that Act or any successor law, all of which are effective in the United States
of America.
1.1.6 The term "Parties" or "Party" shall collectively
mean Southwall and Teijin or either of them individually.
ARTICLE 2
PURPOSE OF THE AGREEMENT
2.1 The purpose of this Agreement is to set forth a general
framework for mutually beneficial cooperation between Southwall and Teijin.
2.2 The Parties will faithfully seek any and all possible
collaboration opportunities such as, but not limited to:
o Joint development of new products in Article 8;
o Jointly establish a new marketing network in the
agreed territory referred in Article 9; and
o Film supply from Teijin to Southwall under the most
favored conditions in Article 10.
ARTICLE 3
ISSUANCE OF SOUTHWALL'S NEW SHARES
3.1 It is agreed among the parties that Teijin may purchase
or partly or wholly sell Southwall shares in the open market, subject to
proceedings and regulations of the Securities Act and subject to the condition
that Teijin will notify Southwall in advance of any such purchase or sale of
Southwall shares through such market.
3.2 On the basis of the representations and warranties and
agreements contained herein, and subject to the terms and conditions of this
Agreement, at the Closing, Southwall will issue and sell to Teijin, and Teijin
agrees to purchase 667,000 shares of authorized but unissued common stock, par
value US$0.001 (the "Shares") at a price of US$7.50 per share (for an aggregate
purchase price of US$5,002,500.00).
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3.3 The Closing provided for in this Agreement will take
place at the office of Southwall at 10:00 a.m. (California time) on the Closing
Date. In consideration of the purchase of the Shares, Teijin shall pay the
purchase price of the Shares at the Closing by wire transfer to Southwall's bank
account designated by Southwall. Within twenty (20) business days of receipt of
such payment, Southwall shall deliver to Teijin a stock certificate or
certificates evidencing the Shares issued in the name of Teijin. As of the
Closing Date, Southwall shall issue and deliver to Teijin documentation
evidencing ownership of the Shares on the Closing Date.
It is agreed by the Parties that the failure to consummate the
Closing on the date and time and at the place determined under this paragraph
will not result in the immediate termination of this Agreement and will not
relieve any Party of any obligation under this Agreement. In this case, the
Parties shall deliberate in good faith for finding the best solution based upon
the purpose of this Agreement as prescribed in Article 2 of this Agreement.
3.4 It is further agreed by the Parties that in consideration
of the purchase of the Shares at a premium to the current market price for
Southwall Common Stock, Southwall shall issue to Teijin at the Closing a warrant
to purchase an additional 158,000 shares of Common Stock at a price of US$9.00
per share, which may be exercised within a three (3) year period from the
Closing Date, which warrant shall be in the form attached hereto as Exhibit A.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES AND COVENANTS
BY SOUTHWALL
Southwall agrees to make the representations and warranties
set forth on Exhibit B hereto except as set forth on the Schedule of Exceptions
attached thereto as of the Closing Date.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES BY TEIJIN
Teijin represents and warrants to Southwall as follows:
5.1.1 Teijin is a corporation duly organized, validly
existing, and in good standing under the laws of Japan.
5.1.2 This Agreement constitutes the legal, valid, and
binding obligation of Teijin, enforceable against Teijin in accordance with its
terms. Teijin has the absolute and unrestricted right, power, and authority to
execute and deliver this Agreement.
5.1.3 Teijin is acquiring the 667,000 shares as mentioned
in Article 3 hereinabove for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act.
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Teijin agrees not to sell or transfer the above-mentioned
667,000 shares of Southwall Common Stock for at least two (2) years after
Closing without the prior written consent of Southwall. In accordance with
Securities Act these shares shall be governed by Rule 144 and other applicable
SEC regulations and shall contain the appropriate legends.
After the said two (2) years, Teijin may sell such shares
without the prior written consent of Southwall.
ARTICLE 6
REGISTRATION RIGHTS
Each of the parties covenants and agrees as to the provisions
as set forth in Exhibit C hereto.
ARTICLE 7
LOAN
7.1 As soon as practicable after the effective date of this
Agreement, Teijin will make financing arrangement for Southwall in the amount of
US$10,000,000.00 as a part of investment fund of the New Plant of Southwall. A
binding loan agreement, letter of guarantee and related formal instruments, if
any, shall be negotiated as soon as possible and shall be executed subject to
the completion of the Closing.
7.2 Major financing conditions are as follows:
(1) Date of Execution: On or before May 6, 1997
(2) First Draw Down Date: May 6, 1997
(3) Expected First Draw Down Amount: US$5,000,000
(4) Second Draw Down Date: Within six (6) months of
First Draw Down Date
(5) Expected Second Draw Down Amount: Balance of Total
Loan Amount
(6) Total Loan Amount: US$10,000,000.
(7) Financing Purpose: Investment fund required for
building the New Plant.
(8) Expected Lender: First class Japanese Bank or its
United States financing company designated by
Teijin.
(9) Borrower: Southwall.
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(10) Grace Period: Four (4) years after the First Draw
Down Date. During this period, semi-annual,
interest-only payments, including guarantee fee.
(11) Repayments: Eight (8) semi-annual equivalent
principal repayments, plus accrued interest and
guarantee fee starting forty-eight (48) months after
the First Draw Down Date.
(12) Interest rate, including guarantee fee: In total one
(1) percent per annum above six (6) months LIBOR
rate by BBA.
(For the purpose of this Agreement, the six (6) months LIBOR
rate means the semi-annual floating rate, which shall first be the effective
rate as of (2) two business days before the date of draw down and thereafter
each time to be decided by the effective rate as of two (2) business days before
the next six (6) month period.)
(13) Security: Southwall shall secure this loan in a
manner satisfactory to Teijin based on mutually
agreed upon valuation of manufacturing equipment and
other tangible and intangible assets of the New
Plant.
(14) Prepayment: Southwall may have the right to prepay
this loan in full or in part without any penalty at
any time, provided that Southwall shall notify
Teijin and the lender bank at least six (6) months
prior to intended prepayment and will comply with
prepayment terms of the loan agreement and letter of
guarantee.
ARTICLE 8
COLLABORATION IN TECHNOLOGY
Southwall and Teijin will negotiate in good faith with respect
to collaboration on the development of polyester or any other new film substrate
products and/or processes at adequate facilities of Southwall in the United
States of America and/or Teijin in Japan as the case may be, or in such other
appropriate places as the parties may mutually agree.
Both Parties will commence collaboration discussions under
this Article within two (2) months after the Closing Date.
ARTICLE 9
SALE AND DISTRIBUTION OF SOUTHWALL PRODUCTS
Teijin may request Southwall to grant distribution rights for
Southwall products within certain territories, including Japan, subject to
existing contractual relationships. By deliberation Southwall may grant
distribution rights of agreed Southwall products to Teijin in the
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agreed territories. The terms and specific nature of such distribution rights
shall also be separately agreed upon by the Parties.
ARTICLE 10
MATERIAL SUPPLY
It is acknowledged that Teijin is the major supplier of PET
film to Southwall. In recognition of this status Southwall hereby acknowledges
Teijin as a Most Favored Supplier and, during the term of this Agreement,
Southwall shall grant Teijin the most preferential position in respect to
Southwall's purchases of PET film and/or other new films so long as the price,
quality and other supply conditions are competitive with those of other
supplier(s).
ARTICLE 11
FAIR RELATIONSHIP
Nothing in this Agreement prohibits or restricts any fair and
arm's length competition between the Parties; provided, however, that if, at any
time during the term of this Agreement, either Party becomes aware of any
additional collaboration opportunity with regard to film substrate products,
such Party shall, to the extent possible and in accordance with the provision of
paragraph 2.1 of this Agreement, offer to meet and confer with the other Party
concerning such an additional opportunity.
ARTICLE 12
TERM AND TERMINATION
12.1 This Agreement shall become effective as of the date
first above written subject to the approval of the respective Boards of
Directors of Southwall and Teijin and approval of governmental authorities of
Japan and the United States of America, if such governmental approval is
necessary.
12.2 This Agreement may, with sixty (60) days prior written
notice, be terminated.
(a) by either Southwall or Teijin if a material breach of
any provisions of this Agreement has been committed by the other Party and such
breach has not been waived or cured within sixty (60) days after notice of such
breach;
(b) by mutual consent of Southwall and Teijin; or
(c) by either Southwall or Teijin if the Closing has not
occurred (other than through the failure of any Party) on or before May 30,
1997.
12.3 Unless earlier terminated under the preceding paragraph,
this Agreement shall be effective until the termination of the Loan Agreement
stipulated in Article 7 hereinabove or seven (7) years after the effective date
of this Agreement whichever occurs later. If Teijin
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owns 5% of the outstanding Common Stock of Southwall at the time of termination
of this Agreement, the Parties will enter into good faith negotiation regarding
further collaboration to benefit both Parties.
The provisions of paragraphs 13.1, 13.3 and 13.6 shall survive
the termination hereunder.
ARTICLE 13
GENERAL PROVISIONS
13.1 Except as otherwise expressly provided in this
Agreement, each Party will bear its respective expenses incurred in connection
with the preparation, execution and performance of this Agreement and the
contemplated transactions, including all fees and expenses of agents,
representatives, legal counsel and accountants.
In the event of early termination of this Agreement under
paragraph 12.2, the obligation of each Party to pay its own expenses will be
subject to any rights of such Party arising from a breach of this Agreement by
the other Party.
13.2 Any public announcement or similar publicity with
respect to this Agreement or the contemplated transactions will not be issued
without the prior written consent of the other Party hereto, except as required
by law.
13.3 Each Party will hold in confidence and not disclose to
any of its own personnel who do not have a need to know or to any third party
any information specifically marked as confidential which is received by it from
the other Party in connection with the transactions contemplated hereby, without
the prior written consent of the other Party.
The foregoing obligation of confidence shall extend for the
term of this Agreement and any extensions hereof and for a period of five (5)
years thereafter; provided, however, that the above confidentiality obligation
shall not apply to any information:
(a) which is or becomes part of the public domain other
than through breach of this Agreement or through the fault of the receiving
Party;
(b) which is or becomes available to the receiving Party
from a source other than the disclosing Party, which source has no obligation to
the disclosing Party in respect thereof;
(c) which is made available by the disclosing Party in
written form to a third party which is not a subsidiary of the disclosing Party
without any confidentiality restrictions;
(d) which is required to be disclosed by law or
governmental order; or
(e) disclosure of which is mutually agreed to by the
Parties.
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13.4 All notices, consents, requests, demands and other
communications authorized or required to be given pursuant to this Agreement
shall be given in writing:
If to Southwall: President
Southwall Technologies Inc.
1029 Corporation Way
Palo Alto, CA 94303
If to Teijin: General Manager
Films Planning & Administration Dept.
Teijin Limited
Iino Bldg.,
1-1, Uchisaiwaicho 2-Chome
Chiyoda-Ku, Tokyo 100
JAPAN
Notices under this Agreement shall be deemed effective on the
earlier of: actual receipt; one working day after dispatch when sent by telex,
cable or by telefax to the recipient's proper telex or telefax number, or when
delivered by hand, or ten (10) working days after being sent by air mail,
certified or registered mail, postage pre-paid, return receipt requested,
addressed as set out above (or as otherwise designated by any Party in writing
by notice given in accordance with this paragraph).
13.5 The provisions in this Agreement relating to the Shares
will be governed by California law; provisions concerning the loan documents
contemplated hereby will be governed by Japanese law unless Teijin agrees that
such provisions shall be governed by California law. All other agreements
contemplated hereby shall be governed according to the mutual agreement of the
parties.
13.6 Any disputes, controversy or claim arising out of or
relating to this Agreement, or breach, termination, invalidity thereof, shall be
finally settled by arbitration in accordance with the UNCITRAL Arbitration Rules
as presently in force. The number of arbitrators shall be three (3). The
language to be used in the arbitration shall be English. If Teijin initiates the
arbitration the location of the arbitration shall be San Francisco, California.
If Southwall initiates the arbitration the location of the arbitration shall be
Tokyo, Japan.
13.7 Any failure of Southwall, on the one hand, or Teijin, on
the other hand, to comply with any obligation, covenant, agreement or condition
herein may be waived in writing by the other Party, but such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits waivers
or consents by or on behalf of either Party, such waiver or consent shall be
given in writing.
13.8 This Agreement supersedes all prior agreements between
the Parties with respect to its subject matter (including the Letter of Intent
between Southwall and Teijin dated
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March 7, 1997) and constitutes the complete and exclusive statement of the
agreement between the Parties with respect to its subject matter. This Agreement
may not be amended, waived or modified except by an instrument in writing
executed by the Parties.
13.9 This Agreement shall be binding upon and shall inure to
the benefit of the Parties and their successors and assigns; provided, however,
that neither Party may assign any of its rights under this Agreement without the
prior written consent of the other Party.
13.10 If any term, covenant, restriction or provision of this
Agreement is held invalid or unenforceable by any court of competent
jurisdiction, the remaining terms, covenants, restrictions and provisions of
this Agreement will remain in full force and effect, and shall in no way be
affected, impaired or invalidated; it being the intent of the Parties that they
would have executed the remaining terms, covenants, restrictions and provisions
without including any of such which may be hereafter declared invalid, void or
unenforceable.
13.11 Any failure or omission by the Parties in the
performance of any obligation under this Agreement shall not be deemed a breach
of this Agreement and shall not create any liability, if the same arises from
any cause or causes beyond the control of any of the Parties, including, but not
limited to, the following, which, for the purpose of this Agreement, shall be
regarded as beyond the control of each of the Parties: Act of God, fire, storm,
flood, earthquake, governmental regulation or direction, acts of the public
enemy, war, rebellion, insurrection, riot, invasion, strike or lockout;
provided, however, that each Party shall resume the performance whenever such
causes are removed.
13.12 The headings of Articles in this Agreement are provided
for convenience only and will not affect its construction or interpretation.
IN WITNESS WHEREOF, the Parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the day
first above written.
FOR SOUTHWALL TECHNOLOGIES INC.
/s/ Martin M. Schwartz
-------------------------------------
Martin M. Schwartz
President and Chief Executive Officer
FOR TEIJIN LIMITED
/s/ Hiroshi Itagaki
-------------------------------------
Hiroshi Itagaki
President and Chief Executive Officer
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EXHIBIT A
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS
SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
Void after
May 30, 2000
SOUTHWALL TECHNOLOGIES, INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
This Warrant is issued to Teijin Limited by Southwall Technologies,
Inc., a Delaware corporation (the "Company"), pursuant to the terms of that
certain Basic Agreement Regarding Stock Purchase Between Southwall and Teijin
(the "Stock Purchase Agreement") dated as of April 9, 1997 by and among the
Company and Teijin Limited, a Japanese corporation.
1. Purchase of Shares. Subject to the terms and conditions
hereinafter set forth, the holder of this Warrant is entitled, upon surrender of
this Warrant at the principal office of the Company (or at such other place as
the Company shall notify the holder hereof in writing), to purchase from the
Company up to 158,000 fully paid and nonassessable shares of Common Stock of the
Company, as more fully described below. The shares of Common Stock issuable
pursuant to this Section 1 (the "Shares") shall also be subject to adjustment
pursuant to Section 8 hereof.
2. Purchase Price. The purchase price for the Shares shall be $9.00
per share. Such price shall be subject to adjustment pursuant to Section 8
hereof (such price, as adjusted from time to time, is herein referred to as the
"Exercise Price").
3. Exercise Period. This Warrant is immediately exercisable and it
shall remain exercisable until and including May 30, 2000; provided, however,
that in the event of (a) the sale of all or substantially all the assets of the
Company, or (b) the merger of the Company into or consolidation with any other
entity, this Warrant shall, on the date of such event, no longer be exercisable
and become null and void. In the event of a proposed transaction of the kind
described above, the Company shall notify the holder of the Warrant at least
fifteen (15) days prior to the consummation of such event or transaction.
4. Method of Exercise. While this Warrant remains outstanding and
exercisable in accordance with Section 3 above, the holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:
<PAGE>
(i) the surrender of the Warrant, together with a duly executed
copy of the form of subscription attached hereto, to the Secretary of the
Company at its principal offices; and
(ii) the payment to the Company of an amount equal to the
aggregate Exercise Price for the number of Shares being purchased.
5. Net Exercise. In lieu of exercising this Warrant by paying the
exercise price in cash, the holder of this Warrant may elect to receive shares
equal to the value of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company together with
notice of such election, in which event the Company shall issue to the holder
hereof a number of shares of Common Stock computed using the following formula:
Y (A - B)
X = ---------
A
Where
X -- The number of shares of Common Stock to be issued to the
holder of this Warrant.
Y -- The number of shares of Common Stock purchasable under this
Warrant.
A -- The fair market value of one share of the Company's Common
Stock.
B -- The Exercise Price (as adjusted to the date of such
calculations).
For purposes of this Paragraph 5, the fair market value of Common
Stock shall mean the average of the closing bid and asked prices of the Common
Stock quoted in the over-the-counter market in which the Common Stock is traded
or the closing price quoted on the Nasdaq Stock Market or on any exchange on
which the Common Stock is listed, whichever is applicable, as published in the
Western Edition of The Wall Street Journal for the ten trading days prior to the
date of determination of fair market value (or such shorter period of time
during which such stock was traded over-the-counter or on such exchange). If the
Common Stock is not traded on the over-the-counter market or on an exchange, the
fair market value shall be the price per share that the Company could obtain
from a willing buyer for shares of Common Stock sold by the Company from
authorized but unissued shares, as such price shall be determined in good faith
by the Company's Board of Directors.
6. Certificates for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued as soon as practicable thereafter, and in any event
within thirty (30) days of the delivery of the subscription notice.
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7. Issuance of Shares. The Company covenants that the Shares, when
issued pursuant to the exercise of this Warrant, will be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens, and charges
with respect to the issuance thereof.
8. Adjustment of Exercise Price and Number of Shares. The number of
and kind of securities purchasable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the
Company shall at any time prior to the expiration of this Warrant subdivide its
Common Stock, by split-up or otherwise, or combine its Common Stock, or issue
additional shares of its Common Stock as a dividend with respect to any shares
of its Common 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. Appropriate adjustments shall also be made to the purchase price
payable per share, but the aggregate purchase price payable for the total number
of Shares purchasable under this Warrant (as adjusted) shall remain the same.
Any adjustment under this Section 8(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In case
of any reclassification, capital reorganization, or change in the Common Stock
of the Company (other than as a result of a subdivision, combination, or stock
dividend provided for in Section 8(a) above), then, as a condition of such
reclassification, reorganization, or change, lawful provision shall be made, and
duly executed documents evidencing the same from the Company or its successor
shall be delivered to the holder of this Warrant, so that the holder of this
Warrant shall have the right at any time prior to the expiration of this Warrant
to purchase, at a total price equal to that payable upon the exercise of this
Warrant, the kind and amount of shares of stock and other securities and
property receivable in connection with such reclassification, reorganization, or
change by a holder of the same number of shares of Common Stock as were
purchasable by the holder of this Warrant immediately prior to such
reclassification, reorganization, or change. In any such case appropriate
provisions shall be made with respect to the rights and interest of the holder
of this Warrant so that the provisions hereof shall thereafter be applicable
with respect to any shares of stock or other securities and property deliverable
upon exercise hereof, and appropriate adjustments shall be made to the purchase
price per share payable hereunder, provided the aggregate purchase price shall
remain the same.
(c) Notice of Adjustment. When any adjustment is required to be
made in the number or kind of shares purchasable upon exercise of the Warrant,
or in the Exercise Price, the Company shall promptly notify the holder of such
event and of the number of shares of Common Stock or other securities or
property thereafter purchasable upon exercise of this Warrant.
9. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional
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shares the Company shall make a cash payment therefor on the basis of the
Exercise Price then in effect.
10. No Stockholder Rights. Prior to exercise of this Warrant, the
holder shall not be entitled to any rights of a stockholder with respect to the
Shares, including (without limitation) the right to vote such Shares, receive
dividends or other distributions thereon, exercise preemptive rights or be
notified of shareholder meetings, and such holder shall not be entitled to any
notice or other communication concerning the business or affairs of the Company.
11. Successors and Assigns. The terms and provisions of this Warrant
and the Stock Purchase Agreement shall inure to the benefit of, and be binding
upon, the Company and the holders hereof and their respective successors and
assigns.
12. Amendments and Waivers. Any term of this Warrant may be amended
and the observance of any term of this Warrant may 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 the shares of Common Stock
issued or issuable upon exercise of this Warrant. Any waiver or amendment
effected in accordance with this Section shall be binding upon each holder of
any Shares purchased under this Warrant at the time outstanding (including
securities into which such Shares have been converted), each future holder of
all such Shares, and the Company.
13. Transfer Procedure. Subject to the provisions of applicable
securities laws, and the written consent of the Company, the holder hereof may
transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant by setting forth the name, address and taxpayer identification
number of the transferee and surrendering this Warrant to the Company for
reissuance to the transferee(s) (and the holder if applicable).
14. Governing Law. This Warrant shall be governed by the laws of the
State of California as applied to agreements among California residents made and
to be performed entirely within the State of California.
SOUTHWALL TECHNOLOGIES, INC.
By:
---------------------------------------
Martin M. Schwartz, President and Chief
Executive Officer
Address: Southwall Technologies, Inc.
1029 Corporation Way
Palo Alto, CA 94303
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EXHIBIT B
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
The Company hereby represents and warrants that, except as set forth
on a Schedule of Exceptions (the "Schedule of Exceptions"), which exceptions
shall be deemed to be representations and warranties as if made hereunder:
1.1 Organization. The Company is a duly organized and validly
existing corporation in good standing under the laws of the state of Delaware
and is duly qualified or registered to do business as a foreign corporation and
is in good standing in each jurisdiction which requires such qualification or
registration wherein it owns or leases any material properties or conducts any
material business, except where the failure so to qualify or register would not,
in the aggregate, have a material adverse effect on the Company. The Company has
the corporate power and authority to own its properties and conduct its business
as currently conducted.
1.2 Capitalization.
(a) The Company has duly authorized capital stock consisting of
(i) 20,000,000 shares of Common Stock, $0.001 par value, of which 6,538,589
shares were issued and outstanding on February 28, 1997 and 378,472 shares were
held in treasury, and (ii) 5,000,000 shares of Preferred Stock, none of which
are issued and outstanding on the date hereof or held in treasury. All such
outstanding shares of Common Stock are duly authorized, validly issued, fully
paid and nonassessable.
(b) The Company has the following outstanding securities which
are convertible into Common Stock as of March 31, 1997: the Convertible
Subordinated Note due May 31, 1999 to Monsanto Company, or its successors or
assigns (the "Monsanto Note"). The Monsanto Note is in the amount of
US$2,650,000 and convertible, prior to repayment, into shares of Southwall
common stock at a conversion price of US$10.00 per share, subject to certain
anti-dilution adjustments.
(c) The Company has adopted the following plans: (i) the Restated
1987 Stock Option Plan; (ii) the 1987 Employee Stock Purchase Plan; (iii) the
1997 Stock Incentive Plan; and (iv) the 1997 Employee Stock Purchase Plan. The
following information is provided as of March 31, 1997. With respect to the
Restated 1987 Stock Option Plan, a total of 2,275,000 shares have been reserved
for issuance, 563,050 shares have been issued and 1,659,237 shares remain
subject to outstanding options. With respect to the 1987 Employee Stock Purchase
Plan, 150,000 shares have been reserved for issuance, 125,213 shares have been
issued and no shares remain available for issuance because such plan terminated
in accordance with its terms, as of March 18, 1997. The 1997 Stock Incentive
Plan which supersedes the Restated 1987 Stock Option Plan was adopted by the
Board on March 20, 1997 and remains
<PAGE>
subject to stockholder approval at the 1997 Annual Meeting; 400,000 shares have
been reserved for issuance, and no options have been granted and no shares have
been issued. With respect to the 1997 Employee Stock Purchase Plan, which the
Board adopted on March 20, 1997 and which remains subject to stockholder
approval at the 1997 Annual Meeting, 100,000 shares have been reserved for
issuance, and no shares have been issued. All such plans have been described in
a list previously delivered to Teijin (the "Stock Plans").
(d) All of the issued and outstanding securities of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable. Except as described in this Section 1.2 or set forth in a list
previously delivered to Teijin, there is no other outstanding voting stock or
other outstanding rights to acquire voting stock. Except as set forth herein
there are no existing voting trusts, voting agreements or similar agreements
between the Company and any of its shareholders.
(e) Copies of the Company's Certificate of Incorporation and the
Company's Bylaws have been delivered by the Company to Teijin and are complete
and correct. The Company will furnish upon the request of Teijin true and
correct copies of any amendments to the foregoing instruments until this
Agreement is terminated.
1.3 Subsidiaries. The only direct or indirect subsidiaries of the
Company are those named in Exhibit 21 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996 or a list previously furnished
to Teijin, and the information relating to the organization of such subsidiaries
set forth in such list is true and correct. Except as set forth in the SEC
Documents or a list furnished to Teijin, the Company is, directly or indirectly,
the record and beneficial owner of all of the outstanding shares of the
subsidiaries, free and clear of any claim, lien, encumbrance or agreement with
respect thereto, and no equity securities of such subsidiaries are required to
be issued by reason of any warrants, rights, options, calls, commitments or
other agreements.
1.4 Authorization and Approval. The Company has full corporate power
and authority to enter into and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement by the Company have been duly authorized by all requisite
corporate action. This Agreement constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies, and to limitations of public
policy as they may apply to Section 1.4 of Exhibit C to this Agreement. The
Company is not a party to, subject to, or bound by any agreement or any
judgment, order, writ, injunction, or decree of any court, governmental body, or
arbitrator which would conflict with or be breached by the execution, delivery
or performance by the Company of this Agreement or which would prevent the
carrying out of this Agreement. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under any
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provision of the Certificate of Incorporation or Bylaws of the Company or any
mortgage, indenture, lease or other agreement or instrument, permit, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or its properties or assets, the effect of which would
have a material adverse effect on the Company as a whole or would materially
impair or restrict the Company's power to perform its obligations as
contemplated hereby. The Shares, when sold and delivered by the Company and paid
for by Teijin pursuant to this Agreement, will have been duly and validly
issued, will be fully paid and nonassessable, and will have the rights,
preferences, privileges and restrictions described in the Certificate of
Incorporation. The Common Stock issuable upon exercise of the Warrants has been
duly and validly reserved, and, when issued in compliance with the provisions of
this Agreement and the Warrant, will be validly issued and will be fully paid
and nonassessable. The issuance and sale of shares of the Shares and Warrant to
Teijin under Article III of the Agreement hereof will not give rise to any
preemptive rights or rights of first refusal on behalf of any person or group.
1.5 SEC Filings and Financial Statements. The Company has heretofore
furnished to Teijin copies of its Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, and all other registration statements, reports and
proxy statements filed by the Company with the Securities and Exchange
Commission ("SEC") on or after January 1, 1996 ("SEC Documents"). Each of the
SEC Documents was prepared and filed in substantial compliance with the
provisions of the Securities Act, the Exchange Act and the rules and regulations
thereunder. Each of the SEC Documents was complete and correct in all material
respects as of its date, and, as of its date, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances in which made, not misleading. The consolidated financial
statements and the notes thereto contained in the SEC Documents are correct and
complete and fairly present the consolidated financial position of the Company
and its subsidiaries on the respective dates thereof and the results of
operations for the periods then ended, and the balance sheets and notes thereto
contained therein show and properly reflect all material liabilities of the
Company and its consolidated subsidiaries on the respective dates thereof,
except for various claims and lawsuits against the Company now pending, the
total liability from which would not, in the judgment of the Company, materially
adversely affect the business, properties, or financial condition of the Company
and its subsidiaries, taken as a whole. Each such financial statement complies
as to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, and
was prepared in conformity with generally accepted accounting principles
consistently applied (except, in the case of unaudited statements, as permitted
by the SEC for its Quarterly Reports on Form 10-Q).
1.6 Litigation. There is no action, suit, proceeding or
investigation pending or to Southwall's knowledge threatened against the Company
that questions the validity of this Agreement, or the right of the Company to
enter into such agreement, or to consummate the transactions contemplated hereby
or thereby, or that might result, either individually or in the aggregate, in
any material adverse changes in the assets, condition, affairs or prospects of
the
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Company, financially or otherwise, or any change in the current equity ownership
of the Company.
1.7 No Pending Transactions. The Company is not a party to or bound
by any agreement (i) to merge or consolidate with, or acquire all or
substantially all of the property and assets of, any other person, (ii) to sell,
lease, or exchange all or any substantial part of its property and assets to any
other person, or (iii) except as otherwise disclosed to Teijin or as
contemplated by this Agreement, to issue, grant or sell any voting stock or
rights to acquire voting stock in any transaction where Teijin would, upon
completion of the transaction, own five percent (5%) or more of all outstanding
Voting Stock.
1.8 No Material Adverse Changes. Except as otherwise disclosed
herein or in the SEC Documents, since December 31, 1996, there has not been any
material adverse change in the financial condition or in the operations,
properties, assets or liabilities of the Company and its subsidiaries, taken as
a whole, whether or not arising in the ordinary course of business.
1.9 Dividends. Since December 31, 1996, the Company has not made any
declaration, setting aside or payment to the holders of its Common Stock of any
dividends or other distributions in respect of the Common Stock or agreed to
take any such action (other than repurchases under employee stock plans).
1.10 Intellectual Property Rights. Except as disclosed in the SEC
Documents filed prior to the execution of this Agreement, to its knowledge the
Company and its subsidiaries own or possess adequate rights to use all material
patents, trademarks, trade names, service marks, trade secrets, copyrights and
other proprietary industrial property rights as are necessary in connection with
the business of the Company, the lack of which would have a material adverse
effect on the Company and its subsidiaries taken as a whole, and the Company
does not have any knowledge of any conflict with the rights of the Company and
its subsidiaries therein or any knowledge of any conflict by them with the
rights of others therein which would have a material adverse effect on the
Company and its subsidiaries taken as a whole.
1.11 Compliance with Laws. To the Company's best knowledge, the
business of the Company and its subsidiaries is not being conducted in material
violation of any applicable law, rule or regulation (including environmental
regulations), judgment, decree or order of any governmental entity which is
material to the conduct of the Company's business, except for any violations
which, individually or in the aggregate, will not have a material adverse effect
on the business condition of the Company and its subsidiaries taken as a whole.
There are no judgments or outstanding orders, injunctions, decrees, stipulations
or awards (whether rendered by a court or administrative agency or by
arbitration) against the Company or any subsidiary or against any of their
respective properties or business which will, individually or in the aggregate,
have a material adverse effect on the business condition of the Company and its
subsidiaries taken as a whole.
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1.12 Disclosure.
(a) No representation or warranty made by the Company in this
Agreement, and no statement contained in any certificate, list or other
instrument specified in this Agreement (when read together and taken as a
whole), contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances under which they are made, not misleading.
(b) Notwithstanding the foregoing, Teijin shall be deemed to have
knowledge of all information set forth in the SEC Documents. Any facts disclosed
in the SEC Documents or in response to any particular representation contained
herein shall be deemed to have been disclosed to Teijin in connection with all
other applicable representations contained herein.
ARTICLE II
COVENANTS OF THE COMPANY
Until the termination of this Agreement or until Teijin shall no
longer hold 5% of the outstanding Common Stock of the Company, the Company
covenants and agrees as follows:
2.1 Rule 144. With a view to making available to Teijin the benefits
of Rule 144 promulgated under the Securities Act, any other similar rules or
regulations of the SEC which may at any time permit Teijin to sell or distribute
without registration the Shares and shares of Common Stock issued upon exercise
of the Warrant, the Company agrees to use its best efforts to file with the SEC
in a timely manner all reports and other documents required to be filed under
the Exchange Act.
2.2 Future SEC Filings. The Company shall promptly provide to Teijin
copies of all SEC Documents (excluding exhibits) filed with the SEC after the
Closing Date.
2.3 Stock Exchange Listing. The Company will use its best efforts to
obtain the listing on the Nasdaq National Market of the Shares and the shares of
Common Stock which Teijin may acquire upon exercise of the Warrant.
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EXHIBIT C
ARTICLE I
REGISTRATION RIGHTS
1.1 Rights to Demand Registration.
(a) If at any time and from time to time, Teijin shall request
the Company in writing to register under the Securities Act the Shares or any
shares of Common Stock issued upon exercise of the Warrant and held by Teijin
(the shares subject to such request herein referred to as the "Registrable
Shares"), the Company shall use all reasonable efforts to cause the Registrable
Shares specified in such request (which must be at least such percentage of the
aggregate shares of Common Stock then outstanding as is reasonably anticipated
to result in an offering with aggregate gross proceeds to Teijin in excess of
$7,500,000, or such lesser percentage if it constitutes all shares of voting
stock held by Teijin at such time) to be registered as soon as reasonably
practicable so as to permit the sale thereof and in connection therewith prepare
and file, on such appropriate form as the Company in its discretion shall
determine, a registration statement under the Securities Act to effect such
registration and seek to have such registration statement become effective as
promptly as practicable; provided, however, that each such request shall:
(i) specify the number of Registrable Shares intended to be
offered and sold,
(ii) express the present intention of Teijin to offer or
cause the offering of such Registrable Shares for distribution,
(iii) describe the nature or method of the proposed offer
and sale thereof, and
(iv) contain the undertaking of Teijin to provide all such
information and materials and take all such action as may be required in order
to permit the Company to comply with all applicable requirements of the SEC and
to obtain any desired acceleration of the effective date of such registration
statement.
(b) Upon any registration becoming effective pursuant to this
Section 1.1, the Company shall use its best efforts to keep such registration
statement current for a period of 90 days. Notwithstanding the foregoing, (i)
the Company shall not be obligated to cause any special audit to be undertaken
in connection with any such registration, (ii) the Company shall be entitled to
postpone for a reasonable period of time, but not in excess of 120 calendar
days, the filing of any registration statement otherwise required to be prepared
and filed by it if the Company at the time it receives a request for
registration, reasonably believes in good faith, and discloses to Teijin the
reasons for such belief, that it would be disadvantageous to
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the Company for such filing to be made at the time requested by Teijin in which
event the Company may delay the preparation and filing of a registration
statement for a period of up to 120 days and (iii) the Company shall not be
obligated to file a registration statement pursuant to this Section 1.1 during
the 90-day period following the effectiveness of any registration statement
filed by the Company in connection with an underwritten primary offering of its
securities. The obligation of the Company to register any Registrable Shares on
demand by Teijin in accordance with this Section 1.1 shall expire after
registration statements filed by reason of such demands have become effective on
four separate occasions, and in no event shall Teijin be entitled to request
more than two demand registration statements hereunder in any 12-month period.
The Company shall not be obligated to file any registration statement if the
number of shares of Common Stock to be registered for sale would exceed ten
percent (10%) of the aggregate shares of Common Stock then outstanding. In
connection with any demand offering under this section 1.1 involving an
underwriting of shares of the Company's capital stock, the Company shall select
the underwriters subject to the reasonable consent of Teijin.
1.2 The Company's Obligations. As to each offering of Common Stock
covered by a registration statement referred to in Section 1.1, the Company
shall:
(a) Use its best effort to have such registration statement
declared effective as promptly as reasonably practicable on or after such time
and date as specified by Teijin and will promptly notify Teijin and its
underwriters, if any, and confirm such advice in writing (i) when such
registration statement has become effective, (ii) when any post-effective
amendment to any such registration statement becomes effective and (iii) of any
request by the SEC for any amendment or supplement to such registration
statement or any prospectus relating thereto or for additional information;
(b) Furnish to Teijin or the underwriters such number of copies
of any prospectus (including any preliminary prospectus) in conformity with the
requirements of the Securities Act, as Teijin may reasonably request in order to
effect the offering and sale of the shares of Common Stock being offered and
sold by Teijin, but only while the Company is required under the provisions
hereof to cause the registration statement to remain current;
(c) Use the best efforts to register or qualify not later than
the effective date of such registration statement the shares of Common Stock
held by Teijin registered thereunder under the "blue sky" laws of such states as
Teijin may reasonably request; provided, however, that the Company shall not be
obligated to qualify as a foreign corporation or as a dealer in securities or to
execute or file any general consent to service of process under the laws of any
such state where it is not at such time so qualified or subject; and
(d) For a period of at least 90 days from the effective date of
the registration statement, keep such registration statement in effect and
current and from time to time amend or supplement the registration statement and
the prospectus in connection therewith in compliance with the Securities Act and
the rules and regulations adopted thereunder to permit the sale or distribution
of the shares with respect to which such registration statement shall have
become effective. If at any time the SEC should institute or threaten to
institute any proceedings
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for the purpose of issuing, or should issue a stop order suspending the
effectiveness of any such registration statement, the Company will promptly
notify Teijin and will use its best efforts to prevent the issuance of any such
stop order or to obtain the withdrawal thereof as soon as possible. The Company
will advise Teijin promptly of any order or communication of any public board or
body addressed to the Company suspending or threatening to suspend the
qualification of any of the shares of Common Stock for sale in any Jurisdiction.
1.3 Expenses. The out-of-pocket costs and expenses incurred in
connection with any registration pursuant to Section 1.1 shall be borne by
Teijin, provided that Teijin shall not be required to reimburse the Company for
compensation of the Company's officers and employees, regular audit expenses,
and normal corporate costs. The costs and expenses of any such registration
shall include, without limitation, the reasonable fees and expenses of the
Company's counsel and its accountants and all other out-of-pocket costs and
expenses of the Company incident to the preparation, printing and filing under
the Securities Act of the registration statement and all amendments and
supplements thereto and the cost of furnishing copies of each preliminary
prospectus, each final prospectus and, each amendment or supplement thereto to
underwriters, dealers and other purchasers of the securities so registered, the
costs and expenses incurred in connection with the qualification of such
securities so registered under the "blue sky" laws of various jurisdictions, the
fees and expenses of the Company's transfer agent and all other costs and
expenses of complying with the foregoing provisions of this Article I.
1.4 Indemnification.
(a) In the case of any offering registered pursuant to Section
1.1, the Company hereby indemnifies and agrees to hold harmless Teijin, any
underwriter (as defined in the Securities Act) of shares offered by Teijin, and
each person, if any, who controls Teijin or any such underwriter within the
meaning of Section 15 of the Securities Act against any losses, claims, damages
or liabilities, joint or several, to which any such persons may be subject,
under the Securities Act or otherwise, and to reimburse any of such persons for
any legal or other expenses reasonably incurred by them in connection with
investigating any claims or defending against any actions, insofar as such
losses, claims, damages or liabilities arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement under which such Registrable Shares were registered under
the Securities Act pursuant to this Article I, any prospectus contained therein,
if used during the period appropriate for such prospectus, or any amendment or
supplement thereto, or the omission or alleged omission to state therein (if so
used) a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, except insofar as such losses, claims, damages or liabilities arise
out of or are (x) based upon any such untrue statement or omission or alleged
untrue statement or omission made in reliance upon information furnished to the
Company in writing by Teijin or any underwriter for Teijin specifically for use
therein, or (y) made in any preliminary prospectus, and the prospectus contained
in the registration statement, as declared effective or in the form filed by the
Company with the SEC pursuant to Rule 424 under the Securities Act shall have
corrected such statement or omission and a copy of such prospectus shall not
have been sent or otherwise delivered to such person at or prior to the
confirmation of such sale to such person.
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1.5 Participation. The Company will permit counsel and other
representatives of Teijin to participate in meetings in connection with the
preparation of each registration statement referred to in Section 1.1. Before
filing the registration statement or amendments or supplements thereto, the
Company shall furnish to Teijin copies of all such documents proposed to be
filed. The Company shall promptly deliver to Teijin copies of the registration
statement and amendments thereto as filed with the SEC and upon the
effectiveness of the registration statement such number of copies of the
prospectus included in such registration statement as Teijin may reasonably
request.
1.6 Proposed Distribution. As to each registration statement
referred to in Section 1.1, Teijin will provide the Company with a description
of the proposed method or methods of distribution of securities from time to
time contemplated by Teijin, and the Company shall include such description in
the registration statement and file any and all amendments and supplements
necessary in connection therewith.
1.7 Prior Registration Rights. Notwithstanding the foregoing,
however, the registration rights granted to Teijin in this Article I are subject
to the registration rights granted by the Company to certain investors under
agreements entered into by the Company prior to the date of this Agreement. The
Company has made available to Teijin copies of such prior registration rights.
1.8 Termination of Registration Rights. Teijin shall not be
entitled to exercise any right provided for in this Article 1 after the three
(3) year period following the issuance of the shares.
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