<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Date of Report (Date of earliest event reported)
February 12, 1998
GENUS, INC.
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(Exact name of registrant as specified in its charter)
CALIFORNIA
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(State or other jurisdiction of incorporation or organization)
0-17139 94-2790804
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Commission File Number (I.R.S. Employer Identification Number)
1139 Karlstad Drive
Sunnyvale, CA 94089
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(Address of principal executive offices)
(408) 747-7120
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(Registrant's telephone number, including area code)
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<PAGE>
ITEM 5. OTHER EVENTS
On February 12, 1998, the Registrant closed a private placement of up to
$10,000,000 of convertible preferred stock to certain institutional investors
(the "Investors") pursuant to Regulation D promulgated under the Securities
Act of 1933, as amended. The Investors invested $5,000,000 at the closing
and will invest another $5,000,000 in the future if certain conditions are
met.
The material agreements between the Registrant and the Investors and a
copy of the Registrant's press release announcing the closing of the
preferred stock financing have been filed as exhibits to this Current Report
on Form 8-K.
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<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunder duly authorized.
GENUS, INC.
Date: February 17, 1998 /s/ MARY F. BOBEL
------------------------
Mary F. Bobel
Executive Vice President and Chief Financial
Officer
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
(c) EXHIBITS (in accordance with Item 601 of Regulation S-K)
<S> <C>
4.2 Convertible Preferred Stock Purchase Agreement, dated
February 2, 1998, among the Registrant and the Investors.
4.3 Registration Rights Agreement, dated February 2, 1998,
among the Registrant and the Investors.
4.4 Certificate of Determination.
99.1 Press Release dated February 12, 1998
</TABLE>
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<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT NAME
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<S> <C>
4.2 Convertible Preferred Stock Purchase Agreement, dated
February 2, 1998, among the Registrant and the Investors.
4.3 Registration Rights Agreement, dated February 2, 1998, among
the Registrant and the Investors.
4.4 Certificate of Determination.
99.1 Press Release dated February 12, 1998.
</TABLE>
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EXHIBIT 4.2
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Between
GENUS, INC.,
SOUTHBROOK INTERNATIONAL INVESTMENTS,
LTD.,
WESTOVER INVESTMENTS L.P.,
MONTROSE INVESTMENTS, LTD,
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
and
BROWN SIMPSON STRATEGIC GROWTH FUND, LTD.
Dated as of February 2, 1998
<PAGE>
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated
as of February 2, 1998, between Genus, Inc., a California corporation (the
"COMPANY"), and Southbrook International Investments, Ltd., a corporation
organized and existing under the laws of the British Virgin Islands
("SOUTHBROOK"), Westover Investments L.P., a Delaware limited partnership
("WESTOVER"), Montrose Investments, Ltd, a Cayman Islands exempt limited
partnership ("MONTROSE"), Brown Simpson Strategic Growth Fund, L.P., a New
York limited partnership ("BROWN SIMPSON LP") and Brown Simpson Strategic
Growth Fund, Ltd., a Cayman Islands exempt company ("BROWN SIMPSON LIMITED").
Southbrook, Westover, Montrose, Brown Simpson LP and Brown Simpson Limited
are each referred to herein as a "PURCHASER" and are collectively referred to
herein as the "PURCHASERS."
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, shares of the Company's 6%
Series A Convertible Preferred Stock, no par value (the "SERIES A
PREFERRED"), and the Company's 6% Series B Convertible Preferred Stock, no
par value (the "SERIES B PREFERRED" and together with the Series A Preferred,
the "PREFERRED STOCK").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Company and each Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED SHARES
1.1 PURCHASE AND SALE. (a) Subject to the terms and conditions set
forth herein, the Company shall issue and sell to the Purchasers, and the
Purchasers, severally and not jointly, shall purchase from the Company: (i)
100,000 shares of Series A Preferred (the "SERIES A SHARES"); and (ii) up to
100,000 shares of Series B Preferred (the "SERIES B SHARES"); and together
with the Series A Shares, the "SHARES").
(b) The Series A Preferred shall have the respective rights,
preferences and privileges set forth in EXHIBIT A attached hereto (the
"SERIES A TERMS"), which shall be incorporated into a certificate of
determination to be approved by the Purchasers and filed on or prior to the
Series A Closing (as defined below) by the Company with the Secretary of
State of California (the "SERIES A DETERMINATION"). The Series B Preferred
shall have respective rights, preferences and privileges identical to the
Series A Terms, mutatis mutandis, and shall rank pari passu with the Series A
Preferred with regard to dividends, liquidation, voting rights and any other
preferential rights designated therein, except that (i) the Conversion Price
(as defined below) for conversion of the Series B Shares shall be determined
as of the Original Issue Date (as defined below) for such Series B Shares and
(ii) the Initial Conversion Price for the Series B Shares shall be equal to
110% of the average Per Share Market Value for the 30 Trading Days
immediately preceding the Original Issue Date for the Series B Shares.
<PAGE>
The Series B Preferred shall be authorized pursuant to a certificate of
determination prepared by the Company, subject to the approval of the
Purchasers, and filed at or prior to the Series B Closing Date (as defined
below), by the Company with the Secretary of State of California (such
certificate of determination, together with the Series A Determination, are
referred to as the "CERTIFICATES OF DETERMINATION").
For purposes of this Agreement, "CONVERSION PRICE," "ORIGINAL ISSUE
DATE," "CONVERSION DATE," "TRADING DAY" and "PER SHARE MARKET VALUE" shall
have the meanings set forth in EXHIBIT A; and "MARKET PRICE" as at any date
shall mean the average Per Share Market Value for the five (5) Trading Days
immediately preceding such date.
1.2 PURCHASE PRICE. The purchase price per Share shall be $50.00.
1.3 THE CLOSINGS.
(a) THE SERIES A CLOSING. (i) The closing of the purchase and
sale of the Series A Shares (the "SERIES A CLOSING") shall take place at the
offices of Robinson Silverman Pearce Aronsohn & Berman LLP ("ROBINSON
SILVERMAN"), 1290 Avenue of the Americas, New York, New York 10104,
immediately following the execution hereof or such later date as the parties
shall agree, but not prior to the date that the conditions set forth in
Section 4.1 have been satisfied or waived by the appropriate party nor later
than February 10, 1998, provided, however, that if all conditions for such
closing (except those conditions which must be satisfied at such closing)
other than the filing of the Series A Determination have been satisfied by
February 10, 1998, the date for such closing may be extended to a date no
later than February 13, 1998. The date of the Series A Closing is
hereinafter referred to as the "SERIES A CLOSING DATE." At the Series A
Closing, the Company shall sell and issue to the Purchasers, and the
Purchasers shall, severally and not jointly, purchase from the Company,
100,000 Series A Shares for an aggregate purchase price of $5,000,000 (the
"SERIES A PURCHASE PRICE").
(ii) At the Series A Closing, (a) the Company shall deliver
to the Purchasers (i) one or more stock certificates representing the Series
A Shares purchased by such Purchaser as set forth next to such Purchaser's
name on SCHEDULE 1 attached hereto, each registered in the name of such
Purchaser, (ii) Warrants in the form of EXHIBIT B (the "SERIES A WARRANTS")
to purchase an aggregate of 300,000 shares of the Company's common stock, no
par value (the "COMMON STOCK") at an exercise price equal to 125% of the
closing bid price of the Common Stock on the day prior to the Series A
Closing Date, exercisable for three years from the Original Issue Date, each
registered in the name of such Purchaser and in the amounts set forth in
SCHEDULE 1 and (iii) all other documents, instruments and writings required
to have been delivered at or prior to the Series A Closing by the Company
pursuant to this Agreement and the Registration Rights Agreement, dated the
date hereof, by and between the Company and the Purchasers, in the form of
EXHIBIT C (the "REGISTRATION RIGHTS AGREEMENT"), and (b) each Purchaser shall
deliver to the Company the portion of the Series A Purchase Price set forth
next to its name on SCHEDULE 1, in United States dollars in immediately
available funds by wire transfer to an account designated in writing by the
Company for
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<PAGE>
such purpose prior to the Series A Closing Date, and all documents,
instruments and writings required to have been delivered at or prior to the
Series A Closing by such Purchaser pursuant to this Agreement and the
Registration Rights Agreement.
(b) THE SERIES B CLOSING. (i) Subject to the terms and conditions
set forth in this Agreement, either party shall, if the average Per Share
Market Value for the thirty Trading Days prior to the date of the Series B
Subsequent Financing Notice is greater than $4.00, have the right to deliver
a written notice to the other party (a "SERIES B SUBSEQUENT FINANCING
NOTICE") requiring such other party to either sell or buy, as the case may
be, the Series B Shares for an aggregate purchase price of $5,000,000 (the
"SERIES B PURCHASE PRICE"). Either party may deliver a Series B Subsequent
Financing Notice to the other party no earlier than 90 days after the
effective date of the Underlying Shares Registration Statement (as defined in
the Registration Rights Agreement) relating to the securities issued at the
Series A Closing Date and no later than July 27, 1999. At the Series B
Closing each Purchaser shall be obligated (subject to the terms and
conditions herein) to purchase such portion of such Series B Shares as equals
such Purchaser's pro rata portion of the Series A Purchase Price. The
closing of the purchase and sale of the Series B Shares (the "SERIES B
CLOSING") shall take place at the offices of Robinson Silverman on such date
indicated in the Series B Subsequent Financing Notice (which may not be prior
to the 15th Trading Day or subsequent to the 30th Trading Day after receipt
by either party of the Subsequent Financing Notice, or as otherwise agreed to
by the parties); PROVIDED that in no case shall the Series B Closing take
place unless and until the conditions listed in Section 4.2 have been
satisfied or waived by the appropriate party. The date of the Series B
Closing is hereinafter referred to as the "SERIES B CLOSING DATE."
(ii) At the Series B Closing, (a) the Company shall deliver
to each Purchaser (i) a pro rata portion of the Series B Shares (determined
by reference to the amount of Series A Shares issued and sold at the Series A
Closing) to be issued and sold thereat (or such other amount upon which the
parties may agree), registered in the name of the appropriate Purchaser, (ii)
a pro rata portion of Warrants (determined by reference to the amount of
Series A Warrants issued and sold at the Series A Closing) in the form of
EXHIBIT B (the "SERIES B WARRANTS", and together with the Series A Warrants,
the "WARRANTS") to purchase an aggregate of 300,000 shares of Common Stock at
an exercise price equal to 125% of the closing bid price of the Common Stock
on the day prior to the Series B Closing Date, exercisable for three years
from the Original Issue Date, each registered in the name of such Purchaser
and (iii) the legal opinion referenced in Section 4.2(b)(xii), substantially
in the form attached hereto as EXHIBIT D, and (3) all other documents,
instruments and writings required to have been delivered at or prior to the
Series B Closing by the Company to the Purchasers pursuant to this Agreement;
and (b) each Purchaser shall deliver to the Company (i) its pro-rata portion
of the Series B Purchase Price in United States dollars in immediately
available funds by wire transfer to an account designated in writing by the
Company for such purpose on or prior to the Series B Closing Date and (ii)
all documents, instruments and writings required to have been delivered at or
prior to the Series B Closing by such Purchaser pursuant to this Agreement.
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<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) ORGANIZATION AND QUALIFICATION. The Company is a corporation,
duly incorporated, validly existing and in good standing under the laws of
the State of California, with the requisite corporate power and authority to
own and use its properties and assets and to carry on its business as
currently conducted. The Company has no subsidiaries other than as set forth
in SCHEDULE 2.1(a) to the disclosure letter dated the date hereof, delivered
by the Company to the Purchasers and made a part hereof (the "DISCLOSURE
LETTER") (collectively the "SUBSIDIARIES"). Each of the Subsidiaries is a
corporation, duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization (as
applicable), with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Each of the Company and the Subsidiaries is duly qualified to do business and
is in good standing as a foreign corporation in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in
good standing, as the case may be, would not, individually or in the
aggregate, (x) adversely affect the legality, validity or enforceability of
the Preferred Stock or any of the Transaction Documents (as defined below) in
any material respect, (y) have or result in a material adverse effect on the
results of operations, assets, prospects, or financial condition of the
Company and the Subsidiaries, taken as a whole or (z) adversely impair the
Company's ability to perform fully on a timely basis its obligations under
any Transaction Document (any of (x), (y) or (z), being a "MATERIAL ADVERSE
EFFECT").
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by this Agreement and the other Transaction
Documents, and otherwise to carry out its obligations hereunder and
thereunder. This Agreement, the Certificates of Determination, the Warrants
and the Registration Rights Agreement are collectively referred to as the
"TRANSACTION DOCUMENTS." The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required
by the Company. Each of the Transaction Documents has been duly executed by
the Company and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. Neither the Company nor
any Subsidiary is in violation of any of the provisions of its respective
certificate of incorporation, articles, by-laws or other charter documents.
Prior to each of the closing dates the respective Certificate of
Determination will have been filed with
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<PAGE>
the Secretary of State of the State of California and will be in full force
and effect, enforceable against the Company in accordance with the terms
thereof.
(c) CAPITALIZATION. The authorized, issued and outstanding
capital stock of the Company is set forth in SCHEDULE 2.1(c) to the
Disclosure Letter. No shares of Common Stock are entitled to preemptive or
similar rights, nor is any holder of the Common Stock entitled to preemptive
or similar rights arising out of any agreement or understanding with the
Company by virtue of any of the Transaction Documents. Except as disclosed
in SCHEDULE 2.1(c) to the Disclosure Letter, there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or, except as a result of the purchase and
sale of the Shares and Warrants, securities, rights or obligations
convertible into or exchangeable for, or giving any person any right to
subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock,
or securities or rights convertible or exchangeable into shares of Common
Stock. To the knowledge of the Company, except as specifically disclosed in
the SEC Documents (as defined below) or SCHEDULE 2.1(c) to the Disclosure
Letter, no Person or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT") or has the right to acquire by
agreement with or by obligation binding upon the Company beneficial ownership
of in excess of 5% of the Common Stock, other than as contemplated hereby. A
"PERSON" means an individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company,
joint stock company, government (or an agency or subdivision thereof) or
other entity of any kind.
(d) ISSUANCE OF SHARES AND WARRANTS. The Shares and Warrants are
duly authorized and, when issued and paid for in accordance with the terms
hereof, shall be validly issued, fully paid and nonassessable, free and clear
of all liens, encumbrances and rights of first refusal of any kind
(collectively, "LIENS"). The Company, at the Series A Closing Date and the
Series B Closing Date (each a "CLOSING DATE"), as the case may be, will have
and at all times while the Shares and any Warrants are outstanding will
maintain an adequate reserve of duly authorized shares of Common Stock to
enable it to perform its obligations under this Agreement, the Warrants and
the Certificates of Determination with respect to the number of Shares and
Warrants issued and outstanding at such Closing Date and in no circumstances
shall such reserved and available shares of Common Stock be less than the sum
of (i) 200% of the maximum number of shares of Common Stock which would be
issuable upon conversion of the Shares were such conversion effected on the
Original Issue Date for such Shares (ii) the number of shares of Common Stock
issuable upon exercise of the Warrants and (iii) the number of shares Common
Stock which would be issuable upon payment of dividends on the Shares,
assuming each Share is outstanding for two years. The shares of Common Stock
issuable upon conversion of the Shares or exercise of the Warrants and which
may be issued as payment of dividends on the Shares are collectively referred
to herein as the "UNDERLYING SHARES." When issued in accordance with the
Certificates of Determination, and upon exercise of the Warrants and payment
of the exercise price thereof, if any, the Underlying Shares will be duly
authorized, validly issued, fully paid and nonassessable, free and clear of
all Liens.
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<PAGE>
(e) NO CONFLICTS. The execution, delivery and performance of this
Agreement and the other Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and
thereby do not and will not (i) conflict with or violate any provision of its
certificate of incorporation, bylaws or other charter documents (each as
amended through the date hereof) or (ii) subject to obtaining the consents
referred to in Section 2.1(f), conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture or instrument (evidencing a
Company debt or otherwise) to which the Company is a party or by which any
property or asset of the Company is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to which the
Company is subject (including Federal and state securities laws and
regulations), or by which any material property or asset of the Company is
bound or affected, except in the case of each of clauses (ii) and (iii), such
conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have or result
in a Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any
governmental authority, except for violations which, individually or in the
aggregate, would not have a Material Adverse Effect.
(f) CONSENTS AND APPROVALS. Except as specifically set forth in
SCHEDULE 2.1(f) to the Disclosure Letter, neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court or
other Federal, state, local or other governmental authority or other person
in connection with the execution, delivery and performance by the Company of
the Transaction Documents, other than (i) the filings of the Certificates of
Determination with respect to the Preferred Stock with the Secretary of State
of California, which filings with respect to each of the Series A Shares and
the Series B Shares shall be effected prior to the Series A Closing Date and
the Series B Closing Date, as appropriate, (ii) the filing of Underlying
Shares Registration Statements with the Securities and Exchange Commission
(the "COMMISSION"), which shall be filed in accordance with and in the time
periods set forth in the Registration Rights Agreement, (iii) the
application(s) or any letter(s) acceptable to the Nasdaq Stock Market for the
listing of the Underlying Shares with the Nasdaq Stock Market (and with any
other national securities exchange or market on which the Common Stock is
then listed), and (iv) any filings, notices or registrations under applicable
state securities laws, unless, in all such cases, the failure to obtain such
consent, waiver, authorization or order, or to give such notice or make such
filing or registration would not have or result in, individually or in the
aggregate, a Material Adverse Effect (together with the consents, waivers,
authorizations, orders, notices and filings referred to in SCHEDULE 2.1(f) to
the Disclosure Letter, the "REQUIRED APPROVALS").
(g) LITIGATION; PROCEEDINGS. Except as specifically disclosed in
the Disclosure Materials (as hereinafter defined) there is no action, suit,
notice of violation, proceeding or investigation pending or, to the knowledge
of the Company, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (Federal,
state, county, local or foreign) which (i) adversely affects or challenges
the legality, validity or enforceability of any of the
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<PAGE>
Transaction Documents or the Preferred Stock or (ii) could reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect.
(h) NO DEFAULT OR VIOLATION. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party
or by which it or any of its properties is bound, (ii) is in violation of any
order of any court, arbitrator or governmental body applicable to it, or
(iii) is in violation of any statute, rule or regulation of any governmental
authority to which it is subject, except as could not reasonably be expected
to, in any such case (individually or in the aggregate), have or result in a
Material Adverse Effect.
(i) SCHEDULES. The Schedules to this Agreement and the Schedules
to the Disclosure Letter, together with the other Disclosure Materials,
furnished by or on behalf of the Company do not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements made therein, in light of the circumstances under which
they were made, not misleading.
(j) PRIVATE OFFERING. Neither the Company nor any Person acting
on its behalf has taken or will take any action which might subject the
offering, issuance or sale of the Securities to the registration requirements
of the Securities Act of 1933, as amended (the "SECURITIES ACT").
(k) SEC DOCUMENTS; FINANCIAL STATEMENTS; NO ADVERSE CHANGE. The
Company has filed all reports required to be filed by it under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), including pursuant to
Section 13(a) or 15(d) thereof, for the three years preceding the date hereof
(or such shorter period as the Company was required by law to file such
material) (the foregoing materials being collectively referred to herein as
the "SEC DOCUMENTS" and, together with the Schedules to this Agreement and
the Schedules to the Disclosure Letter, the "DISCLOSURE MATERIALS") on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Documents prior to the expiration of any such extension.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Commission promulgated thereunder, and none
of the SEC Documents, when filed, 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. All material
agreements to which the Company is a party or to which the property or assets
of the Company are subject have been filed as exhibits to the SEC Documents
as required; neither the Company nor any of its Subsidiaries is in breach of
any agreement where such breach would have or result in a Material Adverse
Effect. The financial statements of the Company included in the SEC
Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects
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<PAGE>
the financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal year-end audit adjustments.
Since the date of the financial statements included in the Company's last
filed Quarterly Report on Form 10-Q for the period ended September 30, 1997,
there has been no event, occurrence or development that has had a Material
Adverse Effect which has not been specifically disclosed to the Purchasers by
the Company. The Company last filed audited financial statements with the
Commission on March 28, 1997, and has not received any comments from the
Commission in respect thereof.
(l) SENIORITY. No class of equity securities of the Company is
senior to the Preferred Stock in right of payment, whether upon liquidation,
dissolution or otherwise.
(m) INVESTMENT COMPANY. The Company is not, and is not controlled
by or under common control with an affiliate (an "AFFILIATE") of, an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
(n) CERTAIN FEES. Except for fees payable to Brown Simpson Asset
Management, LLC ("BSAM") pursuant to Section 3 of the letter agreement dated
January 9, 1998 between the Company and BSAM, as amended (the "ENGAGEMENT
LETTER") and a finder's fee payable to CIBC Oppenheimer Corp. in connection
with the introduction of BSAM to the Company (the parties hereto acknowledge
that CIBC Oppenheimer Corp. acted merely as a finder and not as an agent of
either the Purchasers or the Company and will not and has not, in connection
with the transactions contemplated by this Agreement, provided any other
services to the Purchasers or the Company except for introducing BSAM to the
Company), no fees or commissions will be payable by the Company to any
broker, financial advisor, finder, investment banker, or bank with respect to
the transactions contemplated by this Agreement. The Purchasers shall have
no obligation with respect to any fees or with respect to any claims made by
or on behalf of other Persons for fees of a type contemplated in this Section
that may be due in connection with the transactions contemplated by this
Agreement. The Company shall indemnify and hold harmless each of the
Purchasers, its employees, officers, directors, agents, and partners, and
their respective Affiliates (as such term is defined under Rule 405
promulgated under the Securities Act), from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees.
(o) SOLICITATION MATERIALS. The Company has not (i) distributed
any offering materials in connection with the offering and sale of the
Shares, the Warrants or the Underlying Shares other than the Disclosure
Materials and any amendments and supplements thereto or (ii) solicited any
offer to buy or sell the Shares, the Warrants or the Underlying Shares by
means of any form of general solicitation or advertising. None of the
Disclosure Materials or any other information provided to the Purchasers by
or on behalf of the Company contain any untrue statement of material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
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(p) FORM S-3 ELIGIBILITY. The Company is, and at each Closing
Date will be, eligible to register securities for resale with the Commission
under Form S-3 promulgated under the Securities Act.
(q) EXCLUSIVITY. The Company shall not issue and sell the
Preferred Stock to any Person other than the Purchasers pursuant to this
Agreement other than with the specific prior written consent of each of the
Purchasers.
(r) LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. The Company
has not in the two years preceding the date hereof received notice (written
or oral) from any stock exchange, market or trading facility on which the
Common Stock is or has been listed (or on which it has been quoted) to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such exchange or market. Immediately prior to and giving
effect to the transactions contemplated in this Agreement, the Company is in
compliance with all such maintenance requirements.
(s) PATENTS AND TRADEMARKS. The Company has, or has rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and rights (collectively,
the "INTELLECTUAL PROPERTY RIGHTS") which are necessary for use in connection
with its business, as currently conducted and as described in the SEC
Documents, and which the failure to so have would have a Material Adverse
Effect. Except as disclosed in SCHEDULE 2.1(s) to the Disclosure Letter, to
the best knowledge of the Company, there is no existing infringement by
another Person of any of the Intellectual Property Rights which are necessary
for use in connection with the Company's business.
(t) ACKNOWLEDGEMENT OF DILUTION. The Company acknowledges that
the issuance of the Underlying Shares upon (i) conversion of the Shares and
payment of dividends thereon in accordance with the Certificates of
Determination and (ii) exercise of the Warrants may result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its
obligation to issue Underlying Shares upon (x) conversion of the Shares and
payment of dividends thereon in accordance with the Certificates of
Determination and (y) upon exercise of the Warrants is unconditional and
absolute subject to the limitations set forth herein in the Certificate of
Determination or pursuant to the Warrants, regardless of the effect of any
such dilution.
(u) REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as
described on SCHEDULE 2.1(u) to the Disclosure Letter, (A) the Company has
not granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority which has
not been satisfied and (B) no Person, including, but not limited to, current
or former shareholders of the Company, underwriters, brokers or agents, has
any right of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by this
Agreement or any other Transaction Document.
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(v) TITLE. The Company owns no real property and, except as
disclosed in SCHEDULE 2.1(v) to the Disclosure Letter, the Company and the
Subsidiaries have 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, except for liens, claims or
encumbrances 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 its Subsidiaries. Any real property and facilities held
under lease by the Company and 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 buildings by the Company and its Subsidiaries.
(w) REGULATORY PERMITS. 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 as described in the SEC Documents except where the
failure to possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("MATERIAL PERMITS"), and neither the Company
nor any such Subsidiary has received any notice of proceedings relating to
the revocation or modification of any Material Permit.
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) ORGANIZATION; AUTHORITY. Each Purchaser is a corporation duly
incorporated or a limited partnership duly formed, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
formation with the requisite power and authority, corporate or otherwise, to
enter into and to consummate the transactions contemplated hereby and by the
Registration Rights Agreement and otherwise to carry out its obligations
hereunder and thereunder. The purchase by such Purchaser of the Shares and
the Warrants hereunder has been duly authorized by all necessary action on
the part of such Purchaser. Each of this Agreement and the Registration
Rights Agreement has been duly executed and delivered by such Purchaser and
constitutes the valid and legally binding obligation of such Purchaser,
enforceable against such Purchaser, in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights generally and to general principles of equity.
(b) INVESTMENT INTENT. Each Purchaser is acquiring the Shares,
the Warrants and the Underlying Shares for its own account for investment
purposes only and not with a view to or for distributing or reselling such
Shares, Warrants or Underlying Shares or any part thereof or interest
therein, without prejudice, however, to such Purchaser's right, subject to
the provisions of this Agreement and the Registration Rights Agreement, at
all times to sell or otherwise dispose of all or any part of such Shares,
Warrants or Underlying Shares pursuant to an effective registration statement
under the Securities Act and in compliance with applicable State securities
laws or under an exemption from such registration.
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(c) PURCHASER STATUS. At the time such Purchaser was offered the
Shares and the Warrants, it was, and at the date hereof, it is, and at each
Closing Date and each exercise date under the Warrants, it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) EXPERIENCE OF PURCHASER. Each Purchaser either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the Shares,
the Warrants and the Underlying Shares, and has so evaluated the merits and
risks of such investment.
(e) ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT. Each
Purchaser is able to bear the economic risk of an investment in the Shares,
the Warrants and the Underlying Shares and, at the present time, is able to
afford a complete loss of such investment.
(f) ACCESS TO INFORMATION. Each Purchaser acknowledges receipt of
the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and
to receive answers from, representatives of the Company concerning the terms
and conditions of the offering of the Shares, the Warrants and the Underlying
Securities and the merits and risks of investing in the Shares, the Warrants
and the Underlying Securities; (ii) access to information about the Company
and the Company's financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision with
respect to the investment and to verify the accuracy and completeness of the
information contained in the Disclosure Materials.
(g) RELIANCE. Each Purchaser understands and acknowledges that
(i) the Shares and the Warrants are being offered and sold to the Purchaser
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under Section
4(2) of the Securities Act or Regulation D promulgated thereunder and (ii)
the availability of such exemption, depends in part on, and the Company will
rely upon the accuracy and truthfulness of, the foregoing representations and
such Purchaser hereby consents to such reliance.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 TRANSFER RESTRICTIONS. (a) If any Purchaser should decide to
dispose of Shares or any portion of the Warrants (and upon conversion or
exercise thereof, as the case may be, any of the
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Underlying Shares) held by it, each Purchaser understands and agrees that it
may do so only pursuant to an effective registration statement under the
Securities Act or pursuant to an available exemption from the registration
requirements of the Securities Act. In connection with any transfer of any
Shares or any Underlying Shares other than pursuant to an effective
registration statement or to the Company, the Company may require the
transferor thereof to provide to the Company a written opinion of counsel
experienced in the area of United States securities laws selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred securities under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register (i) any transfer of Shares or Warrants by one Purchaser to another
Purchaser, and agrees that no documentation other than executed transfer
documents shall be required for any such transfer, and (ii) any transfer of
Shares or Warrants by any Purchaser to an Affiliate of such Purchaser or to
an Affiliate of another Purchaser, or any transfer among any such Affiliates,
provided that transferee certifies to the Company that it is an "accredited
investor" as defined in Rule 501(a) under the Securities Act and that the
matters set forth in Sections 2.2(b) through (f) are true with respect to it.
Any such transferee shall be bound by the terms of this Agreement and shall
have the rights of a Purchaser under this Agreement and the Registration
Rights Agreement.
(b) Each Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Shares, the
Warrants and the Underlying Shares:
[NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE] [THE SECURITIES REPRESENTED HEREBY HAVE
NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
[FOR SHARES ONLY] THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND CONVERSION SET FORTH IN A
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF FEBRUARY 2,
1998, EXECUTED BY THE ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT IS
ON FILE AT THE PRINCIPAL OFFICE OF GENUS, INC.
The Underlying Shares issuable upon conversion of the Shares or as
payment of dividends thereon or exercise of the Warrants shall not contain
the legend set forth above if in the written opinion of counsel to the
Company experienced in the area of United States securities laws
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such legend is not required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued by the
staff of the Commission). The Company agrees that it will provide each
Purchaser, upon request, with a certificate or certificates representing
Underlying Shares, free from such legend at such time as such legend is no
longer required hereunder.
3.2 STOP TRANSFER INSTRUCTION. The Company may not make any notation
on its records or give instructions to any transfer agent of the Company
which enlarge the restrictions of transfer set forth in Section 3.1.
3.3 FURNISHING OF INFORMATION. As long as any Purchaser owns Shares,
Warrants or Underlying Shares, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to Section 13(a) or 15(d) of the Exchange Act. As long as any
Purchaser owns Shares, Warrants or Underlying Shares, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of the Exchange
Act, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act
annual and quarterly financial statements, together with a discussion and
analysis of such financial statements in form and substance substantially
similar to those that would otherwise be required to be included in reports
required by Section 13(a) or 15(d) of the Exchange Act, as well as any other
information required thereby, in the time period that such filings would have
been required to have been made under the Exchange Act. The Company further
covenants that it will take such further action as any holder of Shares may
reasonably request, all to the extent required from time to time to enable
such Person to sell Underlying Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion referenced
above in this Section. Upon the request of any such Person, the Company
shall deliver to such Person a written certification of a duly authorized
officer as to whether it has complied with such requirements.
3.4 BLUE SKY LAWS. In accordance with the Registration Rights
Agreement, the Company shall qualify or obtain exemptions for the Underlying
Shares under the securities or Blue Sky laws of such jurisdictions as the
Purchasers may request and shall continue such qualification at all times
through the third anniversary of the last Closing Date; PROVIDED, HOWEVER,
that neither the Company nor its Subsidiaries shall be required in connection
therewith to qualify as a foreign corporation where they are not now so
qualified or to take any action that would subject the Company to general
service of process in any such jurisdiction where it is not then so subject
or subject the Company to any material tax in any such jurisdiction where it
is not then so subject.
3.5 INTEGRATION. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer
or sale of the Shares, the Warrants or the Underlying Shares in a manner that
would require the registration under the Securities Act of the sale of the
Shares, the Warrants or the Underlying Shares to any Purchaser.
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3.6 CERTAIN AGREEMENTS. As long as any Purchaser owns Shares, the
Company shall not, and shall cause the Subsidiaries not to, without the
consent of the holders of all of the Shares then outstanding, (i) amend its
articles of incorporation, bylaws or other charter documents so as to
adversely affect any rights of any Purchaser; (ii) declare, authorize, set
aside or pay any dividend or other distribution with respect to the Common
Stock except as permitted under the Certificates of Determination and as
would not adversely affect the rights of any Purchaser hereunder or under the
Certificates of Determination; (iii) repay, repurchase or offer to repay,
repurchase or otherwise acquire shares of its Common Stock in any manner; or
(iv) enter into any agreement with respect to any of the foregoing.
3.7 LISTING AND RESERVATION OF UNDERLYING SHARES. (a) The Company
shall (i) not later than the applicable Closing Date prepare and file with
the Nasdaq Stock Market (as well as any other national securities exchange or
market on which the Common Stock is then listed) an additional shares listing
application or a letter acceptable to the Nasdaq Stock Market covering and
listing such number of shares of Common Stock, as required by the
Registration Rights Agreement, (ii) take all steps necessary to cause the
Underlying Shares to be approved for listing in the Nasdaq Stock Market (as
well as on any other national securities exchange or market on which the
Common Stock is then listed) as soon as possible thereafter, and (iii)
provide to the Purchasers evidence of such listing, and the Company shall
maintain the listing of its Common Stock on such exchange.
(b) The Company shall reserve for issuance shares of Common Stock
issuable upon conversion of the Shares and for payment of dividends thereupon
in shares of Common Stock pursuant to the terms of the Certificates of
Determination and upon exercise of the Warrants in accordance with their
terms the number of shares to be listed on the Nasdaq Stock Market (and such
other national securities exchange or market on which the Common Stock is
then listed or traded) as set forth in Section 3.7(a). Shares of Common
Stock reserved for issuance upon the conversion of the Shares as set forth in
Section 3.7(a) shall be allocated pro rata to each of the Purchasers in
accordance with the amount of Shares issued and delivered to such Purchaser
at each Closing, as applicable.
3.8 NO VIOLATION OF APPLICABLE LAW. Notwithstanding any provision of
this Agreement to the contrary, if the redemption of Shares or Underlying
Shares otherwise required under this Agreement or the Registration Rights
Agreement would be prohibited by the relevant provisions of the California
General Corporations Law, such redemption shall be effected as soon as it is
permitted under such law; PROVIDED, HOWEVER, that from the 5th day after such
redemption notice until such redemption price is paid in full, a late fee on
any such unpaid amount shall accrue at the rate of 15% per annum.
3.9 NOTICE OF BREACHES. (a) The Company and each Purchaser shall give
prompt written notice to the other of any breach of any representation,
warranty or other agreement contained in this Agreement or in the
Registration Rights Agreement, as well as any events or occurrences arising
after the date hereof and prior to, with respect to the Series B Closing, the
Series B Closing Date, which would reasonably be likely to cause any
representation or warranty or other agreement of such party,
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as the case may be, contained herein to be incorrect or breached as of such
Closing Date. However, no disclosure by either party pursuant to this
Section 3.9 shall be deemed to cure any breach of any representation,
warranty or other agreement contained herein or in the Registration Rights
Agreement.
(b) Notwithstanding the generality of Section 3.9(a), the Company
shall promptly notify each Purchaser of any notice or claim (written or oral)
that it receives from any lender of the Company to the effect that the
consummation of the transactions contemplated hereby and by the Registration
Rights Agreement violates or would violate any written agreement or
understanding between such lender and the Company, and the Company shall
promptly furnish by facsimile to the holders of the Shares a copy of any
written statement in support of or relating to such claim or notice.
(c) The default by any Purchaser of any of its obligations,
representations or warranties under any Transaction Document shall not be
imputed to, and shall have no effect upon, any other Purchaser or affect the
Company's obligations under the Transaction Documents to any non-defaulting
Purchaser.
3.10 CONVERSION OBLIGATIONS OF THE COMPANY. The Company covenants to
convert Shares and to deliver Underlying Shares in accordance with the terms
and conditions and time period set forth in the respective Certificates of
Determination and to deliver Underlying Shares upon exercise of Warrants in
accordance with the terms and conditions and time periods set forth in the
Warrants.
3.11 SUBSEQUENT REGISTRATIONS. Other than Underlying Shares and other
"Registrable Securities" (as defined in the Registration Rights Agreement) to
be registered in accordance with the Registration Rights Agreement, the
Company shall not, for a period of not less than 90 Trading Days after the
date that each Underlying Shares Registration Statement relating to the
securities issued at the Series A Closing Date and the Series B Closing Date
is declared effective by the Commission, without the prior written consent of
the Purchasers, (i) issue or sell any of its or any of its Affiliates' equity
or equity-equivalent securities pursuant to Regulation S promulgated under
the Securities Act, or (ii) register for resale any securities of the
Company. Any days that any Purchaser is unable to sell Underlying Shares
under an Underlying Shares Registration Statement shall be added to such 90
Trading Day period for the purposes of (i) and (ii) above.
3.12 PRESS RELEASE. The Company shall issue a press release in
connection with the transactions contemplated herein, relating to the issue
and sale of the Shares and Warrants to the Purchasers which press release
shall be approved by the Company and BSAM.
3.13 USE OF PROCEEDS. The Company shall use all of the proceeds from
the sale of the Shares for working capital and general corporate purposes and
not for the satisfaction of any portion of Company borrowings or to redeem
Company equity or equity-equivalent securities. Pending application of the
proceeds of this placement in the manner permitted hereby, the Company will
invest such proceeds in interest bearing accounts and/or short-term,
investment grade interest bearing securities.
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3.14 REIMBURSEMENT. In the event that any Purchaser, other than by
reason of its gross negligence or willful misconduct, or the breach of any
representation, warranty or covenant in this Agreement or in connection with
any information furnished by such Purchaser for use in any Registration
Statement, becomes involved in any capacity in any action, proceeding or
investigation brought by or against any person, including stockholders of the
Company, in connection with or as a result of the consummation of the
transactions contemplated pursuant to the Transaction Documents, the Company
will reimburse such Purchaser for its legal and other expenses (including the
cost of any investigation and preparation) incurred in connection therewith.
The reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any affiliate of each Purchaser and
partners, directors, agents, employees and controlling persons (if any), as
the case may be, of each Purchaser and any such affiliate, and shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, each Purchaser and any such
affiliate and any such person. The Company also agrees that no Purchaser or
any such affiliates, partners, directors, agents, employees or controlling
persons shall have any liability to the Company or any person asserting
claims on behalf of or in right of the Company in connection with or as a
result of the consummation of the Transaction Documents except to the extent
that any losses, claims, damages, liabilities or expenses incurred by the
Company result from the gross negligence or willful misconduct of such
Purchaser or entity in connection with the transactions contemplated by this
Agreement.
3.15 SERIES B OBLIGATION. Notwithstanding anything to the contrary
contained in this Agreement, if there is a Change of Control prior to the
Series B Closing Date, neither the Company nor the Purchasers shall be
obligated to sell or to purchase the Series B Shares.
3.16 CONVERSION LIMITATION. In no event shall a Purchaser be permitted
to convert any shares of Preferred Stock in excess of the number of such
shares upon the conversion of which, (x) the number of shares of Common Stock
beneficially owned by such Purchaser (other than shares of Common Stock
issuable upon conversion of shares of Preferred Stock) PLUS (y) the number of
shares of Common Stock issuable upon the conversion of such shares of
Preferred Stock, would be equal to or exceed (z) 4.999% of the number of
shares of Common Stock then issued and outstanding, including shares issuable
on conversion of the Preferred Stock held by such Purchaser after application
of this Section 3.16. As used herein, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
thereunder. To the extent that the limitation contained in this Section 3.16
applies, the determination of whether shares of Preferred Stock are
convertible (in relation to other securities owned by a Purchaser) and of
which shares of Preferred Stock are convertible shall be in the sole
discretion of such Purchaser, and the submission of shares of Preferred Stock
for conversion shall be deemed to be such Purchaser's determination of
whether such shares of Preferred Stock are convertible (in relation to other
securities owned by a Purchaser) and of which shares of Preferred Stock are
convertible, in each case subject to such aggregate percentage limitation,
and the Company shall have no obligation to verify or confirm the accuracy of
such determination. This paragraph may be amended (i) in order to clarify an
ambiguity
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or otherwise to give effect to such limitation, by the board of directors of
the Company and the holders of two-thirds (2/3) of the shares of Preferred
Stock then outstanding. Nothing contained herein shall be deemed to
restrict the right of a Purchaser to convert such shares of Preferred Stock
at such time as such conversion will not violate the provisions of this
paragraph. The provisions of this Section 3.16 may be waived by a Purchaser
as to itself (and solely as to itself) upon not less than 65 days prior
notice to the Company, and the provisions of this Section 3.16 shall continue
to apply until such 65th day (or later, if stated in the notice of waiver).
3.17 PAYMENT RESTRICTIONS. Notwithstanding any provision of the
Transaction Documents (as defined in the Purchase Agreement) to the contrary,
if payment of any amounts payable by the Company to the Purchasers under the
Transaction Documents, including, without limitation, any amounts payable as
dividends, penalties or upon redemption of Shares or Underlying Shares, would
be prohibited in the absence of consent from Sumitomo Bank of California
pursuant to the Company's Credit Agreement dated August 15, 1997 with
Sumitomo Bank of California ("SUMITOMO"), as the same may be amended,
supplemented, superseded or replaced from time to time or any replacement
facility (the "CREDIT AGREEMENT"), then the Company shall use its best
efforts to obtain such consent as promptly as practicable after any such
payment is required, and any amounts payable by the Company with respect to
its obligation to pay any such dividends, penalties, or redemption payments
shall continue to accrue until such consent is obtained. Nothing contained in
this Section 3.17 shall be construed as a waiver by the Purchasers of any
rights they may have under any of the Transaction Documents.
3.18 BANK LOAN PAYMENT RESTRICTIONS. The Company hereby covenants it
will not, from the date of this Agreement through the later of (i) the date
which is 180 days from the date of this Agreement and (ii) the date which is
90 days subsequent to the date of the effectiveness of the Registration
Statement required to be filed by the Company with respect to the Series A
Shares under the Registration Rights Agreement, voluntarily repay or pay down
any portion of any of its bank debt, including, without limitation, any
amounts due under the Credit Agreement, and the Company hereby further
covenants that it will not, from the date of the Series B Closing Date
through the later of (i) the date which is 180 days from the Series B Closing
Date and (ii) the date which is 90 days subsequent to the date of the
effectiveness of the Registration Statement required to be filed by the
Company with respect to the Series B Shares under the Registration Rights
Agreement, repay or pay down any portion of any of its bank debt, including,
without limitation, any amounts due under the Credit Agreement; provided,
however, that the foregoing shall not prohibit the Company from paying any
such bank debt upon acceleration of such bank debt or at maturity.
3.19 STANDSTILL. The Company hereby agrees that, except for the
transactions contemplated by this Agreement, it will not, without the prior
written consent of the Purchasers, enter into any agreement to sell or sell
any of its or any of its Affiliates' equity or equity-equivalent securities
for the 45 day period subsequent to the date of this Agreement.
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ARTICLE IV
CONDITIONS
4.1 (a) CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
SELL THE SERIES A SHARES. The obligation of the Company to sell the Series A
Shares and the Series A Warrants hereunder is subject to the satisfaction or
waiver by the Company, at or before the Series A Closing, of each of the
following conditions:
(i) ACCURACY OF THE PURCHASERS' REPRESENTATIONS AND
WARRANTIES. The representations and warranties of each Purchaser shall be
true and correct in all material respects as of the date when made and as of
the Series A Closing Date, as though made on and as of such date;
(ii) PERFORMANCE BY THE PURCHASERS. Each Purchaser shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Purchaser at or prior to the
Series A Closing; and
(iii) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement relating
to the issuance or conversion of any of the Shares or exercise any of the
Warrants.
(b) CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO
PURCHASE THE SERIES A SHARES. The obligation of each Purchaser hereunder to
acquire and pay for the Series A Shares and the Series A Warrants is subject
to the satisfaction or waiver by such Purchaser, at or before the Series A
Closing, of each of the following conditions:
(i) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Company set forth in
this Agreement and in the Registration Rights Agreement shall be true and
correct in all material respects as of the date when made and as of the
Series A Closing Date as though made on and as of such date;
(ii) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the
Series A Closing;
(iii) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the
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transactions contemplated by this Agreement or the Registration Rights
Agreement relating to the issuance or conversion of any of the Shares or
exercise of any of the Warrants.
(iv) ADVERSE CHANGES. Since the date of the financial
statements included in the Company's Quarterly Report on Form 10-Q or Annual
Report on Form 10-K, whichever is more recent, last filed prior to the date
of this Agreement, no event which had a Material Adverse Effect and no
material adverse change in the financial condition or prospects of the
Company shall have occurred which is not disclosed in the Disclosure
Materials (for purposes hereof changes in the market price of the Common
Stock may be considered in determining whether there has occurred an event
which has had a Material Adverse Effect or whether a material adverse change
has occurred);
(v) NO SUSPENSIONS OF TRADING IN COMMON STOCK. The trading
in the Common Stock shall not have been suspended by the Commission or on the
Nasdaq Stock Market which suspension shall remain in effect.
(vi) LISTING OF COMMON STOCK. The Company shall have filed
a listing application to list those shares required to be listed by the
Registration Rights Agreement in connection with the Series A Closing for
trading on the Nasdaq Stock Market;
(vii) LEGAL OPINION. The Company shall have delivered to the
Purchasers the opinion of Wilson Sonsini Goodrich & Rosati, professional
corporation, outside counsel to the Company, in substantially the form
attached hereto as EXHIBIT D;
(viii) REQUIRED APPROVALS. All Required Approvals shall have
been obtained other than those relating solely to the Series B Shares;
(ix) SHARES OF COMMON STOCK. On or prior to the Series A
Closing Date, the Company shall have duly reserved the number of Underlying
Shares required by the Transaction Documents to be reserved for issuance upon
conversion of Series A Shares and payment of dividends thereon and exercise
of the Warrants;
(x) DELIVERY OF STOCK CERTIFICATES. The Company shall have
delivered to each Purchaser or such Purchaser's designee the stock
certificate(s) representing the Series A Shares, registered in the name of
such Purchaser, each in form satisfactory to the Purchaser;
(xi) REGISTRATION RIGHTS AGREEMENT. The Company shall have
executed and delivered the Registration Rights Agreement;
(xii) CERTIFICATE OF DETERMINATION. The Series A
Determination shall have been duly filed with the Secretary of State of
California, and the Company shall have delivered a copy thereof to the
Purchaser certified as filed by the office of the Secretary of State of
California;
-19-
<PAGE>
(xiii) CHANGE OF CONTROL. No Change of Control (as hereafter
defined) shall have occurred between the date hereof and the Series A Closing
Date;
(xiv) TRANSFER AGENT INSTRUCTIONS. The Irrevocable Transfer
Agent Instructions, in the form of EXHIBIT E attached hereto, shall have been
delivered to and acknowledged in writing by the Company's transfer agent;
(xv) BANK WAIVER. The Company shall have delivered to the
Purchasers a fully executed waiver and consent or amendment to the Credit
Agreement, which waiver or amendment shall be in form and substance
satisfactory to the Purchasers, of Sumitomo (the "BANK WAIVER"), which shall
permit the Company under the provisions of the Credit Agreement to pay up to
$250,000 to the Purchasers in payment of any penalties due to the Purchasers
under any of the Transaction Documents so long as there is no event of
default under the Credit Agreement;
(xvi) SUBSIDIARY. Ionex/Hei Corporation shall be in good
standing in the State of Massachusetts; and
(xvii) OFFICER'S CERTIFICATE. On the Series A Closing Date,
the Company shall deliver to the Purchasers an Officer's Certificate dated
the Series A Closing Date and signed by an executive officer of the Company
confirming the accuracy of the Company's representations, warranties and
covenants as of such Series A Closing Date and confirming the compliance by
the Company with the conditions precedent set forth in this Section 4.1 as
of such Series A Closing Date.
4.2 (a) CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO SELL
THE SERIES B SHARES. The obligation of the Company to sell the Series B
Shares and the Series B Warrants hereunder is subject to the satisfaction or
waiver by the Company, at or before the Series B Closing, of each of the
following conditions:
(i) ACCURACY OF THE PURCHASERS' REPRESENTATIONS AND
WARRANTIES. The representations and warranties of each Purchaser shall be
true and correct in all material respects as of the date when made and as of
the Series B Closing Date, as though made on and as of such date;
(ii) PERFORMANCE BY THE PURCHASERS. Each Purchaser shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Purchaser at or prior to the
Series B Closing Date; and
(iii) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement relating
to the issuance or conversion of any of the Shares or exercise of any of the
Warrants.
-20-
<PAGE>
(b) CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO
PURCHASE THE SERIES B SHARES. The obligation of each Purchaser hereunder to
acquire and pay for the Series B Shares and the Series B Warrants is subject
to the satisfaction or waiver by each Purchaser, at or before the Series B
Closing of each of the following conditions:
(i) CLOSINGS. Prior to the Series B Closing, the Series A
Closing shall have occurred;
(ii) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Company contained
herein and in the Registration Rights Agreement shall be true and correct in
all material respects as of the date when made and as of the Series B Closing
Date, as though made on and as of such date;
(iii) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement and the
Registration Rights Agreement to be performed, satisfied or complied with by
the Company at or prior to the Series B Closing Date;
(iv) UNDERLYING SHARES REGISTRATION STATEMENTS. With respect
to the Series B Closing, the Underlying Shares Registration Statement with
respect to the Underlying Shares issuable on conversion of all outstanding
Series A Shares and as payment of dividends thereon and exercise of the
Warrants shall have been declared effective under the Securities Act by the
Commission; and on such Closing Date such Underlying Shares Registration
Statement shall be effective, not subject to any stop order and not be
subject to any suspension pursuant to Section 3(p) of the Registration Rights
Agreement, and shall have been effective and shall not have been subject to
any stop order for the ninety (90) days prior to such Closing Date and no
stop order shall be pending or threatened as at such Closing Date;
(v) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court of governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement relating
to the issuance or conversion of any of the Shares or exercise of any of the
Warrants;
(vi) ADVERSE CHANGE TO STOCK PRICE. During the period which
is 30 Trading Days prior to the date of the Series B Closing, the closing bid
price on the Common Stock shall not have decreased by more than 35% from the
highest closing bid price during such period;
(vii) NO SUSPENSIONS OF TRADING IN COMMON STOCK. The trading
in the Common Stock shall not have been suspended by the Commission or on the
Nasdaq Stock Market (except for any suspension of trading of limited duration
solely to permit dissemination of material information regarding the Company);
-21-
<PAGE>
(viii) LISTING OF COMMON STOCK. The Common Stock shall have
been at all times since the Series A Closing Date, and on the Series B
Closing Date be listed for trading on the Nasdaq Stock Market or Nasdaq
SmallCap Market;
(ix) CHANGE OF CONTROL. No Change of Control in the Company
shall have occurred. "CHANGE OF CONTROL" means the occurrence of any of (i)
an acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of in excess of 50% of the voting securities of the Company, (ii) a
replacement of more than one-half of the members of the Company's board of
directors which is not approved by those individuals who are members of the
Company's board of directors on the date hereof in one or a series of related
transactions, (iii) the merger of the Company with or into another entity,
consolidation or sale of all or substantially all of the assets of the
Company in one or a series of related transactions or (iv) the execution by
the Company of an agreement to which the Company is a party or by which it is
bound, providing for any of the events set forth above in (i), (ii) or (iii);
(x) LEGAL OPINION. The Company shall have delivered to the
Purchasers the opinion of the Company's outside counsel, in substantially the
form attached hereto as EXHIBIT D dated the applicable Closing Date;
(xi) REQUIRED APPROVALS. All Required Approvals shall have
been obtained;
(xii) SHARES OF COMMON STOCK. On the Series B Closing Date,
the Company shall have duly reserved the number of Underlying Shares required
by this Agreement to be reserved for issuance upon conversion of Series B
Shares, respectively, and payment of dividends thereon;
(xiii) DELIVERY OF STOCK CERTIFICATES. The Company shall have
delivered to each Purchaser or such Purchaser's designee the stock
certificate(s) representing the Shares, being purchased at such Closing,
registered in the name of such Purchaser, each in form satisfactory to such
Purchaser;
(xiv) PERFORMANCE OF CONVERSION/EXERCISE OBLIGATIONS. The
Company shall have (a) delivered Underlying Shares upon conversion of Shares
and otherwise performed its obligations in accordance with the terms,
conditions and timing requirements of each Certificate of Determination and
(b) delivered Underlying Shares upon exercise of the Warrants and otherwise
performed its obligations in accordance with the terms of the Warrants;
(xv) SHAREHOLDER APPROVAL. If due to the issuance or
conversion of Shares issued in the Series B Closing, the Company would be
required to receive shareholder approval in order to satisfy the shareholder
approval provisions of the Nasdaq Stock Market, or any other exchange or
market on which the Common Stock is then listed or traded, with respect to
the issuance of 20% or more of a company's capital stock, or any similar
stockholder approval requirements, then the Company shall have satisfied such
shareholder approval requirement;
-22-
<PAGE>
(xvi) TRANSFER AGENT INSTRUCTIONS. The Irrevocable Transfer
Agent Instructions, in the form of EXHIBIT E attached hereto, shall have been
delivered to and acknowledged in writing by the Company's transfer agent;
(xvii) BANK WAIVER. So long as the Credit Agreement is in
effect, the Bank Waiver shall be in full force and effect; and
(xviii) OFFICER'S CERTIFICATE. On the Series B Closing Date,
the Company shall deliver to the Purchasers an Officer's Certificate dated
the Series B Closing Date and signed by an executive officer of the Company
confirming the accuracy of the Company's representations, warranties and
covenants as of such Series B Closing Date and confirming the compliance by
the Company with the conditions precedent set forth in this Section 4.2 as of
such Series B Closing Date.
ARTICLE V
MISCELLANEOUS
5.1 FEES AND EXPENSES. Each party shall pay the fees and expenses
of its advisers, counsel, accountants and other experts, if any, and all
other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, except as
set forth in the Registration Rights Agreement. The Company shall pay all
stamp and other taxes and duties levied in connection with the issuance of
the Shares pursuant hereto.
5.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with
the Exhibits and Schedules hereto, including, without limitations, the
Schedules to the Disclosure Letter, the Registration Rights Agreement and
each Certificate of Determination (each when filed) and the Warrants contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, except that the provisions of Section
3 and Section 5 of the Engagement Letter shall survive.
5.3 NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to
have been received (a) upon hand delivery (receipt acknowledged) or delivery
by telex (with correct answer back received), telecopy or facsimile (with
transmission confirmation report) at the address or number designated below
(if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery
(if delivered on a business day after during normal business hours where such
notice is to be received) or (b) on the second business day following the
date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall as set forth below each parties
name on SCHEDULE 1, and if to the Company with copies to Wilson Sonsini
Goodrich & Rosati, Attn: Andrew J. Hirsch, Esq.,
-23-
<PAGE>
fax: (650) 354-4210 and if to any Purchaser with copies to Robinson Silverman
Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York, NY
10104, Attn: Kenneth L. Henderson, Esq., fax: (212) 541-4630, or such other
address as may be designated in writing hereafter, in the same manner, by
such person.
5.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchasers; or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right accruing to it
thereafter.
5.5 HEADINGS. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
5.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each of the
Purchasers. No Purchaser may assign this Agreement (other than to an
Affiliate of such Purchaser) or any rights or obligations hereunder without
the prior written consent of the Company, except that any Purchaser may
assign its rights hereunder and under the Transaction Documents without the
consent of the Company as long as such assignee demonstrates to the
reasonable satisfaction of the Company its satisfaction of the
representations and warranties set forth in Section 2.2 and its financial
ability to perform its obligations under the Transaction Documents. This
provision shall not limit a Purchaser's right to transfer securities or
transfer or assign rights hereunder or under the Registration Rights
Agreement.
5.7 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.
5.8 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
New York without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the non-exclusive jurisdiction of the
state and Federal courts sitting in the City of New York, borough of
Manhattan, 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 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 in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
-24-
<PAGE>
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.
5.9 SURVIVAL. The agreements and covenants contained in Article
III and this Article V shall survive the delivery and conversion of the
Shares pursuant to this Agreement and the representations and warranties of
the Company and the Purchasers contained in Article II shall survive each
Closing hereunder and any conversion of Shares and exercise of the Warrants.
5.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together 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, it being understood
that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create
a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if
such facsimile signature page were an original thereof.
5.11 PUBLICITY. The Company and each Purchaser shall consult with
each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed, except that no prior consent shall
be required if such disclosure is required by law, in which such case the
disclosing party shall provide the other party with prior notice of such
public statement. The Company shall not publicly or otherwise disclose the
names of any of the Purchasers without each such Purchaser's prior written
consent.
5.12 SEVERABILITY. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement
shall not in any way be affecting or impaired thereby and the parties will
attempt to agree upon a valid and enforceable provision which shall be a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
5.13 REMEDIES. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, the
Purchasers will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. Each of the Company and the
Purchasers (severally and not jointly) agree that monetary damages would not
be adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.14 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any
-25
<PAGE>
Closing, and no action taken by any Purchaser pursuant hereto or thereto,
shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert with respect
to such obligations or the transactions contemplated by this Agreement. Each
Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.
5.15 NO RELIANCE. Each party acknowledges that (i) it has such
knowledge in business and financial matters as to be fully capable of
evaluating this Agreement, the other Transaction Documents and the
transactions contemplated hereby and thereby, (ii) it is not relying on any
advice or representation of the other party in connection with entering into
this Agreement, the other Transaction Documents or such transactions (other
than the representations made in this Agreement or the other Transaction
Documents), (iii) it has not received from such party any assurance or
guarantee as to the merits (whether legal, regulatory, tax, financial or
otherwise) of entering into this Agreement or the other Transaction Documents
or the performance of its obligations hereunder and thereunder, and (iv) it
has consulted with its own legal, regulatory, tax, business, investment,
financial and accounting advisors to the extent that it has deemed necessary,
and has entered into this Agreement and the other Transaction Documents based
on its own independent judgment and on the advice of its advisors as it has
deemed necessary, and not on any view (whether written or oral) expressed by
such party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
-26-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Preferred Stock Purchase Agreement to be duly executed by their respective
authorized persons as of the date first indicated above.
<TABLE>
<CAPTION>
GENUS, INC. SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD
<S> <C>
By: /s/ MARY F. BOBEL By: /s/ KENNETH L. HENDERSON
------------------------ -------------------------------------
Name: Mary F. Bobel Name: Kenneth L. Henderson
Title: Executive Vice President Title: Attorney-in-fact
and Chief Financial
Officer
WESTOVER INVESTMENTS L.P.
By: HBK Investments L.P., as investment manager
By: /s/ DAVID C. HALEY
-----------------------------------
Name: David C. Haley
Title: Authorized Agent
MONTROSE INVESTMENTS, LTD.
By: HBK Investments L.P., as investment manager
By: /s/ DAVID C. HALEY
-----------------------------------
Name: David C. Haley
Title: Authorized Agent
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
By: /s/ EVAN M. LEVINE
-----------------------------------
Name: Evan M. Levine
Title: Principal
BROWN SIMPSON STRATEGIC GROWTH FUND, LTD.
By: /s/ EVAN M. LEVINE
-----------------------------------
Name: Evan M. Levine
Title: Principal
</TABLE>
<PAGE>
SCHEDULE 1
COMPANY:
GENUS, INC.
1139 Karlstad Drive
Sunnyvale, California 94089
Attn: Mary Bobel
Fax: (408) 747-7140
PURCHASERS:
SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.
c/o Trippoak Advisors, Inc.
630 Fifth Avenue, Suite 2000
New York, NY 10111
Attn: Robert L. Miller
Fax: (212) 332-3256
Portion of Series A Purchase Price - $2,500,000
Series A Shares - 50,000
Number of Shares
underlying Series A Warrant - 150,000
WESTOVER INVESTMENTS L.P.
777 Main Street, Suite 2750
Fort Worth, Texas 76102
Attn: Will Rose
Fax: (817) 870-6190
Portion of Series A Purchase Price - $800,000
Series A Shares - 16,000
Number of Shares
underlying Series A Warrant - 48,000
MONTROSE INVESTMENTS, LTD.
777 Main Street, Suite 2750
Fort Worth, Texas 76102
Attn: Will Rose
Fax: (817) 870-6190
Portion of Series A Purchase Price - $1,200,000
Series A Shares - 24,000
Number of Shares
underlying Series A Warrant - 72,000
-28-
<PAGE>
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
152 West 57th street, 40th Floor
New York, New York 10019
Attn: Mitchell Kaye
Fax: (212) 247-1329
Portion of Series A Purchase Price - $100,000
Series A Shares - 2,000
Number of Shares
underlying Series A Warrant - 6,000
BROWN SIMPSON STRATEGIC GROWTH FUND, LTD.
152 West 57th street, 40th Floor
New York, New York 10019
Attn: Mitchell Kaye
Fax: (212) 247-1329
Portion of Series A Purchase Price - $400,000
Series A Shares - 8,000
Number of Shares
underlying Series A Warrant - 24,000
-29-
<PAGE>
SCHEDULE 2.1
GENUS, INC.
DISCLOSURE LETTER
To: Southbrook International Investments, Ltd., Westover Investments L.P.,
Montrose Investments Ltd., Brown Simpson Strategic Growth Fund, L.P., and
Brown Simpson Strategic Growth Fund Ltd. (the "Purchasers") under that
certain Convertible Preferred Stock Purchase Agreement, dated as of
February 2, 1998 (the "Purchase Agreement"), and Genus, Inc., a California
corporation (the "Company").
This Disclosure Letter is delivered pursuant to Section 2.1 of the Purchase
Agreement. The disclosure set forth in the attached Schedules represents
exceptions, qualifications and other disclosures pursuant to certain of the
representations and warranties set forth in Section 2.1 of the Purchase
Agreement. Capitalized terms used herein (or in the attached Schedules) and
defined in the Purchased Agreement shall have the meanings ascribed in the
Purchase Agreement, unless the context otherwise requires.
This Disclosure Letter may not be amended or revised without the written
consent of the Company and the Purchasers.
This Disclosure letter may be executed in any number of separate
counterparts, each of which when so executed, shall be deemed an original, and
all of said counterparts taken together shall be deemed to constitute but one
and the same instrument.
IN WITNESS WHEREOF, the undersigned has executed this Disclosure Letter as
of February 12, 1998.
GENUS, INC.,
a California corporation
By: /s/ MARY F. BOBEL
--------------------------
Name: Mary Bobel
Title: Executive Vice
President and
Chief Financial Officer
<PAGE>
Schedule 2.1(a)
ORGANIZATION AND QUALIFICATION
Subsidiaries
Genus Subsidiary Corporation
(a California corporation)
1139 Karlstad Drive
Sunnyvale, CA 94089
General Ionex Corporation
(a Massachusetts corporation)
4 Stanley Tucker Drive
Newburyport, MA 01950
Ionex/HEI Corporation ("Ionex")
(a Massachusetts corporation)
4 Stanley Tucker Drive
Newburyport, MA 01950
Genus Europa SARL
Zac du Clos aux Pois
CE 487, Lisses
91048 Evry Cedex, France
011-331-69-89-79-20
Genus Korea, Ltd.
3F, KEC Building
#275-7, Yangjae-Dong
Seocho-Ku, Seoul, Korea
011-822-589-4800
Genus, KK
Shin Yokohama West Building
2-3-3 Shin Yokohama, Kouhoku-ku
Yokohama, Japan 222
011-81-45-476-0851
Because Ionex had failed to file Annual Reports as required by the
Secretary of the Commonwealth of Massachusetts, the Secretary of the
Commonwealth had administratively dissolved the corporation. Upon the
Company's filing of the Annual Reports and Application for Revival and
payment of fees, the Secretary of the Commonwealth revived Ionex on February
9, 1998 as if the corporation had not been dissolved.
<PAGE>
Schedule 2.1 (c)
CAPITALIZATION
The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock, no par value, and 2,000,000 shares of Preferred
Stock, no par value. As of December 31, 1997, 16,969,546 shares of Common
Stock were outstanding and no other shares of capital stock were outstanding.
The Company has reserved 1,750,000 shares of Common Stock for issuance
under its 1989 Employee Stock Purchase Plan and as of December 31, 1997,
124,914 shares remained available for future grants. The Company has
reserved 3,503,000 shares of Common Stock for issuance under its 1991
Incentive Stock Option Plan and as of December 31, 1997, 885,236 shares
remained available for future grants.
The Company is obligated to issue warrants to purchase up to 150,000
shares of Common Stock pursuant to a purchase order agreement with Innotech
Corporation. The Company is obligated to issue warrants to purchase up to
100,000 shares of Common Stock to CIBC Oppenheimer Corp. pursuant to the
Engagement Letter dated January 8, 1998.
Pursuant to the Common Shares Rights Agreement, dated April 27, 1990,
between the Company and Bank of America, N.T. & S.A.,as Rights Agent (the
"Rights Agreement"), the Board of Directors of the Company authorized and
declared a dividend of one Common Share purchase right (a "Right") for each
Common Share of the Company outstanding as of July 3, 1990 and with respect
to each Common Share that would become outstanding between the Record Date
and the earlier of the Distribution Date and the Expiration Date, each Right
representing the right to purchase one Common Share upon the occurrence of
certain Triggering Events as set forth in the Rights Agreement. (The terms
in this paragraph which begin with a capitalized letter have the meanings set
forth in the Rights Agreement.)
<PAGE>
Schedule 2.1(f)
CONSENTS AND APPROVALS
None
<PAGE>
Schedule 2.1(k)
SEC DOCUMENTS, FINANCIAL STATEMENTS, NO ADVERSE CHANGE
None
<PAGE>
Schedule 2.1(s)
PATENTS AND TRADEMARKS
None
<PAGE>
Schedule 2.1(u)
REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION
None
<PAGE>
Schedule 2.1(v)
TITLE
Liens Disclosed in the following financing statements:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILING DATE FILE NUMBER FILE TYPE COMMENTS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Signal Capital California 03/04/88 88046502 Original Precautionary
Corporation
- ---------------------------------------------------------------------------------------------------------------
Signal Capital California 12/07/92 88046502 Continuation/
Corporation / Assignment
Assignee Fleet
Credit Corp.
- ---------------------------------------------------------------------------------------------------------------
Signal Capital California 03/04/88 88046503 Original Precautionary
Corporation
- ---------------------------------------------------------------------------------------------------------------
Signal Capital California 12/07/92 88046503 Continuation/
Corporation / Assignment
Assignee Fleet
Credit Corp.
- ---------------------------------------------------------------------------------------------------------------
JLA Credit California 12/09/92 92262193 Original Precautionary
Corporation
- ---------------------------------------------------------------------------------------------------------------
Gestetner Services, California 12/28/92 92274831 Original Equipment
Inc.
- ---------------------------------------------------------------------------------------------------------------
Energy Reduction California 02/02/94 94021670 Original Equipment
Systems, Inc.
- ---------------------------------------------------------------------------------------------------------------
Clarklift of San California 03/08/94 94046091 Original Equipment
Jose, Inc./
Assignee Clark
Credit
Corporation
- ---------------------------------------------------------------------------------------------------------------
Gestetner Services California 05/04/95 9512860043 Original Equipment
Inc.
- ---------------------------------------------------------------------------------------------------------------
Oce California 08/10/95 9522660711 Original Equipment
- ---------------------------------------------------------------------------------------------------------------
Gestetner California 09/05/95 9525560216 Original Equipment
- ---------------------------------------------------------------------------------------------------------------
Lessor: California 10/12/95 9528960403 Original Equipment
General Electric
Capital Corp.
- ---------------------------------------------------------------------------------------------------------------
Lessor: California 10/12/95 9528960412 Original Equipment
General Electric
Capital Corp.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SECURED PARTY JURISDICTION FILING DATE FILE NUMBER FILE TYPE COMMENTS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Berkshire- California 11/17/95 9532560866 Original 2.8 million letter
Newburyport of credit
Limited
Partnership
- ---------------------------------------------------------------------------------------------------------------
Berkshire- California 12/28/95 96003c0137 Assignment 2.8 million letter
Newburyport in full of credit assigned
Limited to Shawmut Bank,
Partnership N.A.
Hartford, CT
- ---------------------------------------------------------------------------------------------------------------
General Electric California 01/23/96 9602460481 Original Equipment
Capital Computer
Leasing Corp.
- ---------------------------------------------------------------------------------------------------------------
General Electric California 02/18/97 9705060799 Original Equipment
Capital Computer
Leasing Corp.
- ---------------------------------------------------------------------------------------------------------------
General Electric California 05/08/97 9705060799 Amendment Serial numbers
Capital Computer added to
Leasing Corp. Equipment
- ---------------------------------------------------------------------------------------------------------------
Leasetec Systems California 05/08/97 ? 9712560143 Original Equipment
Credit
- ---------------------------------------------------------------------------------------------------------------
Sumitomo Bank of California 8/18/97 9723160990 Original Broad Collateral
California
- ---------------------------------------------------------------------------------------------------------------
Sumitomo Bank of Texas 8/18/97 171308 Original Broad Collateral
California
- ---------------------------------------------------------------------------------------------------------------
Sumitomo Bank of Massachusetts 8/19/97 ? Original Broad Collateral
California
- ---------------------------------------------------------------------------------------------------------------
Sumitomo Bank of Santa Clara 8/19/97 13819520 Original Fixture
California County,
California
- ---------------------------------------------------------------------------------------------------------------
Sumitomo Bank of Massachusetts 8/27/97 14286 Original
California
- ---------------------------------------------------------------------------------------------------------------
Sumitomo Bank of Austin, Texas occurring, but
California not of record yet
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
Exhibit A
See Exhibit 4.4 to this Current Report on Form 8-K
<PAGE>
EXHIBIT B
NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
GENUS, INC.
WARRANT
Dated ___________, 1998
Genus, Inc., a corporation organized and existing under the laws of the
State of California (the "COMPANY"), hereby certifies that, for value received,
____________________________, or its registered assigns ("HOLDER"), is entitled,
subject to the terms set forth below, to purchase from the Company up to a total
of _________ shares of Common Stock, no par value (the "COMMON STOCK"), of the
Company (each such share, a "WARRANT SHARE" and all such shares, the "WARRANT
SHARES") at an exercise price equal to $____ per share (as adjusted from time to
time as provided in Section 8, the "EXERCISE PRICE"), at any time and from time
to time from and after the date hereof and through and including ____________,
2001 (the "EXPIRATION DATE"), and subject to the following terms and conditions:
1. REGISTRATION OF WARRANT. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the
"WARRANT REGISTER"), in the name of the record Holder hereof from time to
time. The Company may deem and treat the registered Holder of this Warrant as
the absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, and the Company shall
not be affected by notice to the contrary.
2. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) The Company shall register the transfer of any portion of
this Warrant in the Warrant Register, upon surrender of this Warrant, with
the Form of Assignment attached hereto duly completed and signed, to the
Company at the office specified in or pursuant to Section 3(b). Upon any
such registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "NEW
WARRANT"), evidencing the portion of this Warrant so transferred shall be
issued to the transferee and a New Warrant evidencing the remaining portion
of this Warrant not so transferred, if any, shall be issued to the
transferring Holder. The acceptance of the New Warrant by
<PAGE>
the transferee thereof shall be deemed the acceptance of such transferee of
all of the rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof
by the Holder to the office of the Company specified in or pursuant to
Section 3(b) for one or more New Warrants, evidencing in the aggregate the
right to purchase the number of Warrant Shares which may then be purchased
hereunder. Any such New Warrant will be dated the date of such exchange.
3. DURATION AND EXERCISE OF WARRANTS.
(a) This Warrant shall be exercisable by the registered
Holder on any business day before 5:30 P.M., Eastern Standard Time, at any
time and from time to time on or after the date hereof to and including the
Expiration Date. At 5:30 P.M., Eastern Standard Time on the Expiration Date,
the portion of this Warrant not exercised prior thereto shall be and become
void and of no value. This Warrant may not be redeemed by the Company.
(b) Subject to Sections 2(b), 6 and 11, upon surrender of
this Warrant, with the Form of Election to Purchase attached hereto duly
completed and signed, to the Company at its address for notice set forth in
Section 11 and upon payment of the Exercise Price multiplied by the number of
Warrant Shares that the Holder intends to purchase hereunder, in lawful money
of the United States of America, in cash or by certified or official bank
check or checks, all as specified by the Holder in the Form of Election to
Purchase, the Company shall promptly (but in no event later than 3 business
days after the Date of Exercise (as defined herein)) issue or cause to be
issued and cause to be delivered to or upon the written order of the Holder
and in such name or names as the Holder may designate, a certificate for the
Warrant Shares issuable upon such exercise, free of restrictive legends other
than as required by the Purchase Agreement of even date herewith between the
Holder, the Company and the other purchasers named therein (the "PURCHASE
AGREEMENT"). Any person so designated by the Holder to receive Warrant
Shares shall be deemed to have become holder of record of such Warrant Shares
as of the Date of Exercise of this Warrant.
A "DATE OF EXERCISE" means the date on which the Company shall
have received (i) this Warrant (or any New Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New
Warrant) appropriately completed and duly signed, and (ii) payment of the
Exercise Price for the number of Warrant Shares so indicated by the holder
hereof to be purchased.
(c) This Warrant shall be exercisable, either in its entirety
or, from time to time, for a portion of the number of Warrant Shares. If
less than all of the Warrant Shares which may be purchased under this Warrant
are exercised at any time, the Company shall issue or cause to be issued, at
its expense, a New Warrant evidencing the right to purchase the remaining
number of Warrant Shares for which no exercise has been evidenced by this
Warrant.
4. PIGGYBACK REGISTRATION RIGHTS. If at any time during the term
of this Warrant when there is not an effective registration statement
covering the resale of the Warrant Shares and naming the Holder as a selling
stockholder thereunder, the Company wishes to file any registration statement
with
-2-
<PAGE>
the Securities and Exchange Commission (other than registration statements of
the Company filed on Form S-8 or Form S-4, each as promulgated under the
Securities Act of 1933, as amended, pursuant to which the Company is
registering securities pursuant to a Company employee benefit plan or
pursuant to a merger, acquisition or similar transaction including
supplements thereto, but not additionally filed registration statements in
respect of such securities) the Company must provide, within not less than 20
days thereafter, notice to each of the Holder and Robinson Silverman Pearce
Aronsohn & Berman LLP, attention Eric L. Cohen, of its intention to file such
registration statement and must provide the Holder with the option to include
any or all of the applicable Warrant Shares therein. The piggyback
registration rights granted to the Holder pursuant to this Section shall
continue until all of the Holder's Warrant Shares have been sold in
accordance with an effective registration statement or upon the expiration of
this Warrant. The Company will pay all registration expenses in connection
therewith.
5. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes attributable to the issuance of Warrant Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares or Warrants in a name
other than that of the Holder, and the Company shall not be required to issue
or cause to be issued or deliver or cause to be delivered the certificates
for Warrant Shares unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has
been paid. The Holder shall be responsible for all other tax liability that
may arise as a result of holding or transferring this Warrant or receiving
Warrant Shares upon exercise hereof.
6. REPLACEMENT OF WARRANT. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and indemnity, if reasonably satisfactory to it. Applicants for
a New Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable charges
as the Company may prescribe.
7. RESERVATION OF WARRANT SHARES. The Company covenants that it
will at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling it
to issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other
actual contingent purchase rights of persons other than the Holders (taking
into account the adjustments and restrictions of Section 8). The Company
covenants that all Warrant Shares that shall be so issuable and deliverable
shall, upon issuance and the payment of the applicable Exercise Price in
accordance with the terms hereof, be duly and validly authorized, issued and
fully paid and nonassessable.
8. CERTAIN ADJUSTMENTS. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 8. Upon each such adjustment of
the Exercise Price pursuant to this Section 8, the Holder shall thereafter
-3-
<PAGE>
prior to the Expiration Date be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of Warrant Shares obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment
by the number of Warrant Shares issuable upon exercise of this Warrant
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend or otherwise make a distribution
or distributions on shares of its Common Stock or on any other class of
capital stock (and not the Common Stock) payable in shares of Common Stock,
other than the dividends payable under the Purchase Agreement, (ii) subdivide
outstanding shares of Common Stock into a larger number of shares, or (iii)
combine outstanding shares of Common Stock into a smaller number of shares,
the Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date
in the case of a subdivision or combination, and shall apply to successive
subdivisions and combinations.
(b) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale
or transfer of all or substantially all of the assets of the Company in which
the consideration therefor is equity or equity equivalent securities or any
compulsory share exchange pursuant to which the Common Stock is converted
into other securities or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, consolidation, merger, sale,
transfer or share exchange, and the Holder shall be entitled upon such event
to receive such amount of securities or property of the Company's business
combination partner equal to the amount of Warrant Shares such Holder would
have been entitled to had such Holder exercised this Warrant immediately
prior to such reclassification, consolidation, merger, sale, transfer or
share exchange. The terms of any such consolidation, merger, sale, transfer
or share exchange shall include such terms so as to continue to give to the
Holder the right to receive the securities or property set forth in this
Section 8(b) upon any exercise following any such reclassification,
consolidation, merger, sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to
holders of this Warrant) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred
to in Sections 8(a), (b) and (d)), then in each such case the Exercise Price
shall be determined by multiplying the Exercise Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the
Exercise Price determined as of the record date mentioned above, and of which
the numerator shall be such Exercise Price on such record date less the then
fair market value at such record date of the portion of such assets or
evidence of indebtedness so distributed applicable to one outstanding share
of Common Stock as determined by a nationally recognized or major regional
investment banking firm or firm of
-4-
<PAGE>
independent certified public accountants of recognized standing (which may be
the firm that regularly examines the financial statements of the Company) (an
"APPRAISER") mutually selected in good faith by the holders of a majority in
interest of the Warrants then outstanding and the Company. Any determination
made by the Appraiser shall be final.
(d) If at any time while this Warrant is outstanding, the
Company shall issue or cause to be issued rights or warrants to acquire or
otherwise sell or distribute shares of Common Stock to all holders of Common
Stock for a consideration per share less than the Per Share Market Value (as
defined in the Purchase Agreement) then in effect, then, forthwith upon such
issue or sale, the Exercise Price shall be reduced to the price (calculated
to the nearest cent) determined by dividing (i) an amount equal to the sum of
(A) the number of shares of Common Stock outstanding immediately prior to
such issue or sale multiplied by the Exercise Price, and (B) the
consideration, if any, received or receivable by the Company upon such issue
or sale by (ii) the total number of shares of Common Stock outstanding
immediately after such issue or sale.
(e) For the purposes of this Section 8, the following clauses
shall also be applicable:
(i) RECORD DATE. In case the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or
exchangeable into shares of Common Stock, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(ii) TREASURY SHARES. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by
or for the account of the Company, and the disposition of any such shares
shall be considered an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(g) If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
(iii) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or
-5-
<PAGE>
purchase any shares of capital stock of any class
or of any rights; or
(iv) the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the
Company, any consolidation or merger to which
the Company is a party, any sale or transfer of
all or substantially all of the assets of the
Company, or any compulsory share exchange whereby
the Common Stock is converted into other
securities, cash or property; or
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the
affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last
addresses as they shall appear upon the Warrant Register, at least 20
calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants,
or if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up; PROVIDED,
HOWEVER, that the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice.
9. PAYMENT OF EXERCISE PRICE. The Holder may pay the Exercise
Price in one of the following manners:
(a) CASH EXERCISE. The Holder shall deliver immediately
available funds; or
(b) CASHLESS EXERCISE. The Holder shall surrender this
Warrant to the Company together with a notice of cashless exercise, in which
event the Company shall issue to the Holder the number of Warrant Shares
determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised.
-6-
<PAGE>
A = the closing sale prices of the Common Stock for the
Trading Day immediately prior to the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
been commenced, on the issue date.
10. FRACTIONAL SHARES. The Company shall not be required to issue
or cause to be issued fractional Warrant Shares on the exercise of this
Warrant. The number of full Warrant Shares which shall be issuable upon the
exercise of this Warrant shall be computed on the basis of the aggregate
number of Warrant Shares purchasable on exercise of this Warrant so
presented. If any fraction of a Warrant Share would, except for the
provisions of this Section 10, be issuable on the exercise of this Warrant,
the Company shall, at its option, (i) pay an amount in cash equal to the
Exercise Price multiplied by such fraction or (ii) round the number of
Warrant Shares issuable, up to the next whole number.
11. NOTICES. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and
effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section, (ii) the business day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iii)
upon actual receipt by the party to whom such notice is required to be given.
The addresses for such communications shall be: (1) if to the Company, to
Genus, Inc., 1139 Karlstad Drive, Sunnyvale, California 94089, or to
Facsimile No.: (408) 747-7198 Attention: Chief Financial Officer, or (ii) if
to the Holder, to the Holder at the address or facsimile number appearing on
the Warrant Register or such other address or facsimile number as the Holder
may provide to the Company in accordance with this Section 11.
12. WARRANT AGENT.
(a) The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint
a new warrant agent.
(b) Any corporation into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to
which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business
shall be a successor warrant agent under this Warrant without any further
act. Any such successor warrant agent shall promptly cause notice of its
succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Warrant
Register.
-7-
<PAGE>
13. MISCELLANEOUS.
(a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
This Warrant may be amended only in writing signed by the Company and the
Holder.
(b) Subject to Section 13(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the
Company and the Holder any legal or equitable right, remedy or cause under
this Warrant; this Warrant shall be for the sole and exclusive benefit of the
Company and the Holder.
(c) This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect
any of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall
not in any way be affected or impaired thereby and the parties will attempt
in good faith to agree upon a valid and enforceable provision which shall be
a commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
[SIGNATURE PAGE FOLLOWS]
-8-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
GENUS, INC.
By:
---------------------------------------
Mary F. Bobel, Executive Vice
President and Chief Financial Officer
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of
Common Stock under the foregoing Warrant)
To ___________________:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase [___________]
shares of Common Stock, no par value ("COMMON STOCK"), of Genus, Inc. and
encloses herewith $________ in cash or certified or official bank check or
checks, which sum represents the aggregate Exercise Price (as defined in the
Warrant) for the number of shares of Common Stock to which this Form of Election
to Purchase relates, together with any applicable taxes payable by the
undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
-----------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is
entitled to purchase in accordance with the enclosed Warrant, the undersigned
requests that a New Warrant (as defined in the Warrant) evidencing the right
to purchase the shares of Common Stock not issuable pursuant to the exercise
evidenced hereby be issued in the name of and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , Name of Holder:
-------------- ----
(Print)
-------------------------
(By:)
-------------------------
(Name:)
(Title:)
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
<PAGE>
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock, no par value, of
Genus, Inc. to which the within Warrant relates and appoints ________________
attorney to transfer said right on the books of ___________________ with full
power of substitution in the premises.
Dated:
,
- --------------- ----
---------------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
---------------------------------------
Address of Transferee
---------------------------------------
---------------------------------------
In the presence of:
- --------------------------
<PAGE>
Exhibit C
See Exhibit 4.3 to this Current Report on Form 8-K
<PAGE>
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of February 2, 1998, among Genus, Inc., a California
corporation (the "COMPANY"), Southbrook International Investments, Ltd., a
corporation existing under the laws of the British Virgin Islands
("SOUTHBROOK"), Westover Investments L.P., a Delaware limited partnership
("WESTOVER"), Montrose Investments, Ltd., a Cayman Islands exempt limited
partnership ("MONTROSE"), Brown Simpson Strategic Growth Fund, L.P., a New
York limited partnership ("BROWN SIMPSON LP"), Brown Simpson Strategic Growth
Fund, Ltd., a Cayman Islands exempt company ("BROWN SIMPSON LIMITED") and
CIBC Oppenheimer Corp.("CIBC"). Southbrook, Westover, Montrose, Brown
Simpson LP and Brown Simpson Limited are each referred to herein as a
"PURCHASER" and are collectively referred to herein as the "PURCHASERS."
This Agreement is made pursuant to the Convertible Preferred Stock
Purchase Agreement, dated as of the date hereof among the Company and the
Purchasers (the "PURCHASE AGREEMENT").
The Company and the Purchasers hereby agree as follows:
1. DEFINITIONS
Capitalized terms used and not otherwise defined herein shall have
the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"ADVICE" shall have meaning set forth in Section 3(o).
"AFFILIATE" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "CONTROL,"
when used with respect to any Person, means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities,
by contract or otherwise; and the terms of "AFFILIATED," "CONTROLLING" and
"CONTROLLED" have meanings correlative to the foregoing.
"BUSINESS DAY" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"CLOSING DATE" shall have the meaning set forth in the Purchase
Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's Common Stock, no par value.
<PAGE>
"EFFECTIVENESS DATE" means (i) with respect to the Registration
Statement to be filed with respect to the Series A Shares, the 75th day
following the Series A Closing Date and (ii) with respect to the Registration
Statement to be filed with respect to the Series B Shares, the 75th day
following the Series B Closing Date, or, if such day is not a Business Day,
the Effectiveness Date shall be the next succeeding Business Day.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in Section
2(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FILING DATE" means (i) with respect to the shares of Common Stock
issuable upon conversion of the Series A Shares, March 15, 1998 and (ii) with
respect to the shares of Common Stock issuable upon conversion of the Series
B Shares, the 30th day following the Series B Closing Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may
be, from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section
5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section
5(c).
"LOSSES" shall have the meaning set forth in Section 5(a).
"OPPENHEIMER WARRANT" means the warrant issued by the Company to
CIBC on the Closing Date in connection with the transactions contemplated by
the Purchase Agreement, which warrant is exercisable for 100,000 shares of
the Company's Common Stock.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"PREFERRED STOCK" means the shares of 6% Series A and Series B
Preferred Stock, no par value, of the Company issued to the Purchasers
pursuant to the Purchase Agreement.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other
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amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" means (a) with respect to the Registration
Statement to be filed after the Series A Closing, the shares of Common Stock
issuable upon (i) conversion of the Series A Shares (ii) exercise in full of
the Series A Warrants and the Oppenheimer Warrants and (iii) payment of
dividends in respect of the Series A Shares and (b) with respect to the
Registration Statement to be filed after the Series B Closing, the shares of
Common Stock issuable upon (i) conversion of the Series B Shares (ii)
exercise of the Series B Warrants and (iii) payment of dividends in respect
of the Series B Shares; PROVIDED, HOWEVER that in order to account for the
fact that the number of shares of Common Stock that are issuable upon
conversion of shares of Preferred Stock is determined in part upon the market
price of the Common Stock at the time of conversion, Registrable Securities
shall include (but not be limited to) a number of shares of Common Stock
equal to no less than the sum of (1) 200% times the maximum number of shares
of Common Stock into which the applicable series of Preferred Stock are
convertible, assuming such conversion occurred on the particular Closing Date
for such Series of Preferred Stock, (2) the number of shares of Common Stock
issuable upon exercise of the Warrants then outstanding and (3) the number of
shares of Common Stock issuable on payment of dividends on such Preferred
Stock during the two-year period after the applicable Closing Date assuming
all such dividends were paid in shares of Common Stock. Such registered
shares of Common Stock shall be allocated among the Holders pro-rata based on
the total number of Registrable Securities issued or issuable as of each date
that a Registration Statement, as amended, relating to the resale of the
Registrable Securities is declared effective by the Commission.
Notwithstanding anything herein contained to the contrary, if the actual
number of shares of Common Stock into which the shares of Preferred Stock are
convertible exceeds twice the number of shares of Common Stock into which the
particular series of Preferred Stock are convertible based upon a computation
at a particular Closing Date, the term "Registrable Securities" shall be
deemed to include such additional shares of Common Stock. The Company shall
be required to file additional Registration Statements to the extent the
actual number of shares of Common Stock into which the Preferred Stock is
convertible (together with interest thereon) and Warrants are exercisable
exceeds the number of shares of Common Stock initially registered in
accordance with the immediately prior sentence. The Company shall have 15
Business Days to file such additional Registration Statement after notice of
the requirement thereof, which the Holders may give at such time when the
number of shares of Common Stock as are issuable upon conversion of Preferred
Stock exceeds 185% of the number of shares of Common Stock into which
Preferred Stock are convertible, assuming such conversion occurred on the
Closing Date or the Filing Date (whichever yields a lower Conversion Price.)
"REGISTRATION STATEMENT" means the registration statements and any
additional registration statements contemplated by Section 2(a), including
(in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference
in such registration statement.
"RULE 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
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"RULE 158" means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SERIES A WARRANTS" means the warrants to purchase Common Stock
issued to the Purchasers on the Series A Closing Date pursuant to the
Purchase Agreement.
"SERIES B WARRANTS" means the warrants to purchase Common Stock
issued to the Purchasers on the Series B Closing Date pursuant to the
Purchase Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPECIAL COUNSEL" means one special counsel to the Holders, for
which the Holders will be reimbursed by the Company pursuant to Section 4.
"UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING" means a
registration in connection with which securities of the Company are sold to
an underwriter for reoffering to the public pursuant to an effective
registration statement.
"WARRANTS" means the Series A Warrants, the Series B Warrants and
the Oppenheimer Warrant.
2. SHELF REGISTRATION
(a) On or prior to each applicable Filing Date, the Company shall
prepare and file with the Commission a "Shelf" Registration Statement
covering all Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement shall be
on Form S-3 (except if otherwise directed by the Holders of a majority in
interest of the applicable Registrable Securities in accordance herewith or
if the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case such registration shall be on another
appropriate form in accordance herewith). The Registration Statement shall
state, to the extent permitted by Rule 416 under the Securities Act, that it
also covers such indeterminate number of shares of Common Stock as may be
required to effect (i) conversion of the Preferred Stock to prevent dilution
resulting from stock splits, stock dividends or similar events, or by reason
of changes in the Conversion Price in accordance with the terms of the
Certificate of Determination and (ii) exercise of the Warrants in full to
prevent dilution resulting from stock splits, stock dividends or similar
events, or by reason of changes in the Exercise Price (as defined in the
Warrants) in accordance with the terms of the Warrants. The Company shall
(i) not permit any securities other than the Registrable Securities and those
securities listed in Schedule 2.1(u) of the Disclosure Letter to be included
in the Registration Statement and (ii) use its commercially reasonable
efforts to cause the Registration Statement to be declared effective under
the
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Securities Act as promptly as possible after the filing thereof, but in any
event prior to the Effectiveness Date, and to keep such Registration
Statement continuously effective under the Securities Act until the date
which is two years after the date that such Registration Statement is
declared effective by the Commission or such earlier date when all
Registrable Securities covered by such Registration Statement have been sold
or may be sold without volume restrictions pursuant to Rule 144 as determined
by the counsel to the Company pursuant to a written opinion letter, addressed
to the Company's transfer agent to such effect (the "EFFECTIVENESS PERIOD").
If an additional Registration Statement is required to be filed because the
actual number of shares of Common Stock into which the Preferred Stock is
convertible plus shares issuable upon payment of dividends and exercise of
the Warrants exceeds the number of shares of Common Stock initially
registered in respect of any particular series of Preferred Stock based upon
the computation on a particular Closing Date, the Company shall, as promptly
as reasonably possible, but no later than 20 Business Days to file such
additional Registration Statement, and the Company shall use its best efforts
to cause such additional Registration Statement to be declared effective by
the Commission as soon as possible.
(b) If the Holders of a majority of the Registrable Securities so
elect, an offering of Registrable Securities pursuant to the Registration
Statement may be effected on no more than two occasions in the form of an
Underwritten Offering. In such event, and, if the managing underwriters
advise the Company and such Holders in writing that in their opinion the
amount of Registrable Securities proposed to be sold in such Underwritten
Offering exceeds the amount of Registrable Securities which can be sold in
such Underwritten Offering, the Registrable Securities of CIBC shall first be
excluded from such Underwritten Offering and then if in the opinion of such
managing underwriters the amount of Registrable Securities proposed to be
sold in such Underwritten Offering still exceeds the amount of Registrable
Securities which can be sold in such Underwritten Offering there shall be
included in such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such managing underwriters can be sold,
and such amount shall be allocated pro rata among the Holders (excluding
CIBC) proposing to sell Registrable Securities in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker in interest that will administer
the offering will be selected by the Holders of a majority of the Registrable
Securities included in such offering provided that the Company shall consent
to the inclusion of such investment banker, which consent shall not be
unreasonably withheld. No Holder may participate in any Underwritten
Offering hereunder unless such Holder (i) agrees to sell its Registrable
Securities on the basis provided in any underwriting agreements approved by
the Persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
arrangements.
3. REGISTRATION PROCEDURES
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to each
applicable Filing Date, a Registration Statement on Form S-3 (or if the
Company is not then eligible to register for resale the
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Registrable Securities on Form S-3 such registration shall be on another
appropriate form in accordance herewith, or, in connection with an
Underwritten Offering hereunder, such other form agreed to by the Company and
by a majority-in-interest of Holders of Registrable Securities) in accordance
with the method or methods of distribution thereof as specified by the
Holders (except if otherwise directed by the Holders), and cause the
Registration Statement to become effective and remain effective as provided
herein; PROVIDED, HOWEVER, that not less than five (5) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated therein by reference), the Company shall, if reasonably
practicable (i) furnish to the Holders, their Special Counsel and any
managing underwriters, copies of all such documents proposed to be filed,
which documents (other than those incorporated by reference) will be subject
to the review of such Holders, their Special Counsel and such managing
underwriters, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as
shall be necessary, in the reasonable opinion of respective counsel to such
Holders and such underwriters, to conduct a reasonable investigation within
the meaning of the Securities Act. The Company shall not file the
Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities, their Special Counsel, or any managing underwriters, shall
reasonably object in writing within three (3) Business Days of their receipt
thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare
and file with the Commission such additional Registration Statements in order
to register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or supplemented
by any required Prospectus supplement, and as so supplemented or amended to
be filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; (iii) respond as promptly as reasonably
possible to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as reasonably
possible provide the Holders true and complete copies of all correspondence
from and to the Commission relating to the Registration Statement; and (iv)
comply in all material respects with the provisions of the Securities Act and
the Exchange Act with respect to the disposition of all Registrable
Securities covered by the Registration Statement during the applicable period
in accordance with the intended methods of disposition by the Holders thereof
set forth in the Registration Statement as so amended or in such Prospectus
as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold, their
Special Counsel and any managing underwriters as promptly as reasonably
possible (and, in the case of (i)(A) below, not less than five (5) days prior
to such filing) and (if requested by any such Person) confirm such notice in
writing no later than one (1) Business Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) when the Commission
notifies the Company whether there will be a "review" of such Registration
Statement and whenever the Commission comments in writing on such
Registration Statement and (C) with respect to the Registration Statement or
any post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental
authority for amendments or supplements to the Registration Statement or
Prospectus or for additional information; (iii) of the
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issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement covering any or all of the Registrable Securities
or the initiation of any Proceedings for that purpose; (iv) if at any time
any of the representations and warranties of the Company contained in any
agreement (including any underwriting agreement) contemplated hereby ceases
to be true and correct in all material respects; (v) of the receipt by the
Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of
any Proceeding for such purpose; and (vi) of the occurrence of any event that
makes any statement made in the Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale
in any jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the Holders of a
majority in interest of the Registrable Securities to be sold in connection
with an Underwritten Offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
information as the Company reasonably agrees should be included therein and
(ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment; PROVIDED, HOWEVER, that the Company
shall not be required to take any action pursuant to this Section 3(e) that
would, in the opinion of counsel for the Company, violate applicable law or
be materially detrimental to the business prospects of the Company.
(f) Furnish to each Holder, their Special Counsel and any managing
underwriters, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested
by such Person (including those previously furnished or incorporated by
reference) promptly after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and
any underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders and any underwriters in
connection with the offering and sale of the Registrable Securities covered
by such Prospectus and any amendment or supplement thereto.
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(h) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling
Holders, any underwriters and their Special Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement; PROVIDED, HOWEVER, that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified or to take any action that would subject it
to general service of process in any such jurisdiction where it is not then
so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(i) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by applicable law, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such
names as any such managing underwriters or Holders may request at least two
Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, neither the
Registration Statement nor such Prospectus will contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the Nasdaq Stock
Market and any other securities exchange, quotation system, market or
over-the-counter bulletin board, if any, on which similar securities issued
by the Company are then listed as and when required pursuant to the Purchase
Agreement.
(l) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in Underwritten
Offerings) and take all such other actions in connection therewith (including
those reasonably requested by any managing underwriters and the Holders of a
majority of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities, and whether or not
an underwriting agreement is entered into, (i) make such representations and
warranties to such Holders and such underwriters as are customarily made by
issuers to underwriters in underwritten public offerings, and confirm the
same if and when requested; (ii) in the case of an Underwritten Offering
obtain and deliver copies thereof to the managing underwriters, if any, of
opinions of counsel to the Company and updates thereof addressed to each such
underwriter, in form, scope and substance reasonably satisfactory to any such
managing underwriters and Special Counsel to the selling Holders covering the
matters customarily covered in opinions requested in Underwritten
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Offerings and such other matters as may be reasonably requested by such
Special Counsel and underwriters; (iii) immediately prior to the
effectiveness of the Registration Statement, and, in the case of an
Underwritten Offering, at the time of delivery of any Registrable Securities
sold pursuant thereto, use its best reasonable efforts to obtain and deliver
copies to the Holders and the managing underwriters, if any, of "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and financial
data is, or is required to be, included in the Registration Statement),
addressed to the Company in form and substance as are customary in connection
with Underwritten Offerings; (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures no
less favorable to the selling Holders and the underwriters, if any, than
those set forth in Section 6 (or such other provisions and procedures
acceptable to the managing underwriters, if any, and holders of a majority of
Registrable Securities participating in such Underwritten Offering); and (v)
deliver such documents and certificates as may be reasonably requested by the
Holders of a majority of the Registrable Securities being sold, their Special
Counsel and any managing underwriters to evidence the continued validity of
the representations and warranties made pursuant to clause 3(l)(i) above and
to evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.
(m) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant
retained by such selling Holders or underwriters, at the offices where
normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors, agents and employees of the
Company and its subsidiaries to supply all information in each case
reasonably requested by any such Holder, representative, underwriter,
attorney or accountant in connection with the Registration Statement;
PROVIDED, HOWEVER, that any information that is determined in good faith by
the Company in writing to be of a confidential nature at the time of delivery
of such information shall be kept confidential by such Persons, unless (i)
disclosure of such information is required by court or administrative order
or is necessary to respond to inquiries of regulatory authorities; (ii)
disclosure of such information, in the opinion of counsel to such Person, is
required by law; (iii) such information becomes generally available to the
public other than as a result of a disclosure or failure to safeguard by such
Person; or (iv) such information becomes available to such Person from a
source other than the Company and such source is not known by such Person to
be bound by a confidentiality agreement with the Company.
(n) Comply in all material respects with all applicable rules and
regulations of the Commission.
(o) The Company may require each selling Holder to furnish to the
Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the
Registration Statement, and the Company may exclude from such registration
the Registrable Securities of any such Holder who unreasonably fails to
furnish such information within a reasonable time after receiving such
request.
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If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (if such reference to such Holder by name or
otherwise is not required by the Securities Act or any similar Federal
statute then in force) the deletion of the reference to such Holder in any
amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated
by Section 3(c) and (ii) it and its officers, directors or Affiliates, if
any, will comply with the prospectus delivery requirements of the Securities
Act as applicable to them in connection with sales of Registrable Securities
pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence
of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of
such Registrable Securities under the Registration Statement until such
Holder's receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement contemplated by Section 3(j), or until it is advised
in writing (the "ADVICE") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement.
(p) If (a) there is material non-public information regarding the
Company which the Company's Board of Directors reasonably determines not to
be in the Company's best interest to disclose and which the Company is not
otherwise required to disclose, or (b) there is a significant business
opportunity (including but not limited to the acquisition or disposition of
assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other similar transaction) available to the
Company which the Company's Board of Directors reasonably determines not to
be in the Company's best interest to disclose, then the Company may postpone
or suspend filing or effectiveness of a registration statement for a period
not to exceed 20 consecutive days, provided that the Company may not postpone
or suspend its obligation under this Section 3(p) for more than 60 days in
the aggregate during any 12 month period; provided, however, that no such
postponement or suspension shall be permitted for consecutive 20 day periods,
arising out of the same set of facts, circumstances or transactions.
4. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company, except as and to the extent
specified in Section 4(b), shall be borne by the Company whether or not
pursuant to an Underwritten Offering and whether or not the Registration
Statement is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to the Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A)
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with respect to filings required to be made with the Nasdaq Stock Market and
each other securities exchange or market on which Registrable Securities are
required hereunder to be listed and (B) in compliance with state securities
or Blue Sky laws (including, without limitation, fees and disbursements of
counsel for the Holders in connection with Blue Sky qualifications or
exemptions of the Registrable Securities and determination of the eligibility
of the Registrable Securities for investment under the laws of such
jurisdictions as the managing underwriters, if any, or the Holders of a
majority of Registrable Securities may designate)), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriters, if any, or by the
holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company and Special Counsel
for the Holders, in the case of the Special Counsel, to a maximum amount of
$10,000, (v) Securities Act liability insurance, if the Company so desires
such insurance, and (vi) fees and expenses of all other Persons retained by
the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.
(b) If the Holders require an Underwritten Offering pursuant to
the terms hereof, the Company shall be responsible for all costs, fees and
expenses in connection therewith, except for the fees and disbursements of
the Underwriters (including any underwriting commissions and discounts) and
their legal counsel and accountants (which shall be borne by the Holders).
Therefore, in such circumstances, the Holder shall bear the expenses of the
fees and disbursements of any legal counsel or accounting firm retained by
the underwriters in connection with such Underwritten Offering and the costs
of any determination (but not filing) by the underwriters of the eligibility
of the Registrable Securities for investment under the applicable state
securities laws. By way of illustration which is not intended to diminish
from the provisions of Section 4(a), the Holders shall not be responsible
for, and the Company shall be required to pay the fees or disbursements
incurred by the Company (including by its legal counsel and accountants) in
connection with, the preparation and filing of a Registration Statement and
related Prospectus for such offering, the maintenance of such Registration
Statement in accordance with the terms hereof, the listing of the Registrable
Securities in accordance with the requirements hereof, and printing expenses
incurred to comply with the requirements hereof.
5. INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, the officers, directors, agents (including any
underwriters retained by such Holder in connection with the offer and sale of
Registrable Securities), brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and
employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and
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employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, "LOSSES"), as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material
fact contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading (in the case of any Prospectus or form of Prospectus or
supplement thereto, in light of the circumstances under which they were
made), except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, which information was reasonably relied on by the Company for use
therein or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use
in the Registration Statement, such Prospectus or such form of Prospectus or
in any amendment or supplement thereto. The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which
the Company is aware in connection with the transactions contemplated by this
Agreement.
(b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, the directors,
officers, agents and employees, each Person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from
and against all Losses (as determined by a court of competent jurisdiction in
a final judgment not subject to appeal or review) arising solely out of or
based solely upon any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto, or arising solely out of or based solely
upon any omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading to the extent, but
only to the extent, that such untrue statement or omission is contained in
any information so furnished in writing by such Holder to the Company
specifically for inclusion therein the Registration Statement or such
Prospectus and that such information was reasonably relied upon by the
Company for use in the Registration Statement, such Prospectus or such form
of prospectus or to the extent that such information relates to such Holder
or such Holder's proposed method of distribution of Registrable Securities
and was reviewed and expressly approved in writing by such Holder expressly
for use in the Registration Statement, such Prospectus or such form of
Prospectus, or in any amendment or supplement thereto. In no event shall the
liability of any selling Holder hereunder be greater in amount than the
dollar amount of the net proceeds received by such Holder upon the sale of
the Registrable Securities giving rise to such indemnification obligation;
PROVIDED, HOWEVER, that no such limitation shall apply if such Losses result
solely from the willful misconduct of such Holder.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party promptly shall
notify the Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in
writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of
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<PAGE>
counsel reasonably satisfactory to the Indemnified Party and the payment of
all fees and expenses incurred in connection with defense thereof; provided,
that the failure of any Indemnified Party to give such notice shall not
relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
in writing to pay such fees and expenses; or (2) the Indemnifying Party shall
have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party,
unless such settlement includes an unconditional release of such Indemnified
Party from all liability on claims that are the subject matter of such
Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within 10 Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; PROVIDED,
that the Indemnifying Party may require such Indemnified Party to undertake
to reimburse all such fees and expenses to the extent it is finally
judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d) CONTRIBUTION. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then
each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as
well as any other relevant equitable considerations. The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or
alleged omission of a material fact, has been taken or
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<PAGE>
made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses
shall be deemed to include, subject to the limitations set forth in Section
5(c), any reasonable attorneys' or other reasonable fees or expenses incurred
by such party in connection with any Proceeding to the extent such party
would have been indemnified for such fees or expenses if the indemnification
provided for in this Section was available to such party in accordance with
its terms; PROVIDED, HOWEVER, that no such limitation shall apply if such
Losses result solely from the willful misconduct of such Holder.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by PRO RATA
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder
shall be required to contribute, in the aggregate, any amount in excess of
the amount by which the proceeds actually received by such Holder from the
sale of the Registrable Securities subject to the Proceeding exceeds the
amount of any damages that such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to
the Indemnified Parties.
6. RULE 144
As long as any Holder owns Shares, Warrants or Underlying Shares
(as such term is defined in the Purchase Agreement), the Company covenants to
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company
after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act.
As long as any Holder owns Shares, Warrants or Underlying Shares prior to
the date on which all Holders may resell all of its Shares, Warrants or
Underlying Shares without volume restrictions pursuant to Rule 144(k)
promulgated under the Securities Act (as determined by counsel to the Company
pursuant to a written opinion letter to such effect, addressed and acceptable
to the Company's transfer agent for the benefit of and enforceable by any
holder thereof), if the Company is not required to file reports pursuant to
Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to
the Holders and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been
made under the Exchange Act. The Company further covenants that it will take
such further action as any Holder may reasonably request, all to the extent
required from time to time to enable such Person to sell Underlying Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act,
including providing any legal opinions referred to in the Purchase
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<PAGE>
Agreement. Upon the request of any Holder, the Company shall deliver to such
Holder a written certification of a duly authorized officer as to whether it
has complied with such requirements.
7. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would not
provide adequate compensation for any losses incurred by reason of a breach
by it of any of the provisions of this Agreement and hereby further agrees
that, in the event of any action for specific performance in respect of such
breach, it shall waive the defense that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any of
its subsidiaries has, as of the date hereof, nor shall the Company or any of
its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as disclosed in Schedule 2.1(u) of the Disclosure
Letter, neither the Company nor any of its subsidiaries has previously
entered into any agreement granting any registration rights with respect to
any of its securities to any Person. Without limiting the generality of the
foregoing, without the written consent of the Holders of a majority of the
then outstanding Registrable Securities, the Company shall not grant to any
Person the right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted are subject in
all respects to the prior rights in full of the Holders set forth herein, and
are not otherwise in conflict or inconsistent with the provisions of this
Agreement.
(c) NO PIGGYBACK ON REGISTRATIONS. Neither the Company nor any of
its security holders (other than the Holders in such capacity pursuant hereto
or as disclosed in Schedule 2.1(u) of the Disclosure Letter) may include
securities of the Company in the Registration Statement other than the
Registrable Securities or as disclosed in Schedule 2.1(u) of the Disclosure
Letter, and the Company shall not after the date hereof enter into any
agreement providing any such right to any of its security holders.
(d) PIGGY-BACK REGISTRATIONS. If at any time when there is not an
effective Registration Statement covering Underlying Shares, the Company
shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of
others under the Securities Act of any of its equity securities, other than
on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or
their then equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, the Company shall send to each holder of Registrable Securities
written notice of such determination and, if within twenty (20) days after
receipt of such notice, any such holder shall so request in writing, the
Company shall include in such registration statement all or any part of such
Registrable Securities such holder requests to be registered; provided,
however, that the Company shall not be required to register any Registrable
Securities pursuant to this Section 7(d) that are eligible for sale pursuant
to Rule 144(k) of the Commission. In the case of an
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<PAGE>
underwritten public offering, if the managing underwriter(s) or
underwriter(s) should reasonably object to the inclusion of the Registrable
Securities in such registration statement, then if the Company after
consultation with the Underwriter's Representative should reasonably
determine that the inclusion of such Registrable Securities, would materially
adversely affect the offering contemplated in such registration statement,
and based on such determination recommends inclusion in such registration
statement of fewer or none of the Registrable Securities of the Holders, then
the Registrable Securities of CIBC shall first be excluded from such
registration statement and if additional Registrable Securities must still be
excluded from such registration statement then (x) the number of Registrable
Securities of the Holders (excluding CIBC) included in such registration
statement shall be reduced pro-rata among such Holders (based upon the number
of Registrable Securities requested to be included in the registration), if
the Company after consultation with the underwriter(s) recommends the
inclusion of fewer Registrable Securities, or (y) none of the Registrable
Securities of the Holders shall be included in such registration statement,
if the Company after consultation with the underwriter(s) recommends the
inclusion of none of such Registrable Securities; PROVIDED, HOWEVER, that if
Securities are being offered for the account of other persons or entities as
well as the Company, such reduction shall not represent a greater fraction of
the number of Registrable Securities intended to be offered by the Holders
than the fraction of similar reductions imposed on such other persons or
entities (other than the Company).
(e) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the same shall be in writing and signed by
the Company and the Holders of at least two-thirds of the then outstanding
Registrable Securities; PROVIDED, HOWEVER, that, for the purposes of this
sentence, Registrable Securities that are owned, directly or indirectly, by
the Company, or an Affiliate of the Company are not deemed outstanding.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights
of other Holders may be given by Holders of at least a majority of the
Registrable Securities to which such waiver or consent relates; PROVIDED,
HOWEVER, that the provisions of this sentence may not be amended, modified,
or supplemented except in accordance with the provisions of the immediately
preceding sentence.
(f) NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section prior to 8:00 p.m.
(Eastern Standard Time) on a Business Day, (ii) the Business Day after the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in the Purchase
Agreement later than 8:00 p.m. (Eastern Standard Time) on any date and
earlier than 11:59 p.m. (Eastern Standard Time) on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom
such notice is required to be given to each Holder at its address set forth
under its name on SCHEDULE 1 attached hereto or such other address as may be
designated in writing hereafter, in the same manner, by such Person. Copies
of notices to any
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<PAGE>
Holder shall be sent to Robinson Silverman Pearce Aronsohn & Berman LLP, 1290
Avenue of the Americas, New York, NY 10104, Attn: Kenneth L. Henderson,
Esq., fax: (212) 541-4630 and copies of all notices to the Company shall be
sent to Wilson Sonsini Goodrich & Rosati, a professional corporation, Attn:
Andrew J. Hirsch, Esq., fax: (650) 354-4210.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each
of the parties and shall inure to the benefit of each Holder. The Company
may not assign its rights or obligations hereunder without the prior written
consent of each Holder. Each Purchaser may assign its rights hereunder in
the manner and to the Persons as permitted under the Purchase Agreement.
(h) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall
be automatically assignable by each Holder to any Affiliate of such Holder,
any other Holder or Affiliate of any other Holder and up to four other
assignees of all or a portion of the shares of Preferred Stock, the Warrants
or the Registrable Securities if: (i) the Holder agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee
or assignee, and (b) the securities with respect to which such registration
rights are being transferred or assigned, (iii) following such transfer or
assignment the further disposition of such securities by the transferee or
assignees is restricted under the Securities Act and applicable state
securities laws, (iv) at or before the time the Company receives the written
notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the
provisions of this Agreement, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement. The
rights to assignment shall apply to the Holders (and to subsequent)
successors and assigns.
(i) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(j) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law.
(k) CUMULATIVE REMEDIES. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and
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<PAGE>
shall in no way be affected, impaired or invalidated, and the parties hereto
shall use their reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by
such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any
of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(m) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(n) SHARES HELD BY THE COMPANY AND ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company
or its Affiliates (other than any Holder or transferees or successors or
assigns thereof if such Holder is deemed to be an Affiliate solely by reason
of its holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
<TABLE>
<CAPTION>
GENUS, INC. SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD
<S> <C>
By: /s/ MARY F. BOBEL By: /s/ KENNETH L. HENDERSON
------------------------------------ ----------------------------------------------
Name: Mary F. Bobel Name: Kenneth L. Henderson
Title: Executive Vice President Title: Attorney-in-fact
and Chief Financial
Officer
WESTOVER INVESTMENTS L.P.
By: HBK Investments L.P., as investment manager
By: /s/ DAVID C. HALEY
----------------------------------------------
Name: David C. Haley
Title: Authorized Agent
MONTROSE INVESTMENTS, LTD.
By: HBK Investments L.P., as investment manager
By: /s/ DAVID C. HALEY
----------------------------------------------
Name: David C. Haley
Title: Authorized Agent
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
By: /s/ EVAN M. LEVINE
----------------------------------------------
Name: Evan M. Levine
Title: Principal
BROWN SIMPSON STRATEGIC GROWTH FUND, LTD.
By: /s/ EVAN M. LEVINE
----------------------------------------------
Name: Evan M. Levine
Title: Principal
CIBC OPPENHEIMER CORP.
By: /s/ MATTHEW J. MARYLES
----------------------------------------------
Name: Matthew J. Maryles
Title: Managing Director
</TABLE>
<PAGE>
SCHEDULE 1
COMPANY:
GENUS, INC.
1139 Karlstad Drive
Sunnyvale, California 94089
Attn: Mary Bobel
Fax: (408) 747-7140
PURCHASERS:
SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.
c/o Trippoak Advisors, Inc.
630 Fifth Avenue, Suite 2000
New York, NY 10111
Attn: Robert L. Miller
Fax: (212) 332-3256
WESTOVER INVESTMENTS L.P.
777 Main Street, Suite 2750
Fort Worth, Texas 76102
Attn: Will Rose
Fax: (817) 870-6190
MONTROSE INVESTMENTS, LTD.
777 Main Street, Suite 2750
Fort Worth, Texas 76102
Attn: Will Rose
Fax: (817) 870-6190
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
152 West 57th street, 40th Floor
New York, New York 10019
Attn: Mitchell Kaye
Fax: (212) 247-1329
BROWN SIMPSON STRATEGIC GROWTH FUND, LTD.
152 West 57th street, 40th Floor
New York, New York 10019
Attn: Mitchell Kaye
Fax: (212) 247-1329
CIBC OPPENHEIMER CORP.
200 Liberty Street, 7th Floor
New York, New York 10281
Attn: Matthew J. Maryles
Fax: (212) 667-5785
<PAGE>
EXHIBIT 4.4
CERTIFICATE OF DETERMINATION OF RIGHTS,
PREFERENCES AND PRIVILEGES OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
GENUS, INC.
The undersigned, Mary F. Bobel and Mario M. Rosati, do hereby certify that:
H. They are the duly elected and acting Executive Vice President and
Chief Financial Officer, and Secretary, respectively, of Genus, Inc., a
California corporation (the "Corporation").
I. Pursuant to the authority conferred upon the Board of Directors by
the Restated Articles of Incorporation of the Corporation, the said Board of
Directors on January 26, 1998, adopted the following resolution creating a
series of 100,000 shares of Preferred Stock designated as Series A
Convertible Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Restated Articles of Incorporation, the
Board of Directors does hereby provide for the issue of a series of Preferred
Stock of the Corporation to be designated "Series A Convertible Preferred
Stock" initially consisting of 100,000 shares, and to the extent that the
designations, powers, preferences and relative and other special rights and
the qualifications, limitations and restrictions of the Series A Convertible
Preferred Stock are not stated and expressed in the Restated Articles of
Incorporation, does hereby fix and herein state and express such
designations, powers, preferences and relative and other special rights and
the qualifications, limitations and restrictions thereof, as follows (all
terms used herein which are defined in the Restated Articles of Incorporation
shall be deemed to have the meanings provided therein):
Section 1. DESIGNATION, AMOUNT AND PAR VALUE. The series of
preferred stock shall be designated as 6% Series A Convertible Preferred
Stock (the "PREFERRED STOCK"), and the number of shares so designated shall
be 100,000. Each share of Preferred Stock shall have no par value and a
stated value of $50.00 per share (the "STATED VALUE").
Section 2. DIVIDENDS.
(a) Each Holder of Preferred Stock ("HOLDER") shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available therefor, and the Company shall pay, cumulative dividends at the
rate per share (as a percentage of the Stated Value per share) equal to 6%
per annum, payable, in cash or shares of Common Stock (as defined in Section
8) at (subject to the terms and conditions set fort herein) the option of the
Company. Dividends on the Preferred Stock shall be due and payable on each
yearly anniversary of the Original Issue Date (each a "DIVIDEND PAYMENT
DATE"), and any dividends not paid on any Dividend Payment Date shall accrue
and shall be due and payable upon conversion of the Preferred Stock. No
dividends shall be due and payable for any partial year period for which the
Dividend Payment Date has not yet occurred. A party that holds shares of
Preferred Stock on a Dividend Payment Date will be entitled to receive such
dividend payment and any other accrued and unpaid dividends which accrued
prior to such Dividend Payment Date, without regard to any sale or
disposition of such
<PAGE>
Preferred Stock subsequent to the applicable record date. All overdue accrued
and unpaid dividends and other amounts due herewith shall entail a late fee
at the rate of 15% per annum (to accrue daily, from the date such dividend is
due hereunder through and including the date of payment). Except as
otherwise provided herein, if at any time the Company pays less than the
total amount of dividends then accrued on account of the Preferred Stock or
on account of the Company's 6% Series B Convertible Preferred Stock (which
would be the next series of preferred stock authorized by the Board of
Directors pursuant to the proper filing of a Certificate of Determination
setting forth the rights, preferences and privileges of such series) (the
"SERIES B PREFERRED STOCK"), if issued, which may be purchased pursuant to
the Purchase Agreement, such payment shall be distributed ratably among the
Holders and the holders of the Series B Preferred Stock (the "PREFERRED
HOLDERS") based upon the number of shares held by each Preferred Holder. The
Company shall provide the Holders notice of its intention to pay dividends in
cash or shares of Common Stock not less than 10 Trading Days prior to the
Dividend Payment Date for so long as shares of Preferred Stock are
outstanding. If dividends are paid in shares of Common Stock, the number of
shares of Common Stock payable as such dividend to each Holder shall be equal
to the cash amount of such dividend payable to such Holder on such Dividend
Payment Date divided by the closing bid price of the Common Stock on the
Trading Day prior to such Dividend Payment Date ("DIVIDEND CONVERSION
PRICE"), further provided that the Dividend Conversion Price shall not be
less than $3.47.
(b) Notwithstanding anything to the contrary contained herein, the
Company may not issue shares of Common Stock in payment of dividends (and
must deliver cash in respect thereof) on the Preferred Stock if:
(i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes is insufficient to pay
such dividends in shares of Common Stock;
(ii) the shares of Common Stock to be issued in respect of
such dividends are not registered for resale pursuant to an effective
registration statement that names the recipient of such dividend as a selling
stockholder thereunder (unless such registration statement is not declared
effective solely as a result of the actions of the recipient of such dividend
or if such recipient has failed to provide the Company with the necessary
selling shareholder information to be included in such registration
statement) and may not be sold without volume restrictions pursuant to Rule
144 promulgated under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), as determined by counsel to the Company pursuant to a written opinion
letter, addressed to the Company's transfer agent in the form and substance
acceptable to the Holder;
(iii) the shares of Common Stock to be issued in respect of
such dividends are not listed on the Nasdaq Stock Market or any other
exchange or quotation system on which the Common Stock is then listed for
trading;
(iv) the Company has failed to timely satisfy its obligations
pursuant to any Conversion Notice (as defined in Section 5(a)(ii)).
(c) So long as any Preferred Stock shall remain outstanding,
neither the Company nor any subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities (as defined in
Section 8), nor shall the Company directly or indirectly pay or declare any
dividend or make any distribution (other than a dividend or distribution
described in Section 5) upon, nor shall any distribution be made in respect
of, any Junior Securities, nor shall any monies be set aside for or applied
to the purchase or redemption (through a sinking fund or otherwise) of any
Junior Securities or shares pari passu with the Preferred Stock, except for
repurchases effected by the Company on the open market, pursuant to a direct
stock purchase plan.
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Section 3. VOTING RIGHTS.
(a) Except as otherwise provided herein and as otherwise required
by law, the Preferred Stock shall have no voting rights. However, so long as
any shares of Preferred Stock are outstanding, the Company shall not and
shall cause its subsidiaries not to, without the affirmative vote of the
Holders of all of the shares of the Preferred Stock then outstanding,(a)
alter or change adversely the powers, preferences or rights given to the
Preferred Stock, (b) alter or amend this Certificate of Determination, (c)
authorize or create any class of stock ranking as to dividends or
distribution of assets upon a Liquidation (as defined in Section 4) or
otherwise senior to or pari passu with the Preferred Stock, except for any
series of Preferred Stock issued and sold in accordance with the Purchase
Agreement, (d) amend its Articles of Incorporation, bylaws or other charter
documents so as to affect adversely any rights of any Holders, (e) increase
the authorized number of shares of Preferred Stock and (f) enter into any
agreement with respect to the foregoing.
(b)(i) If the Company shall have defaulted on any of its
conversion obligations, registration obligations or payment obligations
hereunder, and such default has continued for 180 days, then on the 181st day
of the continuance of such default, without the requirement of any additional
action by the Company's Board of Directors or stockholders, the fixed number
of directors constituting the Company's Board of Directors shall be
automatically increased, pursuant to the authority of the Board of Directors
to adjust the fixed number of directors within the authorized minimum and
maximum numbers as stated in the Company's Bylaws, by one directorship and
the Preferred Holders, voting together as a single class, shall be entitled
to elect the director to fill the resulting vacancy on the Company's Board of
Directors. At elections for such director, each Preferred Holder shall be
entitled to one vote for each share of Preferred Stock or Series B Preferred
Stock held. Such right to vote as a single class to elect directors shall,
when vested, continue until all defaults which triggered such right have been
completely cured, and when so cured such right to elect such director
separately as a separate class shall cease.
(ii) Whenever such voting right shall have vested, such right
may be exercised initially either, at a special meeting of the Preferred
Holders called as hereinafter provided or at any annual meeting of
stockholders held for the purpose of electing directors, and thereafter at
such meetings or by the written consent of such holders pursuant to the
California Corporations Code.
(iii) At any time when the voting right granted by this
Section 3(b) shall have vested in the Preferred Holders entitled to vote
thereon, and if such right shall not already have been initially exercised,
an officer of the Corporation shall, upon written request of Preferred
Holders of record of 10% in the aggregate, of shares of Preferred Stock and
Series B Preferred Stock then outstanding, addressed to the Chief Financial
Officer of the Corporation, call a special meeting of Preferred Holders.
Such meeting shall be held at the earliest practicable date upon the notice
required for annual meetings of stockholders at the place for holding annual
meetings of stockholders of the Corporation or, if none, at a place
designated by the Chief Financial Officer of the Corporation. If notice of
such meeting is not mailed within 30 days after such written request is
mailed to the Chief Financial Officer of the Corporation, by registered mail,
addressed to the Chief Financial Officer of the Corporation at its principal
office (such mailing to be evidenced by the registry receipt issued by the
postal authorities), then the Preferred Holders of record of 10% of the
shares of the Preferred Stock and the Series B Preferred Stock then
outstanding may designate in writing any person to call such meeting at the
expense of the Corporation, and such meeting may be called by such person so
designated upon the notice required for annual meetings of stockholders and
shall be held at the same place as is elsewhere provided in this paragraph
3(b)(iii). Any Preferred Holder that would be entitled to vote at such
meeting shall have access to the stock record books of the Corporation for
the purpose of causing a meeting of stockholders to be called pursuant to the
provisions of this paragraph 3(b)(iii). Notwithstanding the provisions of
this paragraph, however, no such special meeting shall be called or held
during a period within 30 days immediately preceding the date fixed for the
Corporation's next annual meeting of stockholders.
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(iv) The directors elected pursuant to this paragraph 3(b)
shall serve until the next annual meeting or until their respective
successors shall be elected and shall qualify, unless earlier terminated as
set forth below. Any director elected by the Preferred Holders may be
removed by, and shall not be removed otherwise than by, the vote of the
Preferred Holders of a majority of the outstanding shares of the Preferred
Stock and the Series B Preferred Stock who were entitled to participate in
such election of directors, voting as a special class, at a meeting called
for such purpose or by written consent as permitted by law and the Articles
of Incorporation and By-laws of the Corporation. If the office of the
director elected by the Preferred Holders, voting as a class, becomes vacant
by reason of death, resignation, retirement, disqualification or removal from
office or otherwise, the Preferred Holders in accordance with the above
procedures, voting as a class, shall elect a successor director who shall
hold office for the unexpired term in respect of which such vacancy occurred.
Upon any termination of the right of the Preferred Holders to vote for
directors as herein provided, the term of office of all directors then in
office elected by the Preferred Holders, voting as a class, shall terminate
immediately. Whenever the terms of office of the directors elected by the
Preferred Holders shall have expired, the number of directors shall be such
number as may be provided for pursuant to the By-laws of the Corporation
irrespective of any increase made pursuant to the provisions of this Section
3(b).
(v) So long as any shares of Preferred Stock or Series B
Preferred Stock are outstanding, the By-laws shall contain no provisions that
would restrict the exercise, by the Preferred Holders of the right to elect
directors under the circumstances provided in Section 3(b)(i) above.
Section 4. LIQUIDATION. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a
"LIQUIDATION"), the Holders shall be entitled to receive out of the assets of
the Company, whether such assets are capital or surplus, for each share of
Preferred Stock an amount equal to the Stated Value plus all due but unpaid
dividends per share, whether declared or not, before any distribution or
payment shall be made to the holders of any Junior Securities, and if the
assets of the Company shall be insufficient to pay in full such amounts, then
the entire assets to be distributed to the Holders of Preferred Stock shall
be distributed among the Preferred Holders ratably in accordance with the
respective amounts that would be payable on such shares if all amounts
payable thereon were paid in full. A sale, conveyance or disposition of all
or substantially all of the assets of the Company or the effectuation by the
Company of a transaction or series of related transactions in which more than
50% of the voting power of the Company is disposed of, or a consolidation or
merger of the Company with or into any other company or companies shall not
be treated as a Liquidation, but instead shall be subject to the provisions
of Section 5. The Company shall mail written notice of any such Liquidation,
not less than 45 days prior to the payment date stated therein, to each
record Holder of Preferred Stock.
Section 5. CONVERSION.
(a)(i) Each share of Preferred Stock shall be convertible into
shares of Common Stock (subject to reduction pursuant to Section 5(a)(iii)
and Section 3.16 of the Purchase Agreement) at the Conversion Ratio (as
defined in Section 8) at the option of the Holder in whole or in part at any
time after the Original Issue Date. The Holders shall effect conversions by
surrendering the certificate or certificates representing the shares of
Preferred Stock to be converted to the Company, or its agent, together with
the form of conversion notice attached hereto as EXHIBIT A (the "HOLDER
CONVERSION NOTICE"). Each Holder Conversion Notice shall specify the number
of shares of Preferred Stock to be converted and the date on which such
conversion is to be effected, which date may not be prior to the date the
Holder delivers such Holder Conversion Notice by facsimile (the "HOLDER
CONVERSION DATE"). If no Holder Conversion Date is specified in a Holder
Conversion Notice, the Holder Conversion Date shall be the date that the
Holder Conversion Notice is deemed delivered pursuant to Section 5(h).
Subject to Sections 5(b) and 5(a)(iii) hereof, each Holder Conversion Notice,
once given, shall be irrevocable. If the Holder is converting less than all
shares of Preferred Stock represented by the certificate or certificates
tendered by the Holder with the Holder
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Conversion Notice, or if a conversion hereunder cannot be effected in full
for any reason, the Company shall promptly deliver to such Holder (in the
manner and within the time set forth in Section 5(b)) a certificate for such
number of shares as have not been converted.
(ii) On the second anniversary of the Original Issue Date or
thereafter, the Company may require the conversion of all, but not less than
all, of the then outstanding and unconverted shares of Preferred Stock with
such conversion being effectuated at the Conversion Price then in effect
(subject to reduction pursuant to Section 5(a)(iii)) by delivering to the
Holder of such shares to be converted a notice in the form attached hereto as
EXHIBIT B (the "COMPANY CONVERSION NOTICE"), PROVIDED, that, no such
conversion is permitted unless at the time of the delivery of the Company
Conversion Notice and on the Company Conversion Date (as defined below), (a)
the Company shall have complied in all material respects with its obligations
under the Registration Rights Agreement, (b) the Company was at the time of
the issuance of the Preferred Stock and the Company is at the time of the
conversion of the Preferred Stock a "listed corporation" as defined in
subdivision (d) of Section 301.5 of the California Corporations Code, (c) the
shares of Common Stock issuable upon such conversion are listed for trading
on the Nasdaq Stock Market or any other exchange or quotation system on which
the Common Stock is then listed for trading as such is defined by subdivision
(d) of Section 301.5 of the California Corporations Code, (d) the Company is
in compliance with all of its obligations under this Certificate of
Determination, the Purchase Agreement and the Registration Rights Agreement,
and (e) the closing bid price of the Common Stock for at least 20 of the 30
Trading Days immediately preceding the date of the Company Conversion Notice
shall have been at least 150% of the Conversion Price on the Original Issue
Date. Each Company Conversion Notice shall specify the date on which such
conversion is to be effected, which date may not be prior to the day after
the Company delivers such Company Conversion Notice by facsimile or later
than 10 Trading Days subsequent to such delivery (the "COMPANY CONVERSION
DATE"). If no Company Conversion Date is specified in a Company Conversion
Notice, the Company Conversion Date shall be the date that the Company
Conversion Notice is deemed delivered pursuant to Section 5(h). A Holder
Conversion Date and a Company Conversion Date are sometimes referred to
herein as the "CONVERSION DATE" and a Holder Conversion Notice and a Company
Conversion Notice are sometimes referred to as a "CONVERSION NOTICE." Any
conversion pursuant to this Section 5(a)(ii) shall be subject to Section 5(b)
with respect to consequences of the Company's failure to deliver shares of
Common Stock in respect of a conversion under this Section. If a conversion
hereunder cannot be effected in full for any reason, the Company shall
promptly deliver to such tendering Holder (in the manner and within the time
set forth in Section 5(b)) a certificate for such number of shares of
Preferred Stock as have not been converted.
(iii) If on the Conversion Date applicable to any conversion,
(A) the Common Stock is then listed for trading on the Nasdaq Stock Market,
the American Stock Exchange or the Nasdaq SmallCap Market, (B) the Conversion
Price then in effect is such that the aggregate number of shares of Common
Stock that would then be issuable upon conversion of all outstanding shares
of Preferred Stock and Series B Preferred Stock, if issued, together with any
shares of Common Stock previously issued upon conversion of Preferred Stock
or Series B Preferred Stock, if issued, and in respect of payment of
dividends hereunder or thereunder and shares of Common Stock issuable upon
the exercise of Warrants, would equal or exceed 19.999% of the number of
shares of Common Stock outstanding on the Original Issue Date (the "ISSUABLE
MAXIMUM"), and (C) the Company has not previously obtained Shareholder
Approval (as defined below), then the Company shall deliver to the Holder
seeking conversion a notice within two Trading Days of receiving such
conversion request of the Company's intention to either (1) issue to any
Holder so requesting conversion of Preferred Stock its pro rata portion of
the Issuable Maximum in the same ratio that the number of shares of Preferred
Stock held by any such Holder bears to all shares of Preferred Stock then
outstanding and, with respect to any shares of Common Stock that otherwise
would have been issuable to such Holder in respect of the Conversion Notice
at issue or in respect of payment of dividends hereunder in excess of the
Issuable Maximum, the Holder may require the Company to, as promptly as
possible, but in no event later than 60 days after notice from such Holder
convene a meeting of the holders of the Common Stock and use its best efforts
to obtain the Shareholder Approval; provided that in no event shall such
meeting be required to occur prior to May 31, 1998, or (2) redeem as
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soon as reasonably possible, but in any event within seven days of such
notice, from funds legally available therefor at the time of such redemption,
the balance of the Preferred Stock subject to such Conversion Notice at a
price per share equal to the product of (i) the average Per Share Market
Value for the five (5) Trading Days immediately preceding (x) the Conversion
Date or (y) the date of payment in full by the Company of such redemption
price, whichever is greater, and (ii) the Conversion Ratio calculated on the
Conversion Date; PROVIDED, HOWEVER, that if the Holder has requested that the
Company obtain Shareholder Approval under clause (1) above and the Company
fails for any reason to obtain such Shareholder Approval within the time
period set forth in clause (1) above, the Company shall be obligated to
redeem as promptly as reasonably possible but in any event within seven days
of such failure the Preferred Stock not converted as a result of the
provisions of this Section in accordance with the provisions of clause (2)
above. If the Company is obligated to redeem shares of Preferred Stock
pursuant to this Section and the Company fails for any reason to pay the
redemption price within the time periods set forth above, the Company will
pay a late fee on such redemption price at a rate of 15% per annum to the
converting Holder of Preferred Stock, accruing from the Conversion Date until
the redemption price plus any accrued late fees thereon is paid in full. The
entire redemption price, including late fees thereon, shall be paid in cash.
"SHAREHOLDER APPROVAL" means the approval by a majority of the total votes
cast on the proposal, in person or by proxy, at a meeting of the shareholders
of the Company held in accordance with the Company's Articles of
Incorporation and by-laws, of the issuance by the Company of shares of Common
Stock exceeding the Issuable Maximum as a consequence of the conversion of
Preferred Stock and exercise of the Warrants into Common Stock at a price
less than the greater of the book or market value on the Original Issue Date
as and to the extent required pursuant to Rule 4460(i) of the Nasdaq Stock
Market or Rule 713 of the American Stock Exchange (or any successor or
replacement provision thereof), as applicable.
(b) Not later than three Trading Days after any Conversion Date,
the Company will deliver to the Holder (i) a certificate or certificates
which shall be free of restrictive legends and trading restrictions (other
than those required by Section 3.1(b) of the Purchase Agreement) representing
the number of shares of Common Stock being acquired upon the conversion of
shares of Preferred Stock (subject to reduction pursuant to Section 5(a)(iii)
and Section 3.16 of the Purchase Agreement), (ii) one or more certificates
representing the number of shares of Preferred Stock not converted, (iii) a
bank check in the amount of accrued and unpaid dividends, if any (if the
Company has elected to pay accrued dividends in cash) and (iv) if the Company
has elected to pay accrued dividends in shares of Common Stock, certificates,
which shall be free of restrictive legends and trading restrictions (other
than those required by Section 3.1 (b) of the Purchase Agreement),
representing such number of Shares of Common Stock as equals such dividend
divided by the Conversion Price on the Dividend Payment Date; PROVIDED,
HOWEVER, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon conversion of any shares
of Preferred Stock until certificates evidencing such shares of Preferred
Stock are either delivered for conversion to the Company or any transfer
agent for the Preferred Stock or Common Stock, or the Holder of such
Preferred Stock notifies the Company that such certificates have been lost,
stolen or destroyed and provides a bond (or other adequate security)
reasonably satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection therewith. The Company shall, upon request of
the Holder, use its best efforts to deliver any certificate or certificates
required to be delivered by the Company under this Section electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions, if available. If in the case of
any Conversion Notice such certificate or certificates, including for
purposes hereof, any shares of Common Stock to be issued on the Conversion
Date on account of accrued but unpaid dividends hereunder, are not delivered
to or as directed by the applicable Holder by the third Trading Day after the
Conversion Date, the Holder shall be entitled by written notice to the
Company at any time on or before its receipt of such certificate or
certificates thereafter, to rescind such conversion, in which event the
Company shall immediately return the certificates representing the shares of
Preferred Stock tendered for conversion. If the Company fails to deliver to
the Holder such certificate or certificates pursuant to this Section,
including for purposes hereof, any shares of Common Stock to be issued on the
Conversion Date on account of accrued but unpaid dividends hereunder, on or
prior to the third Trading Day after the Conversion Date, the Company shall
pay to such Holder, in cash, as liquidated damages and not as a
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penalty, $5,000 for each day after such third Trading Day until such
certificates are delivered. If the Company fails to deliver to the Holder
such certificate or certificates pursuant to this Section prior to the 10th
day after the Conversion Date, the Company shall, at the Holder's option (i)
redeem, from funds legally available therefor at the time of such redemption,
such number of shares of Preferred Stock then held by such Holder, as
requested by such Holder, and (ii) pay all accrued but unpaid dividends on
account of the Preferred Stock for which the Company shall have failed to
issue Common Stock certificates hereunder, in cash. The redemption price
shall be equal to the sum of (A) the aggregate of all accrued but unpaid
dividends, plus (B) the number of shares of Preferred Stock then held by such
Holder multiplied by (1) the average Per Share Market Value for the five (5)
Trading Days immediately preceding (x) the Conversion Date or (y) the date of
payment in full by the Company of such prepayment price, whichever is
greater, multiplied by, (2) the Conversion Ratio calculated on the Conversion
Date. If the Holder has requested that the Company redeem shares of
Preferred Stock pursuant to this Section and the Company fails for any reason
to pay the redemption price under (2) above within seven days after such
notice is deemed delivered pursuant to Section 5(i), the Company will pay a
late fee on the redemption price at a rate of 15% per annum, in cash to such
Holder, accruing from such seventh day until the redemption price and any
accrued late fees thereon is paid in full. Nothing herein shall limit a
Holder's right to pursue actual damages for the Company's failure to deliver
certificates representing shares of Common Stock upon conversion within the
period specified herein (including, without limitation, damages relating to
any purchase of shares of Common Stock by such Holder to make delivery on a
sale effected in anticipation of receiving certificates representing shares
of Common Stock upon conversion, such damages to be in an amount equal to (A)
the aggregate amount paid by such Holder for the shares of Common Stock so
purchased MINUS (B) the aggregate amount of net proceeds, if any, received by
such Holder from the sale of the shares of Common Stock issued by the Company
pursuant to such conversion), and such Holder shall have the right to pursue
all remedies available to it at law or in equity (including, without
limitation, a decree of specific performance and/or injunctive relief).
(c)(i) The conversion price for each share of Preferred Stock
(the "CONVERSION PRICE") in effect on any Conversion Date shall be the lesser
of (a) 110% of the Per Share Market Value for the Trading Day immediately
preceding the Original Issue Date (the "INITIAL CONVERSION PRICE") provided
that the Initial Conversion Price shall not be less than $3.47 or (b) 82% of
the average of fifteen (15) closing bid prices of the Common Stock on the
Nasdaq Stock Market or other market or exchange on which the Common Stock is
then listed or traded, during the forty five (45) Trading Days prior to the
date of the applicable Conversion Notice, which fifteen closing bid prices
shall be chosen by the Holder converting such shares of Preferred Stock;
PROVIDED, HOWEVER, that, (a) if the Underlying Shares Registration Statement
(as defined in the Registration Rights Agreement) is not filed on or prior to
March 15, 1998, or (b) the Company fails to file with the Commission a
request for acceleration in accordance with Rule 12d1-2 promulgated under the
Securities Exchange Act of 1934, as amended, within five (5) days of the date
that the Company is notified (orally or in writing, whichever is earlier) by
the Commission that an Underlying Shares Registration Statement will not be
"reviewed," or not subject to further review, or (c) if the Underlying Shares
Registration Statement is not declared effective by the Commission on or
prior to the 90th day after the Original Issue Date, or (d) if such
Underlying Shares Registration Statement is filed with and declared effective
by the Commission but thereafter ceases to be effective as to all Registrable
Securities (as such term is defined in the Registration Rights Agreement) at
any time prior to the expiration of the "EFFECTIVENESS PERIOD" (as such term
as defined in the Registration Rights Agreement), without being succeeded
within 10 Trading Days by a subsequent Underlying Shares Registration
Statement filed with and declared effective by the Commission, or (e) if
trading in the Common Stock shall be suspended for more than three (3)
consecutive Trading Days or five (5) Trading Days in the aggregate, or (f) if
the conversion rights of the Holders are suspended for any reason, or (g) if
the Company breaches in a material respect any covenant or other material
term or condition to this Agreement, the Purchase Agreement (other than a
representation or warranty contained therein), the Warrants, the Registration
Rights Agreement or any other agreement, document, certificate or other
instrument delivered in connection with the transactions contemplated
thereby, and such breach continues for a period of thirty (30) days after
written notice thereof to the Company, or (h)
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if the Company is required to convene a shareholders meeting pursuant to
Section 5(a)(iii) and fails to convene a meeting of shareholders within the
time periods specified in Section 5(a)(iii) or does so convene a meeting of
shareholders within such time period but fails to obtain Shareholder Approval
at such meeting, or (i) if the Company has breached Section 3(p) of the
Registration Rights Agreement (any such failure or breach being referred to
as an "EVENT," and for purposes of clauses (a), (c) and (f) the date on which
such Event occurs, or for purposes of clause (b) the date on which such five
(5) day period is exceeded, or for purposes of clause (d) the date which such
10 Trading Day-period is exceeded, or for purposes of clause (e) the date on
which such three Trading Day period is exceeded, or for clause (g) the date
on which such thirty (30) day period is exceeded, being referred to as "EVENT
DATE"), the Conversion Price shall be decreased by 2% each month (i.e., the
Conversion Price would decrease by 2% as of the Event Date and an additional
2% as of each monthly anniversary of the Event Date) until the earlier to
occur of the second month anniversary after the Event Date and such time as
the applicable Event is cured. Commencing the second month anniversary after
the Event Date, the Company shall pay to the Holders $50,000 (each Holder
being entitled to receive such portion of such amount as equals its pro rata
portion of the Preferred Stock then outstanding) in cash as liquidated
damages, and not as a penalty on the first day of each monthly anniversary of
the Event Date until such time as the applicable Event, is cured. Any
decrease in the Conversion Price pursuant to this Section shall continue
notwithstanding the fact that the Event causing such decrease has been
subsequently cured.
(ii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall (a) pay a stock dividend or otherwise
make a distribution or distributions on shares of its Junior Securities or
pari passu securities (other than with respect to the Series B Preferred
Stock) payable in shares of Common Stock, (b) subdivide outstanding shares of
Common Stock into a larger number of shares, (c) combine outstanding shares
of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of capital stock of the
Company, the Initial Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
before such event and of which the denominator shall be the number of shares
of Common Stock outstanding after such event. Any adjustment made pursuant
to this Section 5(c)(ii) shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend
or distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall issue rights or warrants to all
holders of Common Stock entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the Per Share Market Value of
Common Stock at the record date mentioned below, the Initial Conversion Price
shall be multiplied by a fraction, of which the denominator shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants plus
the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at such Per Share Market Value. Such
adjustment shall be made whenever such rights or warrants are issued, and
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants.
However, upon the expiration of any right or warrant to purchase Common Stock
the issuance of which resulted in an adjustment in the Initial Conversion
Price pursuant to this Section 5(c)(iii), the Initial Conversion Price shall
immediately upon such expiration be recomputed, and effective immediately
upon such expiration, be increased to the price which it would have been (but
reflecting any other adjustments in the Initial Conversion Price made
pursuant to the provisions of this SECTION 5 after the issuance of such
rights or warrants) had the adjustment of the Initial Conversion Price made
upon the issuance of such rights or warrants been made on the basis of that
number of shares of Common Stock actually purchased upon the exercise of such
rights or warrants.
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(iv) If the Company, at any time while shares of Preferred
Stock are outstanding, shall distribute to all holders of Common Stock (and
not to Holders of Preferred Stock) evidences of its indebtedness or assets or
rights or warrants to subscribe for or purchase any security (excluding those
referred to in Sections 5(c)(ii) and (iii) above), then in each such case the
Conversion Price at which each share of Preferred Stock shall thereafter be
convertible shall be determined by multiplying the Conversion Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which the denominator
shall be the Per Share Market Value of Common Stock determined as of the
record date mentioned above, and of which the numerator shall be such Per
Share Market Value of the Common Stock on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of Common
Stock as determined by the Board of Directors in good faith; PROVIDED,
HOWEVER, that in the event of a distribution exceeding ten percent (10%) of
the net assets of the Company, if the Holders of a majority in interest of
the Preferred Stock dispute such valuation, such fair market value shall be
determined by a nationally recognized or major regional investment banking
firm or firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial
statements of the Company) (an "APPRAISER") selected in good faith by the
Holders of a majority in interest of the shares of Preferred Stock then
outstanding; and PROVIDED, FURTHER, that the Company, after receipt of the
determination by such Appraiser shall have the right to select an additional
Appraiser, in good faith, in which case the fair market value shall be equal
to the average of the determinations by each such Appraiser. In either case
the adjustments shall be described in a statement provided to the Holders of
Preferred Stock of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date mentioned above.
(v) All calculations under this SECTION 5 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(vi) Whenever the Conversion Price is adjusted pursuant to
Section 5(c)(i),(ii),(iii) or (iv), the Company shall promptly mail to each
Holder of Preferred Stock, a notice setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
(vii) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person pursuant
to which (i) a majority of the Company's Board of Directors will not
constitute a majority of the board of directors of the surviving entity or
(ii) less than 50% of the outstanding shares of the capital stock of the
surviving entity will be held by the same shareholders of the Company prior
to such reclassification, consolidation or merger, the sale or transfer of
all or substantially all of the assets of the Company or any compulsory share
exchange pursuant to which the Common Stock is converted into other
securities, cash or property, the Holders of the Preferred Stock then
outstanding shall have the right thereafter to convert such shares only into
the shares of stock and other securities, cash and property receivable upon
or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share exchange,
and the Holders of the Preferred Stock shall be entitled upon such event to
receive such amount of securities, cash or property as the shares of the
Common Stock of the Company into which such shares of Preferred Stock could
have been converted immediately prior to such reclassification,
consolidation, merger, sale, transfer or share exchange would have been
entitled; PROVIDED, HOWEVER, that if such reclassification, consolidation or
merger is (i) approved by the Company's Board of Directors, and (ii) would
not prevent the Company from obtaining a pooling of interest treatment as
evidenced by a certificate to this effect provided to the Holder by the
Company's independent accountants, each Holder shall have the option to
require the Company to redeem, from funds legally available therefor at the
time of such redemption, its shares of Preferred Stock at a price per share
equal to the product of (i) the average Per Share Market Value for the five
(5) Trading Days immediately preceding (1) the effective date, the date of
the closing or the date of the announcement, as the case may be, of the
reclassification, consolidation, merger, sale, transfer or share
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<PAGE>
exchange the triggering such redemption right or (2) the date of payment in
full by the Company of the redemption price hereunder, whichever is greater,
and (ii) the Conversion Ratio calculated on the date of the closing or the
effective date, as the case may be, of the reclassification, consolidation,
merger, sale, transfer or share exchange triggering such redemption right, as
the case may be. The entire redemption price shall be paid in cash, and the
terms of payment of such redemption price shall be subject to the provisions
set forth in Section 6(b). The terms of any such consolidation, merger,
sale, transfer or share exchange shall include such terms so as to continue
to give to the Holder of Preferred Stock the right to receive the securities,
cash or property set forth in this Section 5(c)(vii) upon any conversion or
redemption following such consolidation, merger, sale, transfer or share
exchange. This provision shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
(viii) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
C. the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or
of any rights; or
D. the approval of any stockholders of the Company shall
be required in connection with any reclassification of
the Common Stock of the Company, any consolidation or
merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of
the Company, of any compulsory share of exchange
whereby the Common Stock is converted into other
securities, cash or property; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of
the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of Preferred Stock, and shall cause to be
mailed to the Holders of Preferred Stock at their last addresses as they
shall appear upon the stock books of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose
of such dividend, distribution, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distributions, redemption, rights
or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer
or share exchange; PROVIDED, HOWEVER, that the failure to mail such notice or
any defect therein or in the mailing thereof shall not affect the validity of
the corporate action required to be specified in such notice. Holders are
entitled to convert shares of Preferred Stock during the 20-day period
commencing the date of such notice to the effective date of the event
triggering such notice.
(ix) If the Company (i) makes a public announcement that it
intends to enter into a Change of Control Transaction (as defined below) or
(ii) any person, group or entity (including the Company, but
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excluding a Holder or any affiliate of a Holder) publicly announces a bona
fide tender offer, exchange offer or other transaction to purchase 50% or
more of the Common Stock (such announcement being referred to herein as a
"MAJOR ANNOUNCEMENT" and the date on which a Major Announcement is made, the
"ANNOUNCEMENT DATE"), then, in the event that a Holder seeks to convert
shares of Preferred Stock on or following the Announcement Date, the
Conversion Price shall, effective upon the Announcement Date and continuing
through the earlier to occur of the consummation of the proposed transaction
or tender offer, exchange offer or other transaction and the Abandonment Date
(as defined below), be equal to the lower of (x) the average Per Share Market
Value on the five Trading Days immediately preceding (but not including) the
Announcement Date and (y) the Conversion Price in effect on the Conversion
Date for such Preferred Stock. "ABANDONMENT DATE" means with respect to any
proposed transaction or tender offer, exchange offer or other transaction for
which a public announcement as contemplated by this paragraph has been made,
the date upon which the Company (in the case of clause (i) above) or the
person, group or entity (in the case of clause (ii) above) publicly announces
the termination or abandonment of the proposed transaction or tender offer,
exchange offer or another transaction which caused this paragraph to become
operative.
(d) The Company covenants that it will at all times reserve and
keep available out of its authorized and unissued Common Stock solely for the
purpose of issuance upon conversion of Preferred Stock and payment of
dividends on Preferred Stock, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than
the Holders of Preferred Stock, not less than such number of shares of Common
Stock as shall (subject to any additional requirements of the Company as to
reservation of such shares set forth in the Purchase Agreement) be issuable
(taking into account the adjustments and restrictions of Section 5(a) and
Section 5(c)) upon the conversion of all outstanding shares of Preferred
Stock and payment of dividends hereunder. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly
and validly authorized, issued and fully paid and nonassessable.
(e) Upon a conversion hereunder the Company shall not be required
to issue stock certificates representing fractions of shares of Common Stock,
but may if otherwise permitted, make a cash payment in respect of any final
fraction of a share based on the Per Share Market Value at such time. If the
Company elects not, or is unable, to make such a cash payment, the Holder of
a share of Preferred Stock shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.
(f) The issuance of certificates for shares of Common Stock on
conversion of Preferred Stock shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of the Holder of such shares of
Preferred Stock so converted and the Company shall not be required to issue
or deliver such certificates unless or until the person or persons requesting
the issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has
been paid.
(g) Shares of Preferred Stock converted into Common Stock shall be
canceled and shall have the status of authorized but unissued shares of
undesignated stock.
(h) Any and all notices or other communications or deliveries to
be provided by the Holders of the Preferred Stock hereunder, including,
without limitation, any Conversion Notice, shall be in writing and delivered
personally, by facsimile or sent by a nationally recognized overnight courier
service, addressed to the attention of the Chief Executive Officer of the
Company at the facsimile telephone number or address of the principal place
of business of the Company as set forth in the Purchase Agreement. Any and
all notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by facsimile
or sent
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<PAGE>
by a nationally recognized overnight courier service, addressed to each
Holder of Preferred Stock at the facsimile telephone number or address of
such Holder appearing on the books of the Company, or if no such facsimile
telephone number or address appears, at the principal place of business of
the Holder. Any notice or other communication or deliveries hereunder shall
be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section prior to 8:00 p.m.
(Eastern Standard Time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 8:00 p.m. (Eastern
Standard Time) on any date and earlier than 11:59 p.m. (Eastern Standard
Time) on such date, (iii) upon receipt, if sent by a nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom
such notice is required to be given.
Section 6. REDEMPTIONS.
(a) All outstanding and unconverted shares of Preferred Stock on
the fifth anniversary of the Original Issue Date may be redeemed at any time
thereafter by the Company pursuant to this Section 6(a), from funds legally
available therefor at a price per share equal to the product of (i) the
average Per Share Market Value for the five (5) Trading Days immediately
preceding (1) the fifth anniversary of the Original Issue Date or (2) the
date of payment in full by the Company of the redemption price hereunder,
whichever is greater, and (ii) the Conversion Ratio calculated on the fifth
anniversary of the Original Issue Date. Thereafter, all shares of Preferred
Stock shall cease to be outstanding and shall have the status of authorized
but undesignated stock. The entire redemption price shall be paid in cash.
(b) If any portion of the applicable redemption price under Section
6(a) shall not be paid by the Company within seven (7) calendar days after
the date due, late fees shall accrue thereon at the rate of 15% per annum
until the redemption price plus all such late fees are paid in full (which
amount shall be paid as liquidated damages and not as a penalty). In
addition, if any portion of such redemption price remains unpaid for more
than 7 calendar days after the date due, the Holder of the Preferred Stock
subject to such redemption may elect, by written notice to the Company given
within 30 days after the date due, to either (i) demand conversion in
accordance with the formula and the time frame therefor set forth in Section
5 of all of the shares of Preferred Stock for which such redemption price,
plus accrued liquidated damages thereof, has not been paid in full (the
"UNPAID REDEMPTION SHARES"), in which event the Per Share Market Price for
such shares shall be the lower of the Per Share Market Price calculated on
the date such redemption price was originally due and the Per Share Market
Price as of the Holder's written demand for conversion, or (ii) invalidate AB
INITIO such redemption, notwithstanding anything herein contained to the
contrary. If the Holder elects option (i) above, the Company shall within
three (3) Trading Days of its receipt of such election deliver to the Holder
the shares of Common Stock issuable upon conversion of the Unpaid Redemption
Shares subject to such Holder conversion demand and otherwise perform its
obligations hereunder with respect thereto; or, if the Holder elects option
(ii) above, the Company shall promptly, and in any event not later than three
(3) Trading Days from receipt of Holder's notice of such election, return to
the Holder all of the Unpaid Redemption Shares.
Section 7. PAYMENT RESTRICTIONS. Notwithstanding any provision
to the contrary contained herein, if payment of any amounts payable by the
Company to the Holders hereunder, including, without limitations, any amounts
payable as dividends, penalties or upon redemption of Preferred Stock would
be prohibited in the absence of consent from Sumitomo Bank of California
pursuant to the Company's Credit Agreement dated August 15, 1997 with
Sumitomo Bank of California, as the same may be amended, supplemented,
superseded or replaced from time to time, or any replacement facility, then
the Company shall use its best efforts to obtain such consent as promptly as
practicable after any such payment is required, and any amounts payable by
the Company with respect to its obligation to pay any such dividends,
penalties, or redemption payments shall continue to accrue until such
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<PAGE>
consent is obtained. Nothing contained in this Section 7 shall be construed
as a waiver by the Holders of any rights they may have hereunder.
Section 8. DEFINITIONS. For the purposes hereof, the following
terms shall have the following meanings:
"COMMON STOCK" means the Company's common stock, no par value, and
stock of any other class into which such shares may hereafter have been
reclassified or changed.
"CONVERSION RATIO" means, at any time, a fraction, of which the
numerator is Stated Value plus accrued but unpaid dividends (including any
accrued but unpaid late fees thereon) but only to the extent not paid in
shares of Common Stock in accordance with the terms hereof, and of which the
denominator is the Conversion Price at such time.
"JUNIOR SECURITIES" means the Common Stock and all other equity
securities of the Company which are junior in rights and liquidation
preference to the Preferred Stock.
"ORIGINAL ISSUE DATE" shall mean the date of the first issuance of
any shares of the Preferred Stock regardless of the number of transfers of
any particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"PER SHARE MARKET VALUE" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the Nasdaq
Stock Market or other stock exchange or quotation system on which the Common
Stock is then listed or if there is no such price on such date, then the
closing bid price on such exchange or quotation system on the date nearest
preceding such date, or (b) if the Common Stock is not listed then on the
Nasdaq Stock Market or any stock exchange or quotation system, the closing
bid price for a share of Common Stock in the over-the-counter market, as
reported by the Nasdaq Stock Market or in the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting
prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Holder, or (d) if the
Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an Appraiser selected in good faith by the
Holders of a majority in interest of the shares of the Preferred Stock;
PROVIDED, HOWEVER, that the Company, after receipt of the determination by
such Appraiser, shall have the right to select an additional Appraiser, in
which case, the fair market value shall be equal to the average of the
determinations by each such Appraiser; and PROVIDED, FURTHER that all
determinations of the Per Share Market Value shall be appropriately adjusted
for any stock dividends, stock splits or other similar transactions during
such period.
"PERSON" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"PURCHASE AGREEMENT" means the Convertible Preferred Stock Purchase
Agreement, dated as of February 2, 1998, among the Company and the original
Holders of the Preferred Stock.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of February 2, 1998, by and among the Company and the
original Holders.
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<PAGE>
"TRADING DAY" means (a) a day on which the Common Stock is traded
on the Nasdaq Stock Market or other stock exchange or market on which the
Common Stock has been listed, or (b) if the Common Stock is not listed on the
Nasdaq Stock Market or any stock exchange or market, a day on which the
Common Stock is traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting prices);
PROVIDED, HOWEVER, that in the event that the Common Stock is not listed or
quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean
any day except Saturday, Sunday and any day which shall be a legal holiday or
a day on which banking institutions in the State of New York are authorized
or required by law or other government action to close.
"UNDERLYING SHARES" means the number of shares of Common Stock into
which the Shares are convertible and the shares or Common Stock issuable upon
payment of dividends thereon, in accordance with the terms hereof and the
Purchase Agreement .
Section 9. REDEMPTION OPTION UPON TRIGGERING EVENT. In
addition to all other rights of the Holders contained herein, after a
Triggering Event (as defined below), each Holder shall have the right, at
such Holder's option, to require the Company to redeem all or a portion of
such Holder's Preferred Stock at a price per share of Preferred Stock equal
to the product of (i) the average Per Share Market Value for the five (5)
Trading Days immediately preceding (1) the date of the Triggering Event or
(2) the date of payment in full by the Company of such redemption price,
whichever is greater, and (ii) the Conversion Ratio calculated on the date of
the Triggering Event. A "Triggering Event" shall be deemed to have occurred
at such time as any of the following events:
(i) the failure of the Registration Statement to be
declared effective by the Commission on or prior to the date that is 180 days
after the Original Issue Date;
(ii) while the Registration Statement is required to be
maintained effective pursuant to the terms of the Registration Rights
Agreement, the effectiveness of the Registration Statement lapses for any
reason (including, without limitation, the issuance of a stop order) or is
unavailable to the Holder of the Preferred Stock for sale of the Registrable
Securities (as defined in the Registration Rights Agreement) other than in
accordance with the terms of the Registration Rights Agreement, provided that
the cause of such lapse or unavailability is not due to factors solely within
the control of such Holder seeking to be redeemed pursuant to this Section 8;
(iii) the failure of the Common Stock to be listed on the
Nasdaq Stock Market, The New York Stock Exchange, Inc. or The American Stock
Exchange, Inc. for a period of seven consecutive days; or
(iv) the Company's notice to any Holder of Preferred Stock,
including by way of public announcement, at any time, of its intention not to
comply with proper requests for conversion of any Preferred Stock into shares
of Common Stock.
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this Corporation be, and they hereby
are, authorized and directed to prepare and file a Certificate of Determination
of Rights, Preferences and Privileges in accordance with the foregoing
resolution and the provisions of California law and to take such actions as they
may deem necessary or appropriate to carry out the intent of the foregoing
resolution."
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<PAGE>
J. That the authorized number of shares of Preferred Stock of the
Corporation is 2,000,000, the number of shares constituting Series A
Convertible Preferred Stock (that is the series created by this Certificate
and the resolution set forth above) is 100,000 and that no such Preferred
Stock has been issued.
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<PAGE>
We further declare under penalty of perjury under the laws of this State
of California that the matters set forth in this Certificate are true and
correct of our own knowledge.
Date: February 2, 1998.
/s/ MARY F. BOBEL
-------------------------------
Mary F. Bobel, Executive Vice
President and Chief Financial
Officer
/s/ MARIO M. ROSATI
-------------------------------
Mario M. Rosati, Secretary
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<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series A
Convertible Preferred Stock indicated below, into shares of Common Stock, no
par value (the "Common Stock"), of Genus, Inc. (the "Company") according to
the conditions hereof, as of the date written below. If shares are to be
issued in the name of a person other than undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the
Company in accordance therewith. No fee will be charged to the Holder for
any conversion, except for such transfer taxes, if any.
Conversion calculations:
-------------------------------------------------------
Date to Effect Conversion
-------------------------------------------------------
Number of shares of Preferred Stock to be Converted
-------------------------------------------------------
Number of shares of Common Stock to be Issued
-------------------------------------------------------
Applicable Conversion Price
-------------------------------------------------------
Signature
-------------------------------------------------------
Name
-------------------------------------------------------
Address
<PAGE>
EXHIBIT B
NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of Genus, Inc. (the "COMPANY")
hereby notifies the addressee hereof that the Company hereby elects to
exercise its right to convert [ ] shares of its 6% Series A Convertible
Preferred Stock (the "PREFERRED STOCK") held by the Holder into shares of
Common Stock, no par value (the "COMMON STOCK") of the Company according to
the terms hereof, as of the date written below. No fee will be charged to
the Holder for any conversion hereunder, except for such transfer taxes, if
any which may be incurred by the Company if shares are to be issued in the
name of a person other than the person to whom this notice is addressed.
Conversion calculations:
-------------------------------------------------------
Date to effect Conversion
-------------------------------------------------------
Number of shares of Preferred Stock to be Converted
-------------------------------------------------------
Number of shares of Common Stock to be Issued
-------------------------------------------------------
Applicable Conversion Price
-------------------------------------------------------
Name of Holder
-------------------------------------------------------
Address of Holder
<PAGE>
EXHIBIT 99.1
Company Contact: Agency Contact:
Mary Bobel Bob Climo
Genus, inc. M & C Communications
408/747-7120 408/736-1120
GENUS COMPLETES $5 MILLION EQUITY FINANCING
SUNNYVALE, CALIF., February 12, 1998 - Genus, Inc. (OTC, NASDAQ: GGNS) a
leading manufacturer of process simplification equipment for the
semiconductor industry, today announced that the Company has completed a
private equity placement of $5 million of convertible preferred stock to a
group of institutional investors.
Upon the fulfillment of certain specified conditions, these same
investors have also committed to provide additional financing of up to $5
million dollars. A registration statement will be filed by the Company with
the Securities and Exchange Commission in order to register the resale of the
shares of common stock underlying the convertible preferred stock.
"These additional funds reaffirm our commitment to investing in R&D
during the next year. By continuing the development of our tungsten nitride
barrier film for Genus' LYNX2 CVD system and enhancing the energy range of
our Kestrel implanter products, we believe Genus will be well-positioned to
meet the future manufacturing requirements of our customers," commented James
T. Healy, Genus president and chief executive officer.
Founded in 1982, Genus, Inc. develops, manufactures, markets and
services advanced thin film deposition and ion implantation equipment used in
the fabrication of advanced semiconductor devices. The company's customers
include semiconductor manufacturers located throughout the United States,
Europe and the Pacific Rim, including Japan, Korea and Taiwan. Genus'
corporate offices are located
<PAGE>
at 1139 Karlstad Drive, Sunnyvale, CA 94089; telephone: (408) 747-7120; fax:
(408) 747-7199; e-mail:
[email protected]; Internet: WWW.GENUS.COM.
This release contains forward looking statements dependent on a number of
risks and uncertainties, including, but not limited to, retrenchment in the
semiconductor industry, general conditions in the company's industry sector,
and the additional risks and uncertainties detailed under "Management's
Discussion and Analysis of Results of Operations and Financial Condition"
contained in the company's annual report on Form 10-K for the fiscal year
ended December 31, 1996, and the company's quarterly report on Form 10-Q for
the quarter ended September 30, 1997.
###
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